Wednesday 18 October 2017

Five UK banks must find £13.4bn by end of the year

Bank of England says lenders need to fill their capital shortfall

Ben Moshinsky

FIVE UK banks must find £13.4bn to plug a £27.1bn (€31.7bn) capital shortfall by the end of the year, the Bank of England has said.

The five lenders, including Barclays, Lloyds and Royal Bank of Scotland, have already submitted plans to raise half of the the total.

Lloyds must plan to raise an extra £7bn, while RBS and Barclays need £3.2bn and £1.7bn of additional capital.

"The challenge for the banks is that they have many projects going on in the capital space," said Kevin Burrowes, a partner at Pricewaterhouse Coopers.

"Many of those projects compete and some are duplicative. Banks need to align their projects and look at their business as a whole, rather than in parts, to get to the right capital position."

The strength of Britain's banking system is under scrutiny as the UK government considers selling its stake in Lloyds, which is 39pc-owned by the state, and splitting up RBS.

Chancellor of the Exchequer George Osborne said in a speech in London that the UK government would proceed only "if we get value for the taxpayer".

Barclays said it was "confident it will exceed" the requirements by the 2013 deadline.

Lloyds and RBS said earlier this year that they could meet the requirements without needing to raise additional equity or sell contingent convertible securities – known as CoCos – which convert to equity automatically should capital levels deteriorate to a predetermined level.

"Overall, the UK banks look set to broadly achieve the PRA's capital requirements without the need to issue new equity," Gary Greenwood, a banking analyst at Shore Capital in Liverpool, England, wrote in a note to clients today.

Bailout

RBS, which is 81pc state-owned, is weighed down by too many poor assets to go private immediately, he said.

The Edinburgh-based lender received a £45.5bn bailout, the costliest in banking history, during the global financial crisis.

RBS shares remain below the level at which taxpayers break even. Standard Chartered, HSBC Holdings and Banco Santander's UK unit already comply with the recommendation. (Bloomberg)

Irish Independent

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