Tuesday, September 16, 2014

EU Banks Need $152.5 Billion To Meet Recapitalization Requirements, European Banking Authority Says

December 15, 2011 in Banking Report

By Joe Kirwin

BRUSSELS—European banks continue to be buffeted by the sovereign debt crisis in the euro zone and therefore must raise a total of $152.5 billion in new capital in order to restore confidence in the sector, the European Banking Authority declared on Dec. 8.

In order to reach a Tier One capital buffer agreed upon in October by European Union leaders as part of a comprehensive plan to resolve the euro zone sovereign debt crisis, the EBA said Greek banks faced the biggest recapitalization needs ($40 billion) followed by Spain ($35 billion). Italian banks must raise $20 billion while German banks must raise $17.5 billion, the EBA said.

The recapitalization requirements are approximately $10 billion more than the EBA estimated in October when the EU leaders backed the plan to shore up banks’ balance sheets.

“These buffers are explicitly not designed to cover losses in sovereigns but to provide a reassurance to markets about the banks’ ability to withstand a range of shocks and still maintain adequate capital,” the EBA said in a statement.

The announcement by the EBA comes on the first day of a crucial EU leader summit designed to resolve the euro zone sovereign debt crisis. One decision expected will be a big boost to the EU bailout fund known as the European Financial Stability Facility in order to create a kind of firewall against the contagion that has gutted sovereign debt bond markets…

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