UK banks 'require $31bn balance sheet boost'

17 April 2012

Banks in the UK must raise nearly £25 billion ($31 billion) more in capital to make their bonds an attractive option for investors.

That is according to analysts from Barclays Capital, who believe financiers still have a lot of work to do to improve the health of their balance sheets sufficiently in the aftermath of the banking crisis, the Daily Telegraph reports.

The experts indicated that a total of $156 billion may be necessary to reduce the banks' credit default swap (CDS) spreads to "acceptable levels", which would likely then lead to greater market activity.

For instance, their report noted that at present, the CDS trading point of the Royal Bank of Scotland (RBS) is around 316 points, but the financier would need to raise another $14.4 billion to cut this to a viable level of 150.

Recently, Eric Chalker, director of the UK Shareholders Association, called on the government to curb the salaries offered by RBS and Lloyds before selling its stakes in the banks back to private sector.

By Claire Archer

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