New accounting rules will hit banks hard - Barclays
(3 September 2015 – Europe) Europe’s top banks could be forced to recognise an extra €61.5 billion (A$97 billion) in loan losses, a new report from Barclays shows.
Analysts have calculated how 27 of Europe’s biggest banks may be affected under new global rules governing how much lenders should reserve for potential bad loans.
In the recently published report, they found that the rules would trigger an increase of 34 percent in loan loss provisions across the group, as well as lower bank valuations and more volatile earnings.
In its research, Barclays said the new requirement to recognise expected losses on all loans at initiation would add about €13.4 billion to the banks’ loan loss provisions. Approximately, an additional €48 billion would be added because of added provisions for lifetime losses on bad loans.
Spanish bank Caixa, Italy’s UBI and the UK’s Standard Chartered are most vulnerable to the new rules. On the other hand, banks likely to experience the least impact include Credit Suisse, UBS, Virgin Money and Nordea.
While the rules will not come into effect until 2018, Barclays said some banks with excess capital might take higher provisions in 2016 and 2017 in order to reduce the impact.
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