Banks in Major Countries Meeting Basel Capital Ratios
NEW YORK - Most banks in major countries are on course to meet the new international capital guidelines by the end of next year, according to a study just released by Price Waterhouse.
Only three of the banks surveyed have not satisfied the 7.25% minimum ratio set for the end of last year.
All expect to meet the 8% minimum by the end of 1992, Price Waterhouse found.
Japanese Under Pressure
The survey, based on answers supplied by 86 banks in 23 countries, did not identify the three banks that failed to meet the capital minimums but said that some Japanese banks "appear to be under pressure to reach the minimum standard."
Nearly half the banks surveyed have had to raise additional capital to meet the new standards.
"For some banks, achieving the minimum required standards has been much easier than for others as they only had to ensure their position did not deteriorate," noted Peter Cooke, chairman of the firm's regulatory advisory unit and a former Bank of England associate director who helped draft the capital guidelines.
Some Constraints Noted
"Others had to raise significant amounts of new capital and in some cases face potential constraints on balance-sheet growth to meet the standards set."
Uniform international capital standards, due to take effect at the end of 1992, were introduced by the Basel-based Bank for International Settlements in 1988.
The standards require banks to maintain capital equal to 8% of their risk-weighted assets. They are intended to put banks on a equal competitive footing worldwide and assign different degrees of risk to different assets.
In its second major conclusion, Price Waterhouse noted that higher standards are changing the ways banks do business and that more than one third of the banks have had to restrain their growth in assets.
"Banks in many cases have made a clear move toward off-balance-sheet assets requiring less capital," the survey stated.
"A significant number are also actively pursuing the development of fee based, service oriented products such as corproate finance, portfolio management, and private banking.
The higher standards have also forced banks to increase pricing in order to get a better return on capital and to introduce computerized systems to monitor their capital-to-asset ratios.