Banks `Hit by Pounds 15bn Fall in Pension Funds'
Katherine Griffiths Banking Correspondent, The Independent (London, England)
BRITAIN'S BANKS were hit by a pounds 15bn drop in the value of their pension funds last year due to the grim stock market conditions, according to a damaging analyst note published yesterday.
Fox-Pitt Kelton identified Barclays' pension fund as the most exposed to the fall in equity markets, with pounds 5.7bn of assets having been wiped away in 2002. Royal Bank of Scotland also suffered substantial loss, with the pension fund valued at pounds 4.6bn less than it was in 2001.
Jon Kirk, an analyst at Fox-Pitt, said: "The question is whether a surplus or deficit in the fund ought to be taken into account in the valuation of the company. Pension liabilities are very long- term but then so are company valuations." Fox-Pitt said banks' pension funds were unlikely to plunge into substantial deficits, but may have gone slightly into the red.
But the erosion of their assets, as valued by the incoming FRS 17 accounting method, highlight the likelihood that banks will have to substantially raise payments into the funds. …