October 11, 2011
Far-reaching efforts to strengthen European banks began to take shape Tuesday just as Greece cleared a major hurdle that would allow it to avoid a disorderly default on its debt.
With the European Commission scheduled on Wednesday to release proposals to recapitalize Europe’s banks, France announced its own detailed plans aimed at protecting its most vulnerable financial institutions.
Alain Juppé, the French foreign minister, told the National Assembly that several leading French banks like BNP Paribas, Crédit Agricole and Société Générale, which are deeply exposed to the sovereign debt of Greece and other Southern European countries, would move to increase their capital reserves, initially by using their own revenue or through the financial markets. Money from the government would be drawn upon only as “a last resort,” he said, according to Reuters.
But Mr. Juppé said that the move, which was agreed upon with Germany during talks on Sunday, meant the banks’ best buffers against losses — so-called core Tier 1 capital — would increase to 9 percent or higher, from 7 percent, by 2013.
It was unclear whether any of that money might be drawn from the proposed euro zone bailout fund rather than directly from French government funds.
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1 comment:
Greece is a country quite rich of domestic savings. By mid-year, savings deposits by Greeks in Greek banks were 193 billion EUR (before the capital flight of the last 2-3 years they had been as high as 250 billion EUR).
Greek banks own sovereign debt of 79 billion EUR against their capital & reserves of 47 billion EUR. Write down that sovereign debt by half and the banks should have reasonably priced assets - but no capital & reserves. Then "motivate" Greek depositors to swap 45-50 billion EUR of their deposits into shares of good Greek banks and they would own all of them (and still have about 150 billion EUR deposits in those banks). If they cannot be motivated, force them. And do the same with other European banks.
http://klauskastner.blogspot.com/2011/10/recapitalizing-greek-banks.html
http://klauskastner.blogspot.com/2011/10/recapitalizing-greek-banks.html
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