Regulator tells Barclays, Lloyds and RBS to plug £27bn hole in finances

 

The scale of the challenge facing policymakers to return Lloyds Banking Group and Royal Bank of Scotland to private ownership became clearer today as the banking industry was told to raise another £13.4 billion.

The City’s financial watchdog said four of Britain’s largest banks and building societies needed to raise the new capital to strengthen their balance sheets. The banks have been ordered to find the cash without cutting lending.

The Prudential Regulation Authority said the banks had a £27.1 billion shortfall at the end of 2012, up from a £25 billion earlier estimate, but this has halved because of actions taken by lenders so far this year.

Worryingly for Chancellor George Osborne, Lloyds, which is 39 per cent taxpayer-owned, has an outstanding shortfall of £7 billion according to the PRA, while 81 per cent state-owned RBS needs to find another £3.2 billion.

The report was published just hours after Osborne used his annual Mansion House speech to confirm Government plans to sell its stake in Lloyds — almost certainly in a placing to institutional investors later this year. However, a privatisation of RBS still seems some way off, with the Chancellor claiming he did not want “a quick sale” and would only do so when the bank was “fully able to support our economy”.

The PRA, led by Bank of England Deputy Governor Andrew Bailey, pictured, said banks will need to have capital buffers equivalent to at least 7 per cent of their risk-based assets by the year end.

One source close to Lloyds described its £7 billion figure as “misleading” because it did not fully take into account billions of pounds’ worth of disposals announced since the turn of the year, including wealth manager St James’s Place. In a statement the bank, which is also expected to benefit from a £1 billion dividend from its Scottish Widows unit, said it was already three quarters towards the PRA target and would have it covered before the year end.

RBS said it expected to have the shortfall down to £400 million in December and would raise the rest in 2014 as agreed with the regulator. Barclays will need to find another £1.7 billion in capital, which it said it will do “organically”, and Nationwide’s £400 million gap will be covered by existing plans.

The Co-op Bank had already owned up to a £1.5 billion shortfall while HSBC, Santander UK and Standard Chartered were given the all clear. Experts warned that banks were being swamped by regulation and capital requirements. Only yesterday, the industry was facing calls for a radical shake-up from  the Parliamentary Commission on Banking Standard, which could see bankers jailed and bonuses delayed for up to 10 years.

Kevin Burrowes, UK financial services leader at PricewaterhouseCoopers, said: “Despite the fact that many banks have already made significant investment and progress to ensure their compliance, there remains a growing sense of concern among both regulators and analysts over banks’ overall capital levels.”

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Day In a Page

How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map
Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings
A year of the caliphate:

Isis, a year of the caliphate

Who can defeat the so-called 'Islamic State' – and how?
Marks and Spencer: Can a new team of designers put the spark back into the high-street brand?

Marks and Spencer

Can a new team of designers put the spark back into the high-street brand?
'We haven't invaded France': Italy's Prime Minister 'reclaims' Europe's highest peak

'We haven't invaded France'

Italy's Prime Minister 'reclaims' Europe's highest peak
Isis in Kobani: Why we ignore the worst of the massacres

Why do we ignore the worst of the massacres?

The West’s determination not to offend its Sunni allies helps Isis and puts us all at risk, says Patrick Cockburn
7/7 bombings 10 years on: Four emergency workers who saved lives recall the shocking day that 52 people were killed

Remembering 7/7 ten years on

Four emergency workers recall their memories of that day – and reveal how it's affected them ever since
Humans: Are the scientists developing robots in danger of replicating the hit Channel 4 drama?

They’re here to help

We want robots to do our drudge work, and to look enough like us for comfort. But are the scientists developing artificial intelligence in danger of replicating the TV drama Humans?
Time to lay these myths about the Deep South to rest

Time to lay these myths about the Deep South to rest

'Heritage' is a loaded word in the Dixie, but the Charleston killings show how dangerous it is to cling to a deadly past, says Rupert Cornwell
What exactly does 'one' mean? Court of Appeal passes judgement on thorny mathematical issue

What exactly does 'one' mean?

Court of Appeal passes judgement on thorny mathematical issue