More alarming is British banks’ remaining exposure to asset-backed securities and the monoline insurance companies which may well require further write-downs, further eroding the banks’ capital. RBS had 19.5 billion pounds of such assets on its balance sheet at the end of June. A warning of the write-downs in the offing came Wednesday from Belgian bank KBC which took a 1.2-billion euros hit on nine billion euros in collateralized debt obligations after some were downgraded by Moody’s.
While the scale of U.K. rescue package — with 37 billion euros in capital set aside and another 13 billion euros earmarked if necessary — is hardly small, the amount of capital the world’s banks still have to raise to resume normal lending remains huge. The capital raised so far — around $420 billion before this week’s state-backed rescue packages in the U.S. and Europe, according to Independent Strategy — compares with the estimated losses of at least $1.3 trillion from the credit crisis.