British banks must plug £25bn capital gap

Britain’s banks must plug a £25bn (€29.4bn) capital shortfall as they face a potential £50bn (€58.9bn) hit over the next three years from eurozone shocks, bad debts and mis-selling scandals, the Bank of England warned today.

The Bank’s financial policy committee (FPC) said regulators will order banks to fill the capital hole by the end of the year to withstand the expected strains on their balance sheets.

It warned that over the next three years banks could suffer around £30bn (€35.3bn) in bad debts on exposure to property and eurozone economies, another £10bn (€11.8bn) in conduct costs such as mis-selling claims and around £12bn (€14.1bn) on a more prudent approach to risk.