Banks have $155 billion hole to fill

‘Basel III’ to fully phase in by 2019

BRUSSELS: The largest global banks cut the shortfall in the reserves they’ll need to meet Basel capital rules by

82.9 billion ($112 billion) in the second half of 2012, leaving a gap of 115 billion ($155 billion).

‘‘Shortfalls in the risk-based capital of large internationally active banks continue to shrink,’’ the Basel Committee on Banking Supervision said in a statement yesterday.

The capital gap narrowed by about 42% at the end of 2012 compared with the middle of last year, the Brusselsbased group said.

The requirements, known as ‘‘Basel III’’, are scheduled to fully phase in by 2019.

‘‘Lenders also need to do further work to meet a planned binding limit on bank indebtedness, known as a ‘leverage ratio’,’’ the group said.

‘‘A quarter of large global banks failed to meet the standard,’’ it said.

Global regulators have clashed with lenders over the severity of capital, indebtedness and liquidity rules, which were set out in 2010 as part of an overhaul of banking regulation to avoid a repeat of the financial crisis that followed the collapse of Lehman Brothers Holdings Inc.

The Basel III measures will more than triple the core capital that lenders must hold to at least 7% of their assets, weighted for risk.

The biggest lenders in Europe account for 70.4 billion of the capital shortfall at the end of last year identified by the Basel committee, the European Banking Authority (EBA) said in a separate statement yesterday.

They boosted their capital levels by 29 billion from June 2012, the EBA said.

Banks can plug gaps in capital by either boosting their reserves or by reducing their assets weighted for risk.

Both the European Union and the United States missed a January 2013 deadline to begin phasing in the Basel standards on capital, and have said that they will start the process from next year.

A sample of 222 banks surveyed by the Basel committee, including 101 large international lenders, had a combined shortfall of 563 billion in the easy-to-sell assets needed to meet one of the Basel liquidity rules, the group said.

The liquidity coverage ratio is also set to fully apply from 2019.

The sample of banks also had a 2 trillion shortfall in the stable funding needed to meet a separate Basel requirement for banks to back longterm lending with funds that are unlikely to dry up in a crisis.

This measure, known as a ‘‘net-stable funding ratio’’, is under review by the Basel committee, and is scheduled to become a binding requirement on Jan 1, 2018.

The Basel group defines large global banks as those with more than 3 billion ($4.05 billion) in Tier 1 capital and which are internationally active.

The US, United Kingdom, Sweden and Switzerland are among nations that have promised to set tougher rules for their banks than required by Basel.