European Banks Need 115 Billion Euros

Spiegel
December 8, 2011

The European Banking Authority has determined that banks in Europe need an additional 115 billion euros to conform with new capital ratio requirements. The sum is higher than an October estimate, largely because of capital deficits found at banks in Germany.

European banks are in need of cash, and will have to find some €114.7 billion to top up their capital reserves, according to a stress test carried out by the European Banking Authority. The EBA released the results of its analysis of capital requirements of European financial institutes on Thursday evening.

"The EU-wide recapitalisation exercise is an important element in strengthening European banks' position in the current environment characterised by heightened systemic risk arising from the sovereign debt crisis," the EBA said in a statement.

The EBA will demand that German banks come up with €13.1 billion to satisfy the new core capital ratio of 9 percent recently agreed to by European leaders. Banks have until mid-2012 to fulfil the requirements. The total needed is higher than the €106 billion estimated in October primarily because of the increased needs of banks in Germany, Austria, Belgium and Italy.

The new requirement for Germany is well over double the €5.2 billion estimated in October. According to an unnamed financial source cited by news agency Reuters, the country's leading bank, Deutsche Bank, will have to raise €3.2 billion while struggling financial giant Commerzbank needs to come up with €5.3 billion. Other banks in Germany that will have to find additional capital include state-owned banks LBBW, Nord LB, West LB and Helaba.

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