Banks in moves to raise capital

BANK of Ireland announced a disposal yesterday and BNP Paribas was said to be looking to sell a package of assets, as Europe’s banks step up plans to raise funds to help meet tougher capital rules.

Bank of Ireland said it was selling project finance loans to Japanese bank Sumitomo Mitsui for €470 million, a discount of 16%, as it seeks to shrink itself under an EU-IMF bailout.

BNP is considering selling a private-equity portfolio, a source said. This could be worth more than $700m, according to the Financial Times.

“BNP is considering several options,” the source said.

European banks could ditch up to €3 trillion of loans to raise capital ratios and meet the new capital rules, raising fears economic recovery efforts will be hurt.

The biggest shake-up will be in areas like project finance, shipping finance, aviation and infrastructure as banks cut their risk-weighted assets and seek to get rid of assets in US dollars, where funding is tight.

Major banks in France, Britain, Germany, Spain and Ireland have pledged to sell assets and run off existing loans in a bid to shrink their balance sheets and respond to a sudden and dramatic squeeze on funding since the summer.

Ireland’s banks, at the root of the country’s financial crisis, need to sell or accept repayment on €70 billion of assets by the end of 2013 to reduce their reliance on emergency funding from the European Central Bank.