Banks must find £356bn to meet Basel III target

Major banks will have to raise an extra £356bn in capital to meet Basel III requirements, a Fitch Ratings report claims.

Published last week, the report estimates that the 29 global, systemically important financial institutions might need to raise the money by the end of 2018.

This could restrict their ability to increase dividends or undertake share buybacks.

The $566bn figure, amounting to £356bn, represents a 23% increase relative to the banks’ aggregate common equity of $2.5trillion.

While full Basel III implementation will not occur until 2018, Fitch notes that global banks will face market and supervisory pressures to meet these targets earlier.

The ratings agency believes that the banks will pursue a mix of strategies to address capital shortfalls, in particular retention of future earnings and selling or winding down riskier exposures affected by the rules.

The report states: “Basel III could increase borrowing costs, promote a shift to securitisation and capital markets funding, or cause a migration to less regulated segments of the financial system, including shadow banks.”

The 29 banks have $47trillion in total assets, equivalent to around £29.7trillion, with 17 from Europe, four from Asia and eight from the US.

The UK banks on the list include HSBC, Barclays, Lloyds Banking Group and the Royal Bank of Scotland.