UK Banks Need More Capital Reserves

UK Banks Need More Capital Reserves.

The Bank of England has confirmed that UK banks need to raise and reserve more capital against future losses and restrict the burden on the taxpayer in needing a bailout.

Bank of England Governor, Mervyn King, suggested is the Financial Stability Report that there reasons to think capital ratios do not present an accurate report of the financial position of a bank.

The comments comes amid news from Ireland that the Anglo Irish Bank is suing its auditors, Ernst & Young, for not advising it correctly of the risk of collapse on the Irish property market.

Our view

European Directives and the new capital adequacy requirements of financial companies as part of the Retails Distribution Review in UK (RDR), already set new capital requirements.

The news that banks perhaps needs more is a warning shot from the Bank of England as it takes over responsibility for supervising banks with regard to financial probity.

That said, to see banks blaming others for their failures, in their business area, that they have operated in for hundreds of years is unsettling.  Yet again, is this people looking to blame others for their own shortcomings?