Britain's banks are expected to be told today they face a capital shortfall of up to £60bn as the Bank of England delivers its verdict on the strength of the sector.
The Bank's Financial Policy Committee (FPC) will reveal the scale of the balance sheet pressure in the banking industry and its decision on how to tackle the collective capital hole.
Banks are already braced for grim news after the FPC warned in November that the shortfall in capital needed as a cushion against future crises could be as high as £60bn in its worst-case scenario.
Lenders - such as The Co-operative Bank - have already been taking action to boost their balance sheets after discussions with the Financial Services Authority (FSA).
But it is thought the FPC believes banks will have to go further and raise more than agreed with the FSA, which is set to be axed on Monday as part of a major regulation overhaul in the UK.
In its quarterly report on liabilities and financing in the sector, the Bank yesterday said that capital levels remained broadly unchanged so far this year, although they were expected to rise in the next three months.
It had expected capital levels to have already started increasing.
A number of players are understood to have been given orders by the FSA to beef up their capital cushions, with the Co-operative Bank reportedly warned over a potential £1bn shortfall.
There are fears that state-backed lenders Royal Bank of Scotland and Lloyds Banking Group are also significantly under-capitalised and may be told to bolster their balance sheets with large capital raisings.
The Treasury is expected to make it clear that the taxpayer will not foot the bill and that there will be no more direct state support for RBS and Lloyds.
Instead, the FPC is likely to allow the lenders an extended period to come up with measures to build up their capital buffers.
They have already started making efforts to appease concerned regulators, with RBS recently agreeing to float a stake in its US business Citizens, while Lloyds has raised £500m by selling part of its stake in fund manager St James's Place.
Today's statement is seen as a pivotal one for the FPC, whose job it is to spot and prevent another financial crisis.
It is also the pillar of the new regulatory regime introduced by the coalition, which comes into force on April 1.
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