ZURICH/LONDON (Reuters) - The world’s biggest banks would have needed to find 374 billion euros ($488 billion) if tough new capital rules to be phased in from January had been in place last year.
The finding, from the Basel Committee of global regulators, shows banks need to substantially bolster their balance sheets, although the estimate by the regulator implementing the new rules was 111 billion euros lower than an assessment made six months earlier.
The Committee said on Thursday that if the new rules, known as Basel III, had been in force at the end of December, the biggest banks would have needed 374 billion euros to hold core capital of 7 percent of assets, the target level for banks to meet when new rules come in.
The committee had estimated in April the top banks would have needed 486 billion euros if the rules had been in place at the end of June 2011.
The 102 biggest banks had an average capital ratio of 7.7 percent based on the new rules. But the capital of some of those big banks would have fallen below 4.5 percent, while many would have been short of the necessary pass mark of 7 percent, which includes a buffer they need to build up to prepare for bad times.
Basel III capital rules will be formally phased in from January 2013.
The rules mean banks have to hold more capital in reserve to cover loans. The aim is to create a bigger safety net to protect taxpayers from having to bail out banks and avoid a repeat of the 2007/09 financial crisis.
Reporting by Steve Slater and Catherin Bosley; Editing by Dan Lalor and David Holmes