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LONDON. – Banks have at long last built up their balance sheets with enough surplus cash to survive a future downturn – seven years on from the calamitous collapse of Lehman Brothers and the onslaught of the financial crisis.

The 100 biggest international banks have poured hundreds of billions of euros into their coffers to create capital buffers strong enough to prevent a downfall in the event of another financial crisis.

They’ve managed to plug a €500 billion funding hole identified by regulators back in 2011, by stripping high risk assets from their books, cutting lending to unreliable customers and using profits to beef up their capital buffers.

At the end of last year, these banks were just €6,5 billion short of buffer targets set by regulators.

That was down from a shortfall of €18.6bn six months earlier, and €57,5 billion in the middle of 2013, according to the international regulators on the Basel Committee on Banking Supervision in Switzerland.

The €6,5 billion figure is small compared with their combined profits: the top 100 banks made a profit of €228,1 billion in the six months to the end of 2014.

This means that the sector as a whole has more than enough capacity to set aside additional money to regulatory targets.

Bank of England governor Mark Carney speaks during the bank’s quarterly inflation report news conference at the Bank of England in London.

Smaller banks are also on track to plug their capital hole.

The 121 lenders studied by the regulators need a further €1,5 billion to satisfy targets.

However, this does not mean banks are entirely in the clear.

Regulators across the UK, EU and US run regular stress tests, which simulate a bank’s ability to withstand a financial crisis.

The Bank of England is currently putting British banks through their paces against a fictional crisis which includes a sharp slowdown in the Chinese economy.

It follows last year’s stress tests, which focused on a housing market crash in the UK.

Last year some lenders, including Royal Bank of Scotland and Lloyds Banking Group, were heavily affected by the stress tests.

While they passed the hurdles – which meant that their capital positions remained robust despite the fictitious house price crash – regulators made it clear they would keep a close eye on the banks’ finances.

This year, banks will need to pass the stress tests with flying colours before they are allowed to give money to shareholders by paying dividends or launching share buybacks.

RBS has strengthened its capital position this year, but the tests are based on data from the end of 2014.

Therefore, the bank’s bosses believe they will have to wait until the following round of tests, in late 2016, before they can start returning capital to shareholders. – Telegraph.