The largest global banks cut the shortfall in the reservesthey'll need to meet Basel capital rules by 82.9 billion euros($112 billion) in the second half of 2012, leaving a gap of 115billion euros.

“Shortfalls in the risk-based capital of large internationallyactive banks continue to shrink,” the Basel Committee on BankingSupervision said in a statement on its website. The capital gapnarrowed by about 42 percent at the end of 2012 compared with themiddle of last year, the group said. The requirements, known asBasel III, are scheduled to fully phase in by 2019.

Lenders also need to do further work to meet a planned bindinglimit on bank indebtedness, known as a leverage ratio, the Baselgroup said. A quarter of large global banks failed to meet thestandard, it said.

Global regulators have clashed with lenders over the severity ofcapital, indebtedness and liquidity rules, which were set out in2010 as part of an overhaul of banking regulation to avoid a repeatof the financial crisis that followed the collapse of LehmanBrothers Holdings Inc. The Basel III measures will more than triplethe core capital that lenders must hold to at least 7 percent oftheir assets, weighted for risk.

The biggest lenders in Europe account for 70.4 billion euros ofthe capital shortfall at the end of last year identified by theBasel committee, the European Banking Authority said in a separatestatement today. They boosted their capital levels by 29 billioneuros from June 2012, the EBA said.

Banks can plug gaps in capital by either boosting their reservesor by reducing their assets weighted for risk.

Both the EU and the U.S. missed a January 2013 deadline to beginphasing in the Basel standards on capital, and have said they willstart the process from next year.

A sample of 222 banks surveyed by the Basel committee, including101 large international lenders, had a combined shortfall of 563billion euros in the easy-to-sell assets needed to meet one of theBasel liquidity rules, the group said. The liquidity coverage ratiois also set to fully apply from 2019.

The sample of banks also had a 2 trillion euro shortfall in thestable funding needed to meet a separate Basel requirement forbanks to back long-term lending with funds that are unlikely to dryup in a crisis. This measure, known as a net-stable funding ratio,is under review by the Basel committee, and is scheduled to becomea binding requirement on Jan. 1, 2018.

The Basel group defines large global banks as those with morethan 3 billion euros in Tier 1 capital and which areinternationally active.

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The U.S., U.K., Sweden and Switzerland are among nations thathave promised to set tougher rules for their banks than required byBasel.

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