The U.K.’s banking regulator, the Prudential Regulatory Authority, has identified a £26 billion capital shortfall across Britain’s largest banks, according to a Financial Times report.
Quoting people familiar with the issue, Patrick Jenkins, Banking Editor of the Financial Times, reports that the Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) would need £10 billion – £12 billion, Lloyds Banking Group PLC (NYSE:LYG) (LON:LLOY) would need £8 billion to £9 billion, while Barclays PLC (NYSE:BCS) (LON:BARC) would require £3 billion to £5 billion.
Last week, The Co-operative Bank has announced its rescue plan to plug the £1.5 billion ($2.4 billion) hole in its balance sheet.
However, Prudential Regulatory Authority feels HSBC Holdings plc (NYSE:HBC) (LON:HSBA), Standard Chartered PLC (LON:STAN), Santander UK Plc (LON:SANB) are having good capital position, while the UK’s leading building society, Nationwide Building Society (LON:CEBB) has a small deficit of £1 billion on the capital front.
UK Bank’s Stake Sale Soon
The chancellor of the Exchequer George Osborne during the annual Mansion House dinner meeting indicated that the UK government was “actively considering options for share sales in Lloyds.” Besides the government is also weighing the option of a breakup of the Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS).
During the dinner meeting, the retiring governor of the Bank of England, Mervyn King also remarked that all the major banks in the UK remain highly leveraged.
Confusion has prevailed the capital requirement of UK banks ever since last year the Bank of England’s Financial Planning Committee originally estimated the short fall in the banking system would be up to £50 billion. However, Financial Planning Committee has later pruned its estimates to £25 billion, adding that about £12.5 billion of that was already in projected capital accumulation planned by the banks.
However, the Prudential Regulatory Authority is responsible for implementing the Financial Planning Committee’s assessment at an individual bank. Prudential Regulatory Authority has since done in-depth analysis to ascertain the precise capital requirements of the UK banks.
Public Announcement By Prudential Regulatory Authority
The UK banks’ capital shortfall is expected to be announced during Prudential Regulatory Authority’s scheduled round-up on Thursday. Besides, all the banks that are identified with capital shortfall are expected to outline their approach to deal with them early on Thursday.