The UK’s four biggest banks would need to raise another £155bn in fresh capital to withstand a new financial crisis, despite the view of the Bank of England Governor that lenders have an adequate cushion to cope with further turmoil.

Those are the results of research from three respected financial academics and add to a growing feeling that the Bank of England is dangerously undercooking its capital requirements on UK lenders in the face of swelling instability in financial markets.

UK banks had to be rescued in 2008 and 2009 at massive cost to British taxpayers.

Capital represents the shareholder funds in banks available to absorb losses. When losses are greater than the capital cushion the bank is bust and may need to tap state support if deemed to be systemically important by politicians and regulators.

In a new paper Viral Acharya of New York University, Diane Pierret of the University of Lausanne and Sascha Steffen of the University of Mannheim calculate that HSBC, Barclays, Lloyds and the Royal Bank of Scotland would need to raise $185bn (£155bn) of new equity between them to retain a 5.5 per cent capital cushion in a crisis, which is the benchmark of safety used in the past by the European Banking Authority.

That sum is not far away from the present market capitalisation of these banks, implying that they are massively overexposed.

The EBA’s stress test exercise last Friday showed the UK’s major lenders would see their capital diminished in another European economic crisis, but not below the 5.5 per cent level of so-called “risk-weighted assets” that would have created pressure for more equity injections.

The Bank of England’s Governor, Mark Carney, has made his unwillingness to require banks to raise more capital clear in recent months.

He wrote a letter to the Group of 20 finance ministers last month saying “authorities are committed to not significantly increasing overall capital requirements across the banking sector”.

"Policymakers have been sailing too close to the wind on bank capital" <p>Sir John Vickers</p>

This stance has drawn criticism from a number of independent financial experts and also Sir John Vickers, who chaired the Government’s Independent Banking Commission in 2011.

In May, Sir John said that the Bank had adopted a “soft policy” on bank capital and stressed that his 2011 report, whose conclusions were accepted by Parliament, said that major lenders should have to fund their balance sheets with considerably more.

And in response to the latest academic calculations indicating a £155bn capital shortfall Sir John said: “The weakness of bank share prices is a further indication that policymakers have been sailing too close to the wind on bank capital.”

Robert Jenkins, a senior fellow at Better Markets and a former member of the Bank’s own Financial Policy Committee, said: “The balance sheets of these banks represent a multiple of UK GDP. That the adequacy of their loss-absorbing capital is so hotly contested eight years on from [the collapse of Lehman Brothers] shows the failure of financial reform.”

That view was echoed by Professor Kevin Dowd of Durham University earlier this week, who lambasted the Bank’s “stress test” regime for banks for “portraying a weak banking system as strong”.

"[This shows] the failure of financial reform.” <p>Robert Jenkins</p>

The Bank of England declined to comment on the Acharya, Pierret, Steffen paper's findings but pointed to its response to the EBA stress test last week which said “major UK banks have the resilience necessary to maintain lending to the real economy, even in a macroeconomic stress scenario”.

The Bank is in the process of conducting its own new stress test on UK lenders, which is due to be published in the final quarter of this year.

Acharya, Pierret and Steffen argue that the broader European banking sector could be undercapitalised to the tune of around €890bn – a figure they calculated using stock market valuations of banks’ equity rather than the sums reported by lenders themselves.

Bank share prices have continued to fall since last Friday’s EBA stress test, implying investors are far from reassured by the fact that most lenders received a clean bill of health from the regulators.

The shares of the UK's major lenders are still trading well below the “book value” of their assets.

Lloyds is at 78 per cent of book value on a trailing 12 month basis, HSBC is at 70 per cent, and Barclays is at just 40 per cent. The price to book value of RBS (which is still 72 per cent owned by the UK government) is 42 per cent.

This implies that market think banks are overstating the real value of their assets or that their future capacity to earn profits in future is impaired - or both.

However, in a reflection of the Bank of England's thinking on this, in speech in March the Bank's executive director for financial stability, Alex Brazier, noted that despite the low price to book ratio of the UK's banks, their ability to borrow in financial markets was unimpaired. He said this fact suggested markets are not worried about banks' financial resilience in a crisis.

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Shares in RBS fell more than 7 per cent today after the majority state-owned lender unveiled a £2bn loss over the first half of 2016.

Barlcays and HSBC shares rose but the two lenders' share prices are still down 27 per cent and 42 per cent respectively over the past three years.

Lloyds's share price was also up today but the lender is 30 per cent lower than in 2013.

The share price of RBS, Barclays and Lloyds have also all been severely hit by the 23 June Brexit vote.