ECB sees 12% equity capital becoming new normal, Raiffeisen says

[VIENNA] The European Central Bank is pushing the region's biggest lenders toward a de-facto minimum capital ratio of 12 per cent common-equity-to-assets, Raiffeisen Bank International AG said.

"The regulator signaled to us that 12 per cent will become the standard for all major banks in Europe in the foreseeable future," Raiffeisen's Chief Executive Officer Karl Sevelda told journalists in Vienna yesterday. "That was the simple reason for us to define 12 per cent as our new goal." Raiffeisen, Austria's third-biggest lender, said it would scale back its Russian operation and sell its Polish unit as it seeks to add an extra two percentage points to its capital ratio over the next three years. As the ECB's newly-created supervisory arm seeks to enhance the industry's resilience, banks across the region have been boosting capital to levels far above regulatory minimums since last year.

The so-called CET1 ratio describes the level of high quality capital, mostly common equity, that the bank holds as a percentage of its risk-weighted assets. The ECB hasn't given banks any specific capital-ratio targets for the next three years, an ECB spokeswoman said.

"It's more of an informal expectation," said Raiffeisen's chief-financial officer, Martin Gruell. "There's the expectation that the big banks will reach this level over the medium term." The bank expects the Single Supervisory Mechanism to send it a formal capital requirement later this month as part of its Supervisory Review and Evaluation Process. That requirement won't change substantially, Mr Gruell said.

Until now, Raiffeisen has had to keep its total capital ratio, a broader capital gauge than CET1, above 13.76 per cent under a previous ruling from local supervisors. Total capital stood at 16 per cent at the end of last year, Mr Gruell said.

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