UK Banks Face £60bn Black Hole!
- UK banks face £60bn black hole!
by Philip Aldrick, http://www.telegraph.co.uk/
Britain’s banks face a financial black hole of up to £60bn from regulatory demands, hidden losses, and potential mis-selling costs that threaten to jeopardise future growth, the Bank of England has warned.
In its Financial Stability Report (FSR), the Bank revealed that the big four lenders – RBS, Lloyds, Barclays and HSBC – may need to take £15bn of extra provisions on consumer loans and European debt, “a further £4bn-£10bn” to cover fines and customer compensation, and “between £5bn and £35bn” to meet regulatory risk standards.
Sir Mervyn King, the Bank’s Governor, said the potential losses distorted the “picture of banks’ health” and that lenders may have to “raise capital or take steps to restructure”. He added: “The danger to be avoided is that of inadequately capitalised banks holding back our recovery.”
However, he stressed that no more taxpayer money would be put on the line. “It was made very clear that the Treasury did not want to put more into the state-owned banks,” he said.
Markets have lost confidence in the banks due to their “complex and opaque” numbers and, to recover investors’ trust, lenders need to set aside capital for “expected losses” and for potential compensation and fines over customer mis-selling and Libor rigging, the Bank said. Risk levels also need to be calculated more prudently.
The decision was taken after last week’s meeting of the Financial Policy Committee. In the most dramatic intervention since the £67bn bail-out of lenders from RBS to Lloyds, the proposal will see regulators from the Financial Services Authority sent into banks and building societies to ensures losses are properly declared by March next year.