S&P study raises fears over banks' financial strength

24th Nov 2009 13:25

Rating agency Standard & Poor's said that nearly all of the world's big banks are weakly capitalised.Most of the banks in Japan, the US, Germany, Spain, and Italy included in S&P's survey lack sufficient capital to comfortably maintain their credit ratings and therefore risk further downgrades.Citi, UBS and Japan's Mizuho Financial were rated the worst, while HSBC is the world's best capitalised bank, according to the report.Banks on average had a 6.7% risk adjusted capital (RAC) ratio, which is more than three percentage points below the average tier 1 capital ratio. 'The RAC results illustrate our qualitative opinion that Tier 1 and leverage ratios are not sufficient to come up with an informed view about individual banks' capital adequacy,' said Standard & Poor's credit analyst Bernard de Longevialle. 'We see an important difference between the relative ranking of individual banks' capital adequacy according to our measure, and what is suggested by Tier 1 ratios.'