Monday, 6 September 2010
Barclays says confident over capital rules revamp
Wednesday, 17 February 2010 at 10:14, Reuters, London
Barclays Plc said it has the balance sheet strength and flexibility to withstand a proposed radical shake-up of capital rules, playing down fears it could be one of the hardest hit banks.
Proposed new rules on bank capital and liquidity - dubbed Basel III - will come into effect by the end of 2012 and could leave many banks facing a capital shortfall and Barclays with a £17bn ($26.7bn) gap to plug. "Probably the greatest risk for us is the uncertain outlook for regulatory reform," Barclays CEO John Varley said on Tuesday after reporting annual profits almost doubled.
"We'll need to accommodate such changes as they are finally enacted over the coming years and we have the ability over that period to take mitigating action," he said.
Options could include halving its 20 per cent stake in US asset manager BlackRock or changing the structure of its 58 per cent stake in South Africa's Absa, analysts say.
"We won't talk about specific situations, but you can see over the way that we've run Barclays over the last three years that we have a flexible approach and we understand the imperative nature of having capital ratios that are strong," Varley said.
Barclays may need £17bn to repair an equity Tier 1 ratio that would fall to 5 per cent under the Basel III proposals, analysts at Credit Suisse have estimated. But the analysts said it should be able to plug that hole from retained earnings and balance sheet management.
The regulatory threat has helped knock Barclays shares over 10 per cent lower in the past month, before a 6 per cent rally on Tuesday after its strong results and capital position.
The bank said its core Tier 1 capital ratio was 10 per cent at the end of December, up from 5.6 percent a year ago and far better than analysts had expected. Risk weighted assets fell 12 per cent in 2009 to £383bn.
"It is clear that Barclays has ample capital for its current requirements, and ample flexibility to respond to potential future moves of the regulatory goalposts," said Ian Gordon, analyst at Exane BNP Paribas.
The aim of Basel III is to increase the quantity and quality of banks' capital and remove complexity and inconsistencies from balance sheets.
The proposal unveiled in December would hit Barclays on two fronts - it could need to exclude over £10bn of capital, while its risk-weighted assets could swell by over £130bn as trading book and counterparty exposures are considered riskier, analysts estimate.
Varley said last week he does not expect all of the changes to be implemented and analysts says the proposal on how to deal with minority shareholdings is the most likely to be changed, but wholesale change is unlikely.
Proposed new rules on bank capital and liquidity - dubbed Basel III - will come into effect by the end of 2012 and could leave many banks facing a capital shortfall and Barclays with a £17bn ($26.7bn) gap to plug. "Probably the greatest risk for us is the uncertain outlook for regulatory reform," Barclays CEO John Varley said on Tuesday after reporting annual profits almost doubled.
"We'll need to accommodate such changes as they are finally enacted over the coming years and we have the ability over that period to take mitigating action," he said.
Options could include halving its 20 per cent stake in US asset manager BlackRock or changing the structure of its 58 per cent stake in South Africa's Absa, analysts say.
"We won't talk about specific situations, but you can see over the way that we've run Barclays over the last three years that we have a flexible approach and we understand the imperative nature of having capital ratios that are strong," Varley said.
Barclays may need £17bn to repair an equity Tier 1 ratio that would fall to 5 per cent under the Basel III proposals, analysts at Credit Suisse have estimated. But the analysts said it should be able to plug that hole from retained earnings and balance sheet management.
The regulatory threat has helped knock Barclays shares over 10 per cent lower in the past month, before a 6 per cent rally on Tuesday after its strong results and capital position.
The bank said its core Tier 1 capital ratio was 10 per cent at the end of December, up from 5.6 percent a year ago and far better than analysts had expected. Risk weighted assets fell 12 per cent in 2009 to £383bn.
"It is clear that Barclays has ample capital for its current requirements, and ample flexibility to respond to potential future moves of the regulatory goalposts," said Ian Gordon, analyst at Exane BNP Paribas.
The aim of Basel III is to increase the quantity and quality of banks' capital and remove complexity and inconsistencies from balance sheets.
The proposal unveiled in December would hit Barclays on two fronts - it could need to exclude over £10bn of capital, while its risk-weighted assets could swell by over £130bn as trading book and counterparty exposures are considered riskier, analysts estimate.
Varley said last week he does not expect all of the changes to be implemented and analysts says the proposal on how to deal with minority shareholdings is the most likely to be changed, but wholesale change is unlikely.
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