The top 42 banks in the European Union would need an extra 70.4 billion euros ($95 billion) of capital to comply with new rules that take full effect in 2019, the European Banking Authority (EBA), bloc’s banking watchdog, said on Wednesday.
The EBA published its latest update, estimating that by the end of 2012 the 42 banks’ capital shortfall had been cut by 29.1 billion euros compared with six months before that when it released its previous report.
Basel roughly triples how much capital banks must hold compared with before the 2007-09 financial crisis when many undercapitalised lenders had to be rescued by taxpayers. It requires banks to have a core capital buffer equivalent to at least 7% of their assets on a risk-weighted basis by January 2019.
Under Basel III, banks must also have separate buffers of cash and government debt by 2019, known as a liquidity coverage ratio, to survive market shocks of up to a month unaided. The rules apply to all banks, but they are mainly aimed at the big global banks.
The EBA said that by December last year the top 42 banks already held more liquidity than they are required to by 2019. In Britain, top banks are being encouraged to tap some of their excess liquidity to lend out and aid economic recovery. There was, however, a liquidity shortfall of 225 billion euros among the remaining 128 smaller, more domestically-focused banks in the sample of 170 lenders studied by the EBA.