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Business

Top EU banks still plagued by capital buffer shortfall

Some major European banks keep struggling to meet liquidity targets in line with new rules set up as a consequence of the global financial crisis. German lenders have already met core capital requirements.

The European Banking Authority (EBA) announced Wednesday the top 42 lenders in the 28-member European Union needed to raise an extra 70.4 billion euros ($95 billion) of capital in order to comply with new rules set up after the financial crisis. The rules are known as the Basel III accord and are set to fully take effect in 2019.

Although there's quite some time to go until the deadline, regulators have been putting pressure on banks to move early to encourage investors to buy bonds and shares.

In its latest interim report, the EBA estimated that by the end of last year the banks' capital shortfall had been cut by over 29 billion euros compared with six months earlier when the watchdog published its previous assessment.

Learning from past mistakes

Basel III triples the amount of capital that banks must hold compared with requirements prior to the 2007 financial crisis that saw underfinanced lenders being rescued by taxpayers. The accord stipulates banks must have a core capital buffer amounting to at least 7 percent of their assets on a risk-weighted basis by January 2019.

Lenders are also required to have separate buffers of cash and government debt known as the liquidity coverage ratio in order to survive market shocks of up to a month unaided.

The German central bank reported Wednesday the country's top seven lenders had already met the Basel III requirements by building up a 7-percent core capital buffer. Germany's smaller banks were reported to be in an even better situation, with buffers of close 9 percent already in place way ahead of the deadline.

hg/mz (dpa, Reuters)