LONDON - British authorities on Thursday called on five of the country’s largest banks to raise a combined £13.4 billion ($20.7 billion) in extra capital by the end of the year to protect against future financial shocks.
The demands form part of attempts by the Prudential Regulatory Authority, a British regulator, to strengthen the capital reserves of British lenders after many suffered major losses during the financial crisis.
Under the plans outlined on Thursday, British authorities said that Barclays, Royal Bank of Scotland, Lloyds Banking Group and two smaller lenders must raise a combined £13.4 billion by the end of 2013.
The announcement follows calls earlier this year for British banks to raise a collective £25 billion to increase their common Tier 1 equity ratios, a measure of a firm’s ability to weather financial shocks, to at least 7 percent under the accountancy rules known as Basel III.
The Prudential Regulator Authority, which is part of the Bank of England, thecountry’s central bank, said that the combined figure had now been raised to £27.1 billion, though local firms already had put aside £13.7 billion through asset disposals, bond issuances and other capital raising measures to meet the expected shortfall.
R.B.S and Lloyds, which were both bailed out by British taxpayers during the financial crisis, had the largest capital holes to fill, according to British regulators.
In total, R.B.S. must find £13.6 billion by the end of the year, including capital that the bank already has set aside, while Lloyds has to find an additional £8.6 billion.
Barclays also must raise £3 billion by the end of the year, and two smaller lenders, the Co-Operative Bank and Nationwide, have capital targets of £1.5 billion and £400 million, respectively.
HSBC and Standard Chartered, which both have large operations in emerging markets like China and India, will not have to raise additional capital to meet the common Tier 1 equity ratio of 7 percen! t.
The British regulator also announced new plans that local lenders would have to hold at least 3 percent of equity against their total assets, which also form part of the Basel III accountancy rules. Most of the British banks already had met the new rules, though Barclays’ figure stands at 2.5 percent and must be raised to the meet the regulatory demands by the end of the month.
In statements, R.B.S., Lloyds and Barclays said they did not plan to issue new equity to meet the capital shortfall.
Instead, Lloyds has sold assets, including its stake in the British asset manager St. James’s Place, while Barclays has issued so-called contingent capital, financial mechanisms that are hybrid between traditional bonds and bank equity. R.B.S. also has shed assets from its balance sheet to reduce the capital it needs to meet the reserve target.
Shares in Barclays fell 2.6 percent in early morning trading in London. R.B.S.’s stock price fell almost 1 percent, while shares in Lloyds droppd slightly on Thursday.
