Financial Times
February 5, 2012
The European Banking Authority is to challenge a significant proportion of the capital restructuring plans put forward by the continent’s leading banks to meet tough new capital requirements, say three people familiar with the process.
The regulator said in December that 30 banks needed to boost capital by an aggregate €115bn to reach a 9 per cent target for core tier one capital, a key measure of financial strength.
The banks were given until January 27 to submit plans to the EBA, via national regulators, outlining how they would meet the requirement. The plans will be discussed by the EBA board next week.
According to one person close to the process, as much as half of the measures outlined in those plans do not look credible. There are two particularly contentious tactics being employed – shifting the way in which a bank calculates the risk-weighting of its assets; and promising asset sales that are unlikely to attract buyers. Projected profits for the period to June also appeared over-confident in some cases, given the worsening outlook for the eurozone economy.
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