BoE: U.K. Banks Need Massive Shift in Capital vs. Assets (LYG) (BCS) (RBS)
The short message: U.K. banks need to raise a lot more equity versus assets.
That's according to the latest report from the Bank of England. Latest data show a Â£27.1 billion ($41.96 billion) capital shortfall from Barclays (NYSE: BCS), Royal Bank of Scotland Group (NYSE: RBS), Lloyds Banking Group, (NYSE: LYG), Nationwide Building Society, and Co-op Bank at the end of 2012.
The WSJ noted Thursday morning that RBS, Lloyds, and Barclays would sell assets and shrink certain parts of their businesses to address the shortfalls.
The Bank of England's Prudential Regulation Authority said banks are expected to hold about 7 percent in equity capital versus risk-weighted assets, after making several adjustments for potential loan losses from U.K. commercial real estate and assets in weakened euro-zone countries. After accounting for the banks' current business plans, the number falls to Â£13.4 billion.
Barclays had a Â£3 billion capital deficit at the end of 2012, RBS at Â£13.6 billion, and Lloyds at Â£2.8 billion.
In March, the BoE's Financial Policy Committee said the banks' shortfall was Â£25 billion at the end of 2012, halving that to Â£12.5 billion under current business plans.
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