“U.K. lenders were told by the Bank of England to raise 25 billion pounds ($38 billion) of additional capital, less than analyst estimates.
Banks need to set aside more money to cover bigger potential losses on commercial real estate and from the euro area, possible fines for mis-selling and stricter risk models, the Bank of England said following a report by the Financial Services Authority. The BOE didn’t identify or quantify the number of lenders that need to bolster capital and it said plans already announced by banks should cover about half the shortage.
“It’s a bit of a damp squib,” said Simon Maughan, an analyst at Olivetree Securities Ltd. in London. “The banks are going to have until the end of 2013, at least, to do it and there was no change to the message that they won’t need to raise fresh capital or restrict dividend payments.”
The BOE is pushing banks to increase resilience so they can boost lending and fund an economic recovery. The bank’s focus on loan losses could still hit Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc (LLOY) the most because of their commercial real-estate holdings, whileBarclays Plc (BARC), with its investment banking unit, would be most affected by the changes to risk weights, Maughan said. RBS and Lloyds have announced asset sales this year to bolster capital, and Barclays plans to sell contingent convertible notes.
