Friday, 21 June 2013

Now this is a surprise

Of all the banking institutions in the world, I would have said that Barclays & Nationwide were possibly two of the strongest. Not so according to the PRA [Bank of England's Prudential Regulation Authority].

In the past week, it has told the big banks that it wants them to have equity equivalent to 3% of their gross loans and investments on a so-called stressed basis, or taking account of potential future losses. The introduction of this tough new leverage ratio, may sound boringly technical but it matters, because it means that two big institutions, Nationwide and Barclays have to raise quite a lot more capital than they thought.

There will now be a negotiation on how and when they will raise the necessary equity - but it will be easier for Barclays, with its stock market listing, than for Nationwide as a mutual building society. All they can hope for is that more people put money in, and during this time of austerity, there is not a very high expectation of that in the near future.

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