Bank lending, dividends 'at risk on capital rules'
London, June 20, 2011
Top banks may have to cut lending, dividends or returns to meet stricter capital rules being planned for the biggest financial firms, Morgan Stanley analysts said.
'Many of the top 25 banks could approach likely G-SIFI (globally systemically important financial institutions) standards in the next 3-4 years, but at the cost of dividends, returns or, critically, through more aggressive deleveraging,' the analysts said in a note.
They expected eight banks to be required to hold an extra 2.5 percent of capital under tougher rules for bigger banks, including BNP Paribas, Citigroup , HSBC Holdings and J P Morgan.
Morgan Stanley estimated there will be five tiers, requiring banks to hold 1-3 percent extra capital. No banks are in the top tier. Six banks, including Goldman Sachs and UBS, will be in a third tier requiring them to hold 2 percent more capital, the report said.
Morgan Stanley cut its price targets on several banks, including Bank of America, Credit Suisse, Deutsche Bank and UBS. - Reuters