Several large and regional banks have disclosed what their capital ratios would look like if Basel III were in effect now and early results show that First Horizon National, Huntington Bancshares, SunTrust Banks and TCF Financial would take the biggest capital hits if they do not take steps to change their asset mix.
Among larger banks, the four carry the highest concentrations of home equity loans and risky residential mortgages, which means they would have to set aside more capital than competitors that are less exposed to home loans.
Basel III also caps how much residential mortgage servicing rights can count toward core capital. This week the share price of the four banks suffered as they announced earnings in which they disclosed their estimated ratios.
The disclosures provided the first glimpse of the potential impact of Basel III requirements since the Federal Reserve released proposed Basel guidelines last month.
According to a research note from Keefe, Bruyette & Woods, SunTrust, First Horizon, Huntington and TCF would see the biggest dips in Tier 1 common equity, while Bank of America, Citigroup and Bank of New York Mellon, all would see their pro forma capital ratios increase.
