Big EU Banks Faced $256 Billion Basel III Capital-Gap Last Year

The largest European Union banks would have needed an extra 199 billion euros ($256 billion) in their core reserves had new Basel capital rules been enforced at the end of 2011, the bloc’s top banking regulator said today.

The 44 banks, considered systemically important for the global financial system, would have needed to raise a total of 8 billion euros to meet the bare minimum level of 4.5 percent core tier 1 capital, according to a report on the European Banking Authority’s website. The figure rises to 312 billion euros when taking into account additional surcharges for the biggest banks.

The actual capital and liquidity shortfalls may differ from industry estimates “as the banking sector reacts to the changing economic and regulatory environment,” the regulator said in the report.

Global regulators have clashed with lenders over the severity of the capital and liquidity rules, which were set out in 2010 by the Basel Committee on Banking Supervision as part of an overhaul of banking regulation in the wake of the financial crisis that followed the collapse of Lehman Brothers Holdings Inc. The measures, known as Basel III, will more than triple the core capital that lenders must hold to at least 7 percent of their assets, weighted for risk.

The Basel group’s own survey covered 102 larger banks and 107 other lenders. It found that the largest global banks would have needed an extra 374.1 billion euros in their core reserves to meet the standards scheduled to be phased in by 2019.

The EBA carried out a capital-raising exercise this year in which it required banks to raise 114.7 billion in fresh capital by the end of June.

Banks can address shortfalls in meeting capital requirements by either boosting their reserves or by reducing their assets weighed for risk.

To contact the reporter on this story: Ben Moshinsky in Brussels at bmoshinsky@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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