The new banking rules set forth by Basel III will generate deficits of 100-150 billion dollars in the pockets of America’s top banks, reports a study by Barclays Capital. According to the study, 90 percent of the deficit will go to the six biggest banks.
Barclays Plc’s investment banking branch believes that banks will need to have at least 8 percent of their total assets in top quality capital. Even so, most of them will be just one point above the 7 percent effective global minimum, put in place by the Basel Committee on Banking Supervision earlier this year.
Banks might also need to raise their capital through either retaining earnings or issuing equity. Another option is to get rid of risky assets, by selling off or cutting back on risky operations.
The head of the Capital Advisory Group at Barclay Capital, Tom McGuire, said that the deficits resulting from the implementation of Basel III banking rules are manageable. He added that a thornier issue should be raised, namely the effects the new rules might have on credit cost and availability, as well as banks’ profitability.
McGuire calculates that US banks can cut their equity needs by approximately 10 billion dollars for each 125 billion dollars worth of risk-weighted assets they get rid of.
