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Big Banks Face $638 Billion Shortfall on New Rules

The world's biggest banks would have had to raise more than $600 billion euros to achieve minimum capital ratios if tougher rules that are coming in for the industry had been in force last year.

The world's biggest banks would have had to raise more than $600 billion euros to achieve minimum capital ratios if tougher rules that are coming in for the industry had been in force last year.

The Basel Committee of global regulators said if new rules, known as Basel III, had been in force at the middle of last year banks would have needed 486 billion euros ($638 billion) to hold core capital of 7 percent of their risk-weighted assets.

The 103 biggest banks had an average capital ratio of 7.1 percent, the BIS said on Thursday in a review of the implications of the Basel III capital standards.

But the capital of some would have fallen even below 4.5 percent under the new rules, and would have needed 39 billion euros to just get to that level.

Basel III capital rules will be formally phased in from January 2013.

The BIS said profit after tax of the same banks was 357 billion euros in the year to the end of last June. Its estimate of the capital shortfall included a capital conservation buffer and a surcharge for global systemically important banks where applicable, and was not comparable to industry estimates. ($1 = 0.7622 euros) (Reporting by Catherine Bosley in Zurich and Steve Slater in London; Editing by Jon Loades-Carter)

Copyright 2010 by Reuters. All rights reserved.

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