Lenders cite regulator demands as balance sheets are shored up

Tim Wallace
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BRITAIN’S biggest banks ramped up capital levels rapidly in the first half of the year, Bank of England figures revealed yesterday, in the months after the authorities warned of a black hole in banks’ balance sheets.

The number of banks reporting falling capital levels in the last three months of last year outweighed those reporting rising capital levels by a margin of 7.2 per cent.

That swung around sharply so that in the second quarter of this year a net balance of 44.7 per cent of banks reported rising capital levels.

Over the same time period the balance reporting regulatory pressure as a key driver of capital level changes soared from 9.6 per cent late last year to 36.2 per cent in the last three months.

By contrast lenders were significantly less interested in building up capital levels to cope with the changing economic outlook, changes in the riskiness of assets or as they changed the size of their balance sheets.

It came after the Bank’s financial policy committee warned lenders had underreported capital levels by up to £50bn, with the worst positioned banks £27bn short. They have filled half that already, and expect to fill the remainder in 2014.