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Banks $155bln capital shortfall

Wednesday, Sep 25, 2013 - 01:53

Sept 25 - The pressure is on Europe's top banks to boost capital reserves in a bid to meet regulatory demands. Top banks will need over 70bln euros to make up the shortfall. Will they meet the 2019 deadline? Melanie Ralph reports.

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Its been a long hard slog for the banking industry over the last five years as they've tried to BOOST their capital ratios to keep the regulators happy. The end game is to comply with the new global standards outlined in Basel three....It requires banks to have a core capital buffer equivalent to at least seven percent of their assets. Although the capital shortfall fell by 83 BILLION euros in the second half of last year, global banks still need to find 115 BILLION euros...and a big chunck of that is from Europe. The region's top 42 banks need to find over 70 BILLION euros in just under six years. The watchdog cracking the whip is the European Banking Authority. It's latest update suggests European lenders are finding it harder to strengthen than other global players. BGC's Mike Ingram (SOUNDBITE) (English) MIKE INGRAM, MARKET ANALYST, BGC PARTNERS The health of European banks is absolutely crucial to the health of the European economy. If we've learnt anything over the last few years is that we cannot have healthy economies without health banks. The crucial question going forward is how European banks choose to address this particular problem. At the moment it appears that banks in Europe are choosing to actually shrink their balance sheets as opposed to raising capital. The EBA found the capital shortfall at Europe's banks had been cut by over 29 BILLION over the past year. And some reports suggest that if they carry on at this rate...it could be eliminated as early as February next year. But the banks must also have separate buffers of cash and government debt to survive market shocks of up to a month. That's fine for most of the big banks but the smaller ones are struggling -128 of them still need to find 225 BILLION euros. Several banks now also have fines to pay The report comes as the European Central Bank prepares to take on the role of banking supervisory in the region next year. It and the current regulator are both planning further health checks after this year.

Banks $155bln capital shortfall

Wednesday, Sep 25, 2013 - 01:53

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