September 23rd, 2011
Econintersect: There has been a lot of speculation about the solvency of French banks during the past week. However the list of 16 banks announced today (September 22) that must seek additional capital immediately has no French names. There are seven Spanish banks, two from Germany, two from Greece, two from Portugal and one each from Italy, Cyprus and Slovenia. The Financial Times referred to the 16 as “mostly mid-tier banks.” These 16 are added to the nine that failed the stress test that was reported in July and are under instructions to raise more capital by the end of December. The EBA (European Banking Authority) has given the latest 16 until April to improve their capital positions. Follow up:
Follow up:Here is the list of 16:
- Banco Popular Espanol, Spain
- Bankinter, Spain
- Banco De Sabadell, Spain
- Espirito Santo, Portugal
- Piraeus Bank, Greece
- Hellenic Postbank, Greece
- Nova Ljubljanska Banka, Slovenia
- Marfin Popular Bank, Cyprus
- Banco Popolare, Italy
- Caixa Galicia, Spain
- BFA-Bankia, Spain
- Banco Cívica, Spain
- Caixa Ontinyent, Spain
- HSH Nordbank, Germany
- Norddeutsche Landesbank, Germany
- Banco Português, Portugal
Government support of these banks may be necessary. From the Financial Times:
While the banks are expected to turn to private markets first, officials said that state aid may be required. The French government appears to favour using the new €440 billion rescue fund, known as the European financial stability fund, but other member states are likely to argue for national action.
Joaquín Almunia, the EU competition commissioner, last week extended the special regime for state aid to banks that was set up in the 2008 crisis to allow governments to pump soft loans and guarantees into failing banks.
The Wall Street Journal had a report today that the IMF (International Monetary Fund) had issued an estimate that the potential losses for European banks from the sovereign debt crisis was about $409 billion. From the WSJ:
The fund said fiscal strains emanating from weaker euro zone members have had a direct impact of about €200 billion on banks in the European Union since its debt crisis started last year. In addition to the holdings of government debt, lower bank asset prices raised credit risks.
The IMF cautioned that the figure—based on recent market measures —doesn't necessarily represent the size of a capital hole at European banks, saying such an assessment would require a closer examination of bank balance sheets. But in a report ahead of its annual meeting, it used the calculation to stress the importance of increasing bank capital buffers.