NEW YORK (
) -- Large U.S. banks face an equity capital shortfall of $100 billion to $150 billion once new Basel capital standards are implemented, according to a
Tom McGuire, an investment banker within Barclays' capital advisory group, performed an analysis of how much capital U.S. banks are lacking if they aimed to hold an appropriate cushion.
He found that the top 35 U.S. banks would need to find $100 billion to $150 billion in additional capital between now and 2015 when the rules are implemented, according to a spokesman. About 90% of the capital needs are tied up in the six largest banks. By asset size, those banks would be
Bank of America
. McGuire also estimates that the top 35 banks have a "liquidity shortfall" of $500 billion -- meaning they will have to come up with additional cash and cash-like assets.
However, the investment banker thinks the gaps are "manageable" over that phase-in period and probably won't require much equity raising via stock sales. Instead, he thinks banks will address the shortfalls through retained earnings, asset run-offs and otherwise de-risking business lines.
"These shortfalls are entirely manageable . . . The more difficult question is what affect the new rules will have on the cost and availability of credit and bank profitability," said McGuire told the
, which first reported his analysis on Monday.
The Basel Committee on Banking Supervision issued new rules in September, which will eventually require banks to hold a minimum of 7% risk-weighted Tier-1 capital against assets.
The industry has five years before those rules are implemented, though, and the capital requirements won't necessarily lead to stock sales. Banks could also retain more earnings or shrink the size of their balance sheets to reduce the amount of capital they're required to hold.
Management of big U.S. banks have told investors they are ahead of the game in terms of Basel and capital adequacy during recent public discussions.
During a conference call to review third-quarter results on Oct. 19, Bank of America CEO Brian Moynihan said his team "simply took all the rules that are going to be applied" over the next two years and acted as though they were effective immediately. He added that since early 2010, he'd been telling investors that "from a clear risk basis," Bank of America ought to be holding a Tier 1 capital ratio of 8.5% to 9% of risk-weighted assets and a 5.5% to 6% ratio of tangible common equity, which is the best loss-absorber.
"We thought we would get there by year end 2010," Moynihan said. "We've in fact hit those targets a quarter earlier, and we continue to work on them."
Wells Fargo CFO Howard Atkins said his bank expects to be above 7% "within the next few quarters." Additionally, he said "we believe, given the fact that we don't have big concentrations of market risk, counterparty risk, and so on, that we will be affected substantially less than our peers."
JPMorgan CEO Jamie Dimon also noted that the banking industry is still awaiting guidance from regulators on the "final" Basel III guidance, which has to meld together both new U.S. capital requirements and international standards. He hoped that the G-20 meeting in Korea on Nov. 20 would lead to some additional clarity.
Still, Dimon asserted: "We think we're in very good shape."
-- Written by Lauren Tara LaCapra in New York
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