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Tougher capital rules are key driver of European bank deleveraging

18 October 2012

A banking report from Deloitte, the business advisory firm, highlights the key drivers of deleveraging among European banks.  The report – ‘Capital Gain, asset loss, European bank deleveraging’ – reveals:

  • Nearly three-quarters (71%) of banks surveyed cited regulators’ demands for higher capital as the main driver of their divestment and deleveraging plans;
  • Liquidity constraints are also a significant cause of deleveraging. More than half (53%) of banks rated it as “important” or “extremely important,” with eurozone banks even likelier to cite it.
  • 53% of respondents said deleveraging is expected improve capital ratios by up to 100 basis points. 12% expect an improvement in capital ratios of more than 150bps;
  • High proportion of sales will be assets in Western Europe. Some 88% of banks are formulating plans to sell assets in Western Europe.

Vivian Pereira, banking and capital markets partner at Deloitte, said:

“The banking crisis has forced European banks to carry out a fundamental review of their business models and to restructure and resize their balance sheets. The Deloitte Bank Survey shows that the most important driver for bank deleveraging is the regulatory requirement for higher capital ratios. This has been the main focus of the Basel Committee on Banking Supervision and European Banking Authority, which are pursuing a policy of reducing global systemic risk.

“There are other factors behind bank deleveraging. Funding and liquidity concerns, European Union state aid rules and sovereign bail-out programmes and changes in business strategy induced by the plethora of reforms faced by the banking sector are also important drivers.  Banks in countries under the IMF/EU/ECB programmes also have additional pressures to deleverage.”

Ends

Note to editors
About the Deloitte Bank Survey 2012
Deloitte surveyed 18 financial institutions across eight European countries to gather the banking sector’s views on the drivers, pace, volume and cumulative impact of bank deleveraging. In total these banks had assets worth €11trillion.

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited

 

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