HSBC meets Basel capital target early

Tim Wallace
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BRITISH bank HSBC has hit tough new capital targets years before the official deadline, removing the drag on the lender’s growth and allowing it to supply more credit in the coming years, the firm’s full year results showed yesterday.

HSBC is the first major institution to reach the Basel III requirements, clearing a huge obstacle to lending growth.

The new rules are still to be finalised in an incoming EU directive, CRD IV, but HSBC believes that this year it will have a core tier one capital ratio of 10.3 per cent under the regulations.

This level is above the 10 per cent minimum that a globally systemically important bank needs, and comes well ahead of the deadline. The requirements are being phased in over the next six years.

The new rules are being brought in as a response to the financial crisis, forcing banks to set aside much more capital against their loans in case a downturn strikes and the debts turn bad.

But although the rules should be good for the long-term health of banks, they put a strain on their resources in the short term, acting as a brake on lending.

Now HSBC has hit the target it should be able to grow more quickly once again.

Other British banks still have a way to go to hit the Basel targets.

Barclays’ full year results estimate its comparable figure at 8.3 per cent, while Lloyds puts its fully-loaded ratio at 8.1 per cent and Royal Bank of Scotland estimates its ratio at 7.1 per cent.