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.


Recommended Articles


'Big Four' UK banks may need shoring up

Managing the costs of arbitration when a deal goes wrong

Managing the costs of arbitration when a deal goes wrong

CFOs should be involved in international deal negotiations from the startmore ..

Standard Chartered to upgrade systems after £180m fine

Bank failed to detect millions of suspect paymentsmore ..

Management to blame for core banking failures

IT problems becoming more common, says Forrestermore ..

Chinese man indicted over theft of Boeing C-17 secrets

Su Bin is accused of working with two others to steal gigabytes of U.S. defense-related documentsmore ..

The making of a cybercrime industry

And they're employing tried and tested above-board business methodsmore ..

Is there a bulwark against the rising pound for UK exporters?

Currency volatility has prompted a surge in the use of hedging tacticsmore ..

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
Can finance rise to the challenge of major transformation?

Can finance rise to the challenge of major transformation?

Outdated finance processes, systems and competencies leave too many questions unanswered more ..

In Depth
Interim CFO or consultant? The pros and cons

Interim CFO or consultant? The pros and cons

Ed Harding offers an insight into the life of an interim CFO and the advantages in driving transformation more ..


* *