FSA chief reconsiders capital ratios

by Gill Montia

Story link: FSA chief reconsiders capital ratios

The chairman of the Financial Services Authority has indicated that UK banks may be required to increase their capital ratios, at some point in the future.

Speaking at the Global Financial Forum in New York yesterday, Lord Turner acknowledged that higher capital ratios would increase the cost of banking but asserted that the “potential macroeconomic costs of tighter regulation for banks had to be set against the benefits of lower risk to financial stability”.

Expanding on themes from his recent review of banking regulation, he questioned whether under a new regulatory framework, “banks that are ‘too big to fail’ may be expected to hold extra capital”.

According to a report in the Financial Times, the Government may flesh out the suggestion in new measures to be published as early as next month.

The newspaper names HSBC, Royal Bank of Scotland, Lloyds Banking Group and Barclays as banks likely to be affected.

In related news, US regulators have told Bank of America and Citigroup that they may need to raise more capital, according to a report in the Wall Street Journal.

Both banks have undergone recent “stress-testing” and the findings, which are only at a preliminary stage, are likely to be challenged.