Big Banks ‘Closer’ To Meeting New Capital Rules

Zurich (AFP) – Large banks are making progress toward meeting their capital requirements under Basel III, the banking reforms imposed in a bid to avoid a repeat of the 2008 global financial crisis, a study found Wednesday.

The Basel Committee, which monitors lenders’ progress on the new rules, said that at the end of last year the 101 big international banks in its study were 115 billion euros ($155 billion) short of their targeted capital cushion.

Basel III requires lenders to have a capital cushion of at least 7.0 percent of the total risks they are carrying. Global regulators reached a deal on the new rules in September 2010, and they are being phased in from January 2013 to January 2019.

The big banks’ shortfall was down from 197.9 billion euros in June 2012, the Basel Committee said in a statement.

“As a point of reference, the sum of after-tax profits prior to distributions across the same sample of Group 1 banks during 2012 was 419.4 billion euros,” it said.

The study also measured the banks’ compliance under new Liquidity Coverage Ratio (LCR) requirements.

The LCR rules came into the spotlight in January when regulators agreed to give lenders a reprieve by broadening the definition of the minimum assets every bank needs to hold, making it less costly for them to maintain the required buffer.

The Basel Committee found the big banks had a weighted-average LCR of 119 percent, up from 95 percent in its previous study, which used the old definition.

The committee’s report echoed the findings of a separate study by the European Banking Authority, which found the 42 largest European banks were 70.4 billion euros shy of the 7.0-percent capital cushion.

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