Regulators order lenders to raise more capital

Jun 20, 2013, 7:01 AM EDT
A man stands under a RBS, Royal Bank of Scotland, logo as he uses an ATM outside a branch of the bank in London, Thursday, June 13, 2013.
(AP Photo/Matt Dunham)

LONDON (AP) — British regulators are ordering some of the country's biggest banks to bolster their balance sheets by 27. 1 billion pounds ($42.1 billion) to prevent a repeat of the 2008 banking crisis.

The Prudential Regulation Authority said Thursday that Barclays, Lloyds Banking Group and Royal Bank of Scotland account for much of the shortfall. Barclays must boost its capital by 3 billion pounds and state-backed RBS and Lloyds must find 13.6 billion pounds and 8.6 billion pounds respectively.

The banks will be given time to plug their capital holes. Lloyds and RBS have said they won't need to ask investors for more money. HSBC, Standard Chartered and Santander were not asked to put up more cash.

The report is likely to heap further pressure on banks, which are being ordered to hold more capital even as they are being pushed to lend to businesses and families to kick-start the economy.

The report will also lend more attention to RBS, the bank that is more than 80 percent owned by the taxpayer after receiving a government bailout in 2008. The 45 billion-pound ($71 billion) injection of state capital has weighed down the British economy, and political leaders are anxious to return the bank to the private sector — both to get its money back and to help the recovery.

But the timing of such a sale can take place remains up in the air. Treasury chief George Osborne did not offer a timetable at his annual Mansion House speech Wednesday, but said the government would take on a detailed analysis of whether or not to split off the bank's bad assets into a separate legal entity — known as the good bank/bad bank split.

Lloyds' return to the private sector seems on firmer footing. Osborne used the Mansion House speech to note that the Treasury is "actively considering" the idea — though he offered no timetable or price. Osborne said that the sale of the government state in RBS was "some way off."

The watchdog's report follows the urgent recommendation by the parliamentary standards commission, whose scathing assessment of the state of the banking industry concluded that bankers must be held more accountable for their actions or face greater penalties — perhaps even jail in the most excessive circumstances.