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UK's big banks may be forced to sell assets to meet regulatory demands

by Sarah Miloudi on Nov 30, 2012 at 08:08

UK's big banks may be forced to sell assets to meet regulatory demands

Some of Britain's biggest banks could be forced to dispose of additional assets in order to meet regulatory pressures, it has been warned.

In the Bank of England's latest Financial Stability Report, high street lenders were warned they could have to set aside £15 billion in extra provisions to cover customers' loans, up to £10 billion to cover fines and up to a further £35 billion to meet regulatory risk demands.

The warning went out to the country's four big lenders - Royal Bank of Scotland, LloydsBarclays and HSBC.

Outlining the concerns of the Financial Policy Committee (FPC), Bank of England governor Mervyn King (pictured) said that while UK banks already reported capital over the minimum level, there were good reasons lenders' margin for safety should be widened.

'Since we met in the summer, sentiment in financial markets has improved a little, supported by policy actions from a number of central banks. But the underlying picture for global growth remains weak, and significant adjustments in indebtedness and competitiveness are still required in the euro area. Inevitably, that has implications for our own banking system and economy.

'Against that background, the FPC's primary concern has been to ensure that UK banks have sufficient capital to underpin the resilience of the banking system, so that they are on a solid footing to support economic growth,' King said.

He added: 'The danger to be avoided is that of inadequately capitalised banks holding back our recovery.'

The governor said the Bank wanted the Financial Service Authority to be sure banks' capital buffers were sufficient enough to absorb losses, and if not, to force this level up in a way that does not hinder lending.

This could be achieved by disposing of 'non-core' assets, King said, adding that the City regulator would now be taking the matter forward with individual banks.

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