Major banks face £356bn Basel III bill

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

It estimates that the 29 global systemically important financial institutions might need to raise the money by the end of 2018.

This could restrict the ability of these institutions to increase dividends or undertake share buybacks.

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

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

Fitch believes 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.

Fitch 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’.”

There is an extra surcharge on the 29 G-Sifis raising the Basel capital rules from 7% to between 8% and 9.5%.

They collectively represent $47trillion in total assets with 17 from Europe, four are from Asia and eight are American.

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