German and Spanish banks face the biggest capital shortfalls, following latest stress tests
German banks' total capital shortfall is now in the region of EUR 13 billion, according to the European Banking Authority's latest statistics. However, it says making up the shortfall should not mean reduced lending to the real economy.
According to The European Banking Authority's (EBA) latest statistics regarding bank recapitalisation needs following the latest round of stress tests, show German and Spanish banks face some of the biggest shortfalls.
The EBA's latest figures published on the 8 December, show that German bank Commerzbank has a capital shortfall of EUR 5.3 billion when it comes to meeting requirements for a 9% core capital ratio by the summer of 2012. That fuelled media speculation that the bank may be "nationalised". According to the EBA's stats, Deutsche Bank has a capital shortfall of EUR 3.2 billion. German banks' total capital shortfall is now in the region of EUR 13 billion.
Other banks with high capital shortfalls in terms of meeting the EBA's 9% core capital target included Spain's Banco Santander, which is estimated to have a shortfall of EUR 15 billion. Belgium's Dexia Bank, which has already been nationalised, has a capital deficit of EUR6.3 billion, the EBA estimates, and Italy's UniCredit, a deficit of EUR 7.9 billion.
Capital shortfalls were based on September 2011 figures. The EBA said the capital buffers are 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. "National supervisory authorities may, following consultation with the EBA, agree to the partial achievement of the target by the sales of selected assets that do not lead to a reduced flow of lending to the EU’s real economy but simply to a transfer of contracts or business units to a third party," the EBA stated.
Banks with capital deficits will have to submit plans detailing the actions they intend to take to reach the set targets by 20th January. These plans will have to be agreed with national authorities and reviewed, shared and consulted on with the EBA and with other relevant competent authorities.
Date Posted:8th December 2011