Bloomberg News

Banks May Need $202 Billion Euro-TARP Program, Says JPMorgan

September 26, 2011

Sept. 26 (Bloomberg) -- Euro zone banks need at least 150 billion euros ($202 billion) of capital provided through a Europe-wide Troubled Asset Relief Program akin to the U.S. plan, according to a report by JPMorgan Cazenove.

France could lead with a capital injection of about 15 billion euros to 20 billion euros for its banks, according to a note led by JPMorgan London-based analyst Kian Abouhossein in a note to clients today. Societe Generale SA would be one of the “key beneficiaries” if France led the European TARP program, they said. The minimum required to reopen European bank funding market is 112 billion euros, according to the note.

“We assume a Euro TARP rather than specific support only for the most distressed institutions, as we believe a general solution is required to restore general confidence and reopen the funding markets for all institutions,” Abouhossein said in the note.

TARP, a $700 billion program, was started in 2008 to inject capital into banks following the collapse of the U.S. housing market and the bankruptcy of Lehman Brothers Holdings Inc.

JPMorgan estimates the capital requirement would be about 5.5 billion euros for Societe Generale and about 600 million euros for BNP Paribas SA.

“We assume that France would move first independently, given the recent pronounced pressure on its banks funding costs,” the JPMorgan analysts said. “Germany could potentially also act independently.”

Modeling a European financial rescue on TARP “would be a good solution,” Goldman Sachs Group Inc. President Gary D. Cohn said at a panel discussion with other bank executives yesterday.

--Editors: Francis Harris, Stephen Taylor

To contact the reporter on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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