JavaScript is off. Please enable to view full site.

UK banks told to fill £25 bn capital black hole

UK banks told to fill £25 bn capital black hole

Wednesday, March 27, 2013, 22:30 GMT+7

Major British banks must reinforce their capital by £25 billion ($38.8 billion, 29.5 billion euros) by the end of 2013 after underestimating the potential losses and fines they face over the next three years, the Bank of England said on Wednesday.

The BoE said some banks had sufficient capital to ensure they can meet potential future losses but others needed to raise the funds, although it did not identify them.

It was the first order from the BoE's Financial Policy Committee (FPC), the new financial stability regulator, and followed a four-month study of the sector.

It said British banks and building societies, or lenders owned by their savers, faced losses of billions of pounds from "high-risk loan portfolios" in the British property sector and in "vulnerable" eurozone economies.

They also faced the possibility of £10 billion of fines and therefore "a more prudent approach to risk" was required, meaning they need to build up their capital to levels set out by global banking guidelines.

"Some banks... have capital ratios in excess of 7.0 percent; for those that do not, the aggregate capital shortfall at end of 2010 was around £25 billion," the FPC said.

The banks most affected are likely to be Royal Bank of Scotland (RBS) and Lloyds Banking Group, which are part-owned by the state after running up massive losses during the financial crisis.

Some observers said if RBS and Lloyds are required to raise more capital, it could delay plans to sell the banks back to the private sector.

However shares rose in both banks in early trading on Wednesday because the shortfall figure was not as bad as investors had feared.

Business Secretary Vince Cable criticised the move, saying it would prevent banks who are only just starting to lend to business again from doing so.

"The idea that banks should be forced to raise new capital during a period of recession is an erroneous one," he told Sky News.

Cable said the order would "prolong the time it takes for the British economy to recover" because it would hit the "already-weak" lending to small and medium-sized companies.

Britain is not in recession but would technically enter one if the country's economy is shown to have shrunk in the current first quarter.



Read more

Is Apple 'pampering' Vietnamese market?

The genuine products sold in Vietnam have good prices when compared to other markets in the region, maybe even more affordable than in the U.S.

5 days ago



‘Taste of Australia’ gala dinner held in Ho Chi Minh City after 2-year hiatus

Taste of Australia Gala Reception has returned to the Park Hyatt Hotel in Ho Chi Minh City's District 1 after a two-year hiatus due to the COVID-19 pandemic

Vietnamese woman gives unconditional love to hundreds of adopted children

Despite her own immense hardship, she has taken in and cared for hundreds of orphans over the past three decades.

Vietnam’s Mekong Delta celebrates spring with ‘hat boi’ performances

The art form is so popular that it attracts people from all ages in the Mekong Delta

Vietnamese youngster travels back in time with clay miniatures

Each work is a scene caught by Dung and kept in his memories through his journeys across Vietnam

Latest news