Bloomberg News

European Banks Tumble, Led By BNP, on Concerns on Capital

October 13, 2011

(Updates prices in second paragraph.)

Oct. 13 (Bloomberg) -- European banking stocks tumbled, led by BNP Paribas SA and UniCredit SpA, on speculation that policy makers will make lenders raise more capital.

The 46-member Bloomberg Europe Banks and Financial Services Index fell as much as 3.3 percent, extending this year’s drop to 29 percent. French lenders BNP Paribas and Credit Agricole SA plunged as much as much as 9.2 percent and 6.3 percent, respectively, while Italy’s UniCredit slid as much as 8.1 percent and Intesa Sanpaolo SpA dropped 5.7 percent.

Policy makers are debating how to recapitalize the region’s troubled banks as the sovereign-debt crisis threatens to damage balance sheets and undermine prospects for economic recovery. At least 66 lenders would fail a revised European Union stress test and need to raise about 220 billion euros ($302 billion) of capital in a rerun of the exercise that used a 9 percent core Tier 1 capital ratio rather than the 5 percent used in July, Credit Suisse AG analysts said today in a report.

“It has to do with general concern about the stress tests and the issue of capital,” Christoph Bossman, a banking analyst at WestLB AG in Dusseldorf, Germany, said by telephone.

Bankers may have to give up bonuses and shareholders may forgo dividends at lenders that need capital injections to meet tougher European Union standards, EU President Jose Barroso said yesterday when he announced plans to recapitalize banks.

The EU’s top banking regulator, the European Banking Authority, is considering setting a temporary capital benchmark of 9 percent as part of Barroso’s plan, a person with knowledge of the talks said yesterday.

Austria’s Raiffeisen Bank International AG fell as much as 6.5 percent and Madrid-based Banco Santander SA declined as much as 3.2 percent.

--Editor: Stephen Taylor

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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