Eurozone banks have €767bn shortfall

European banks have a capital shortfall of as much as €767bn, a study suggests, as the ECB probes the financial health of the region’s lenders.

French banks show the biggest gap of €285bn, followed by German lenders with as much as €199bn, Sascha Steffen of the European School of Management and Technology in Berlin and Viral Acharya at New York University said in their study. The figures assume a benchmark capital ratio for other book measures of leverage of 7%, they wrote.

“A comprehensive and decisive AQR will most likely reveal a substantial lack of capital in many peripheral and core European banks,” the authors wrote, referring to the ECB’s asset quality review stage of the comprehensive assessment.

The ECB is conducting a three-stage assessment of bank assets before it assumes oversight of about 130 lenders across the currency bloc from November.

Spanish banks have a shortfall of €92bn, while Italian banks lack €45bn, the study showed.

“Our results suggest that with common equity issuance and haircuts on subordinated creditors, it should be possible to deal with many banks’ capital needs,” the authors wrote.

“Some will, however, require public backstops, especially if bail-ins are difficult to implement without imposing losses on bondholders, who may themselves be other banks and systemically important financial institutions.”

The banking sectors in Belgium, Cyprus, and Greece “seem likely to require backstops”, they said.

— Bloomberg

More in this Section

On Brexit, the rubber hits the road for UK car firms

Shares worry focus on US rates

Brexit will hurt bad but let’s not overstate the costs

Pharma lifts the Trump blues for Ireland


Breaking Stories

Bank's audit committee was independent watchdog, Drumm trial told

21st Century Fox extends guarantee over Sky News

Eurostar tickets to Amsterdam go on sale

KFC stores still shut amid delivery problems

Lifestyle

The biggest cancer killer will take your breath away

Hopefully she had an idea...

Power of the press: Meryl Streep and Tom Hanks discuss 'The Post'

More From The Irish Examiner