Europe's top banks would have had to raise 242 billion euros ($323 billion) or more to achieve minimum capital ratios if tougher rules that are coming in for the industry had been in force last year. The European Banking Authority (EBA) said if the new rules, known as Basel III had been in force at the end of June then 27 of Europe's top 48 banks would have had a core Tier 1 capital ratio of less than 7 percent of assets, which is the target level for banks to meet when new rules come into force.
Basel III capital rules will be formally phased in from January 2013. The EBA's assessment of the impact of Basel III showed that 10 big banks, or a fifth of those assessed, would have had core capital - a measure of a bank's financial strength - of less than the 4.5 percent. Banks would need to raise 242 billion euros in aggregate to reach 7 percent, it said.
Its assessment suggests Basel III rules could hit banks even harder than many in the industry had feared. The average core capital for big banks would have dropped to 6.5 percent under the rules at the end of June, from their reported core capital level of 10.2 percent, the EBA said. Europe's banking watchdog still has concerns about the capital rebuilding plans of a "handful" of the 31 banks who have been told to raise 115 billion euros of capital by the end of June, according to one person familiar with the matter.
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