Erscheinung:27.10.2011 The EBA publishes details on capital shortfall of banks
The European Banking Authority on Wednesday, 26 October 2011, disclosed preliminary data on the capital shortfall expected for the EU banking sector. According to these data, the preliminary and indicative capital shortfall at the EU level totals € 106.4 billion, of which € 5.2 billion is attributable to Germany. The EBA thus clarifies the decision by the European Council requiring a group of major international banks to build up a 9% Core Tier 1 ratio by the end of June 2012, which goes far beyond regulatory requirements. The basis used in this context is the EBA 2011 stress test definition. When calculating the ratio it is necessary to consider an additional buffer for market price losses in sovereign exposure to EEA states.
The preliminary figures stated by the EBA are based on a sample of 70 European credit institutions – of which 13 in Germany – conducted at the beginning of October jointly with the national supervisory authorities. These are all the banks that participated in the 2011 EU-wide stress test except for a subset of small non cross-border banks. In the sample, details on the composition of Core Tier 1 capital as at 30 June 2011 and the sovereign exposure to EEA states were submitted.
The EBA will update the capital shortfall data based on the credit institutions’ audited quarterly figures as at 30 September 2011. The capital requirement to be satisfied by 30 June 2012 will be determined on the basis of a valuation of EEA sovereign exposures reflecting current market prices as at 30 September 2011, so as not to give any incentive to withdraw from these commitments. The EBA expects to disclose the final capital shortfall in the middle of November.
Banks requiring capital will have to submit to their respective national authorities their plans detailing the actions they intend to take to meet the higher capital requirements. The objective will be to avoid excessive deleveraging so as to contain the potential impact on the real economy. Primarily, the banks are to raise fresh capital and/or withhold dividends and bonuses. In narrowly defined cases banks shall be permitted to use convertible bonds where these satisfy the EBA's strict requirements with regard to their conversion conditions and their subsequent capacity to absorb potential losses. Banks shall be permitted to fall back on state aid only if sufficient recapitalisation cannot be achieved by any other means.
In addition to the press release, the EBA has also published on its website numerous questions & answers with further background information as well as a methodological note.
