Banks in Britain need to raise their capital says British authorities. The authorities said that the country’s five largest banks need to raise a £13.4 billion, or $20.7 billion collectively additional capital by the end of this year to overcome if any financial crisis arises.

UK Bank Capital

Prudential Regulatory Authority has asked the banks to do so as a part of their continuous quest to support the capital reserves of British Banks. Many banks saw a downfall and went deep in red during the financial crisis.

Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS),  Barclays PLC (NYSE:BCS) (LON:BARC) and Lloyds Banking Group PLC (NYSE:LYG) (LON:LLOY) are three banks out of five with two other banks being advised by the authorities to raise capital.

Capital requirement

The British Banks were asked to raise combined £25 billion and to enhance common Tier 1 equity ratios to at least 7 percent as per the accountancy rules known as Basel III. The ratio indicates the strength of the bank with which it can overcome the financial crisis.

The collective capital figure has been raised to £27.1 billion by Prudential Regulator Authority, which is a part of the Bank of England, the central Bank of the country. The Authority said that the local firms have already reserved £13.7 billion through asset disposal, bond issuance and various other measures.

Analysts think otherwise

Majority of the banks have agreed upon increasing the capital though it is a multi-billion dollar figure. However, analysts say that issuing new equity to increase the capital was not expected from the banks.

“For the largest impacted banks, this is a restatement of old news,” said Ian Gordon, a banking analyst at Investec in London. “The main consequence of this announcement is further damage to banks’ short-term profitability.”

How much RBS and Lloyds have to raise

As per the regulators, Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) and Lloyds Banking Group PLC (NYSE:LYG) (LON:LLOY) are two banks who have to maintain most of their capital. The efforts made by both the banks were explained last month, which included trimming down the investment banking unit of RBS and Lloyd’s step to sell its stake in the asset manager St. James Place.

Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) has to raise capital of £13.6 billion by the end of 2013 apart from the capital kept reserved by the bank, whereas Lloyds Banking Group PLC (NYSE:LYG) (LON:LLOY) will have to manage £8.6 billion.

Remaining two are smaller lenders

Another big bank Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) will have to raise £3 billion by the end of 2013. Among five banks, two smaller lenders Co-operative Bank and Nationwide will have to raise £1.5 billion and £400 million respectively.

Earlier, RBS and Lloyd were against raising capital

Both the banks Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) and Lloyds Banking Group PLC (NYSE:LYG) (LON:LLOY) were bailed out in 2008, and since then the lenders are finding it difficult to ward of their legacy and non performing assets. However, it is interesting to note that both RBS and Lloyds announced in May that they will not need to raise fresh capital from investors.