Top banks cut shortfall on capital

The largest global banks cut the shortfall in the reserves they will need to meet Basel capital rules by €82.9bn in the second half of 2012, leaving a gap of €115bn.

“Shortfalls in the risk-based capital of large internationally active banks continue to shrink,” the Basel Committee on Banking Supervision said.

The biggest European lenders account for a large part of the remaining shortfall, according to data published by the European Banking Authority.

Banks also need to do further work to meet a planned binding limit on indebtedness, known as a leverage ratio, the Basel group said. One quarter of large global lenders failed to meet the standard.

Global regulators have clashed with lenders over the severity of capital, indebtedness and liquidity rules, which were set out in 2010 as part of an overhaul of banking regulation to avoid a repeat of the financial crisis.

The measures, known as Basel III, will more than triple the core capital that lenders must hold to at least 7% of their assets, weighted for risk.

Stefan Ingves, the Basel group’s chairman, has said that work on the leverage measure should “be largely completed” this year.

Under the Basel plan, banks will have to begin disclosing how well they measure up to the leverage rule from 2015. The Basel III capital requirements are scheduled to phase in fully by 2019.

The biggest lenders in Europe account for €70.4bn of the capital shortfall at the end of last year identified by the Basel committee, the EBA said in a separate statement. They boosted their capital levels by €29bn from June 2012, the EBA said.

Banks can plug gaps in capital by either boosting their retained earnings, issuing more securities eligible to count as capital or by reducing their assets weighted for risk.

The overall capital gap for large global banks narrowed by about 42% at the end of 2012 compared with the middle of last year, the Basel group said.