Bloomberg News

U.K. Banks Don’t Need to Raise Extra Capital, EBA Says

October 27, 2011

(Updates with shares at close in second paragraph.)

Oct. 27 (Bloomberg) -- U.K. banks including Royal Bank of Scotland Group Plc and Barclays Plc won’t need to raise extra capital to insulate themselves against losses on government debt, the European Banking Authority said. The shares soared.

RBS, Britain’s biggest government-owned bank, rose 10 percent to 27.27 pence in London trading. Barclays advanced 18 percent to 210 pence, marking its biggest rise since March 2009, while HSBC Holdings Plc increased 5.5 percent to 555.3 pence.

Banks elsewhere in Europe will need to raise 106 billion euros ($148 billion) in fresh capital under tougher rules being introduced in response to the crisis, the EBA said yesterday. Lenders will need to have core Tier 1 capital equal to at least 9 percent of assets after writedowns on sovereign debt.

“U.K. banks are well above the fray,” wrote Ian Gordon, an analyst at Evolution Securities Ltd. in London in an e-mailed note to investors today. “All the nonsense which has been written suggesting that Barclays, RBS (and others) may need to raise fresh capital can be safely ignored.”

Greek banks will need to raise 30 billion euros of additional capital, Spanish banks 26.2 billion euros, Italian lenders 14.8 billion euros, French firms 8.8 billion euros and German banks 5.2 billion euros, the EBA said. The lenders have until Dec. 25 to submit their plans for raising the money to national supervisors.

After 10 hours of brinkmanship at the second crisis summit in four days, European leaders meeting yesterday in Brussels agreed to boost the firepower of the region’s rescue fund to 1 trillion euros and persuaded bondholders to accept a 50 percent loss on their holdings of Greek government debt.

--Editors: Jon Menon, Steve Bailey

To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.ne

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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