“British banks may not have enough capital to absorb future losses while supporting growth in the economy, the Bank of England warned Thursday.
The central bank, which takes on the responsibility of regulating U.K. banks from the Financial Services Authority (FSA) next year, said an urgent review of capital adequacy was necessary.
“The problem is manageable, and is already understood at least in part by markets,” said BoE Governor Mervyn King. “But it does warrant immediate attention.”
In its Financial Stability Report, the BoE said capital exceeded the minimum required. But the capital could be overstated because banks may be underestimating future losses, arising from the eurozonefor example, as well as taking an overly optimistic view of risk on their books and not recognizing the full cost of past misconduct.
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