Top banks face $100 billion Basel shortfall: report

LONDON Mon Nov 22, 2010 10:36am EST

A man walks by Barclays Capital offices in New York June 8, 2009. REUTERS/Shannon Stapleton

A man walks by Barclays Capital offices in New York June 8, 2009.

Credit: Reuters/Shannon Stapleton

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LONDON (Reuters) - The new Basel III banking rules will leave the biggest U.S. banks short of between $100 billion and $150 billion in equity capital, with 90 per cent of the shortfall concentrated in the top six banks, the Financial Times said, citing research from Barclays Capital.

The newspaper said the study by the investment banking arm of Barclays Plc assumes the banks will need to hold top quality capital equal to 8 percent of their total assets -- a one point cushion against falling below the effective global minimum of 7 percent set in September by the Basel Committee on Banking Supervision.

The regulations mean banks may need to increase their capital through retained earnings or issuing equity or they can cut their risk-weighted assets by selling off assets and cutting back riskier business.

"These shortfalls are entirely manageable ... The more difficult question is what affect the new rules will have on the cost and availability of credit and bank profitability," the FT quoted Tom McGuire, head of the Capital Advisory Group at BarCap, as saying.

McGuire estimates that U.S. banks can cut their equity needs by $10 billion with each $125 billion reduction in risk-weighted assets, the FT said.

Barclays Capital could not be reached for comment.

(Reporting by Louise Heavens; Editing by Lincoln Feast)

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