We use cookies to provide you with a better experience. If you continue to use this site, we'll assume you're happy with this. Alternatively, click here to find out how to manage these cookies

hide cookie message
RSS FeedRisk

'Big Four' UK banks may need shoring up

BoE governor King says problem “manageable” but action needed

Article comments

Bank of England governor Sir Mervyn King has said the UK’s four biggest banks may need £5 billion to £35 billion of new capital to protect against potential future losses but described the issue as “manageable”.

Presenting the UK central bank’s Financial Stability Report on Thursday, King said, "UK banks currently report substantial buffers over the minimum level allowed…But, in judging whether banks are adequately capitalised, we need to ensure that reported capital ratios do in fact provide an accurate picture of banks' health. At present there are good reasons to think that they do not."

He named Barclays, RBS, Lloyds and HSBC as the four in question but added that if action is taken the problem is "manageable".

The Bank of England said there were three reasons why it felt the banks' capital ratios were understated.

"First, expected future credit losses may be understated. Second, costs arising from past failures of conduct may not be fully recognised. And third, the risk weights used by banks in calculating their capital ratios may be too optimistic," King explained.

The governor also said rising costs related to banking scandals also needed capital allocation. Barclays faces multiple investigations in the UK and US, while all four are facing domestic claims for payment protection insurance (PPI) mis-selling.

As a consequence, the Bank of England is worried that the big four "could face additional sizable costs."

The Bank of England will be granted greater oversight responsibilities over UK banks from next year with new governor Mark Carney at the helm and when it takes over the Financial Services Authority (FSA). Ensuring compliance with capital adequacy requirements would be one of its functions.



'Big Four' UK banks may need shoring up

Energy risk: How data is eating up all the energy

Energy risk: How data is eating up all the energy

Any failure in energy supplies to data servers can result in severe consequencesmore ..

EMEA corporate upgrades outnumber downgrades, says Moody’s

Rating agency notes first such instance since the financial crisis yearsmore ..

World hit by record wave of 'mega' data breaches in 2013

Over half a billion records compromisedmore ..

CFOs bullish on UK growth prospects

Finance chiefs' appetite for risk has doubled that of a year agomore ..

Why BYOD needs to be on every CFO’s agenda

The Software Alliance explains why BYOD can be a legal nightmare for businessesmore ..

Audits key to managing cyber risks

Cybersecurity controls and reporting procedures should be assessed annuallymore ..

Send to a friend

Email this article to a friend or colleague:

PLEASE NOTE: Your name is used only to let the recipient know who sent the story, and in case of transmission error. Both your name and the recipient's name and address will not be used for any other purpose.

In Depth
How M&A teams can create value by challenging the CEO

How M&A teams can create value by challenging the CEO

A typical “hold” period of nine to 18 months can generate increased sale value more ..

In Depth
What every company needs to do about big data?

What every company needs to do about big data?

In the first of a three part series, Pat Brans explores just how big 'big data' will get? more ..


* *