PARIS (MNI) – A total of 145 banks in Europe, the United States and
Asia need to raise an estimated E354 billion to comply with the minimum
Basle III bank capital rules, according to a new study.

The study, by the Boston Consulting Group, found that European
banks faced a shortfall of E221 billion. Banks in the US and Asia will
each need to raise about E70 billion, the report said.

The Basle III global capital adequacy rules require banks to have
Tier 1 capital of 7% of risk-weighted assets when they start taking
effect in 2013.

Europe’s banking regulator, the European Banking Authority, is
requiring European banks to raise their highest quality capital to 9% of
risk-weighted assets by June of next year.

“European banks need to develop a comprehensive plan for minimizing
the disruption caused by the new capital requirements. The timeline for
compliance is extremely compressed,” said Gerold Grasshoff, a BCG
partner and co-author of the report.

The study warned that there is a danger banks will attempt to reach
the capital levels by slashing asserts rather than by raising new funds.
The 154 global banks could close the gap, for example, by reducing their
assets by 17%, or E5 trillion, the study said.

The European Central Bank President Mario Draghi warned today that
the deleveraging of bank balance sheets was among the biggest current
threats to the European economy.

Market News International reported earlier Thursday that the ECB
and other Eurozone officials, fearful that the new capital ratio
requirement is leading to massive bank deleveraging that threatens the
Eurozone economy, are mulling a new proposal that would alter the
requirement in order to discourage the banks from such behavior.

This would involve a shift to requiring that banks raise a certain
amount of capital, regardless of fluctuations in the size of their
balance sheets, rather than maintain their capital ratio at a constant
level. Such a shift would remove the incentive banks currently have to
dump assets and restrict lending in order to inflate the ratio.

–Paris newsroom, +331-42-71-55-40, jduffy@marketnews.com

[TOPICS: M$$CR$,MGX$$$,M$X$$$,M$A$$$,MGU$$$,MI$$$$]