Skip to content. | Skip to navigation

Personal tools
Sections
You are here: Home Breaking news European banks need to raise EUR 114.7bn: regulator

European banks need to raise EUR 114.7bn: regulator

08 December 2011, 23:17 CET
— filed under: , , ,

(LONDON) - Europe's banks must raise an extra 114.7 billion euros ($152.5 billion) in new capital to restore stability and confidence in markets, the EU's banking regulator said on Thursday.

The European Banking Authority said in a statement that its final recapitalisation plans were part of "co-ordinated measures to restore confidence in the banking sector" ravaged by the eurozone debt crisis.

The final figure was more than 8.0 billion euros higher compared with the EBA's initial guidance given two months ago.

The results came on the first day of a crucial EU summit that is aimed at resolving the eurozone's festering sovereign debt crisis.

European Union leaders open a make-or-break summit later Thursday aiming to fix a crippling debt crisis, as French President Nicolas Sarkozy warned there would be no "second chance" to save the eurozone.

Markets are on red alert over Europe's banking sector amid widespread concern about exposure to the eurozone's long-running sovereign debt crisis, which has already resulted in EU/IMF bailouts for Ireland, Greece and Portugal.

The EBA examined the balance sheets of 65 banks across Europe, with particular focus on exposure to European government bonds, and said it found capital shortfalls in more than 30 lenders in 12 countries.

The regulator added that the banks would be given until January 20 to tell their national regulatory authorities how they intended raising the additional funds.

"Following completion of the capital exercise conducted in close cooperation with the competent national authority, the EBA has determined that the aggregated shortfall amounts to 114.7 billion euros," it said.

The London-based EU financial regulator ruled that Spanish and Italian banks needed to raise 26.2 billion euros and 15.4 billion euros respectively.

German banks needed to raise a total of 13.1 billion euros, which was far more than the 5.2-billion-euro estimate given in October. French lenders required new capital of 7.3 billion euros.

Germany's biggest lender Deutsche Bank needed 3.2 billion euros in extra capital, the EBA calculated, up from the October estimate of 2.8 billion euros.

And the country's second-biggest bank, Commerzbank, would need 5.3 billion euros, much more than the previous estimate of 2.9 billion euros.

Germany's banking federation BdB slammed the EBA's findings as "arbitrary," and claimed that the results "have not contributed to a stabilisation of the markets."

Turning to French banks, the EBA estimated that the BPCE group needed 3.7 billion euros, Societe Generale 2.1 billion euros and BNP Paribas 1.5 billion euros, while Credit Agricole required no new capital.

The EU regulator added that banks should strengthen their capital buffers to insulate themselves against exposure to eurozone sovereign debt -- and reassure markets about their ability to withstand more financial shocks.

"The formal recommendation adopted by the EBA's board of supervisors states that national supervisory authorities should require the banks included in the sample to strengthen their capital positions by building up an exceptional and temporary capital buffer against sovereign debt exposures to reflect market prices as at the end of September.

"In addition, banks will be required to establish an exceptional and temporary buffer such that the core tier one capital ratio reaches a level of 9.0 percent by the end of June 2012," the regulator added.

Back in October, the EBA had estimated that European banks needed an extra 106.4 billion euros to increase Tier 1 capital ratios to meet the new requirement of 9.0 percent of assets by June 2012.


Document Actions