* Barclays needs to raise 12.8 bln stg, taps investors for5.8 bln
* Deutsche has earmarked 250 bln euros of assets that couldbe sold
* Investors fear more banks will need to raise capital
* UBS draws a line under its 2008 bailout with fund buyback
By Steve Slater and Edward Taylor
LONDON/FRANKFURT, July 30 (Reuters) - A $9 billion rightsissue and a fresh purge of assets are among the measuresBritain's Barclays and Germany's Deutsche Bank announced onTuesday to meet tougher rules on risk, raising concern amonginvestors that regulators will push other European banks intosimilar action.
Unlike their U.S. rivals, which were quickly restructuredand recapitalised in the heat of the financial crisis, Europe'sbanks are still trying to extricate themselves from the legacyof 2007-09, with regulators in Britain and the continent fearfulthat some of them are still too big to fail.
"If Barclays needs to raise that much capital, and it wasrelatively well capitalised by European standards, it suggestswe've got a long way to go in Europe," said the head of equitiesat one UK fund manager.
"We'll see this creep in Europe, moving the bar higher andhigher to get to where the regulators want to go, and we'vestill got a long way to go in terms of capital raising."
Barclays bore the brunt of a surprise new Britishcurb on banks' risk exposure, requiring it to raise an extra12.8 billion pounds of capital in the next year.
To meet the new target, Britain's third-largest bank bymarket value said it would tap shareholders for 5.8 billionpounds, shrink its loan book by 65-80 billion pounds and sell 2billion pounds' worth of bonds, sending its shares sliding over7 percent.
Tougher rules on risk discourage banks from lending, andBritain's business minister last week accused the country'scentral bank of holding back economic recovery by imposinghigher capital levels on banks.
In the euro zone, national regulators are pushing banks toget their houses in order in anticipation of the EuropeanCentral Bank taking over direct supervision of the bloc'slargest banks next year.
Deutsche Bank, which has already raised around 5billion euros in new debt and equity, said it had earmarked anadditional 250 billion euros in assets, roughly equivalent tothe annual economic output of Denmark, that could be cut to meetnew bank safety rules.
Its shares were down 4 percent at 1245 GMT, underperformingthe European banking index, which was down 0.4 percent.
In addition to pressure on capital, European investmentbanks are also in the cross-hairs of a number of regulatoryprobes including a global investigation into manipulation ofbenchmark interest rates and the mis-selling of mortgage-backedbonds in the United States.
In Frankfurt, Deutsche Bank set aside an extra 630 millioneuros to cover claims and settlements, causing it to missquarterly profit expectations.
Even when banks settle with regulators, they still facefurther lawsuits from other aggrieved parties.
Barclays and Swiss bank UBS, which have alreadypaid out nearly $2 billion over their role in the manipulationof benchmark interest rates, were named in a fresh lawsuit bythe city of Philadelphia in connection with the scandal, alongwith Deutsche and a host of other banks.
Barclays also set aside another 2 billion pounds to covercompensation claims arising from mis-sold products in Britain.
UBS BRIGHT SPOT
In one of the few bright spots for European banking onTuesday, UBS said it would buy back a fund set up to purge it oftoxic assets during the financial crisis, drawing a line underits humiliating state bailout in 2008, boosting its capital andraising the prospect of an early increase in dividends.
UBS beat second quarter profit forecasts despite paying a$885 million fine to settle a lawsuit with the U.S. housingregulator over its role in the sale of mortgage-basedsecurities.
UBS's second-quarter performance was driven by buoyantequity markets. Its decision to pull out of most areas of fixedincome meant that unlike Deutsche Bank it was not hit by a dropin income from debt trading in the latter part of the secondquarter after the U.S. Federal Reserve signalled an end to cheapmoney.
Leaving aside the litigation charge, Deutsche Bank's coreinvestment bank underperformed U.S. rivals such as Goldman Sachsand Morgan Stanley. Revenues from Deutsche's investment bankrose just 9 percent, compared with double-digit jumps on WallStreet.
In Spain, Santander's core capital ratio, a measureof its capital strength, rose partly due to a reduction inlending, underlining the risk for regulators that the push forgreater capital levels could further choke the supply of creditand hurt the wider economy.
Earnings from Santander's flagship Latin American businessesfell in the first half of the year as lending income from Brazilfaltered, taking the shine off a turnaround in group profits.
Austria's Erste Bank has already met new globalstandards for capital and said it was more concerned that growthreturn to its core markets in central and eastern Europe.
"We belong to the best capitalised banks in Europe," ChiefExecutive Andreas Treichl told a news conference. "All we needis growth," he said.
Barclays (BARC)
