Bloomberg News

Europe Banks Must Find $900 Billion in 2012, CreditSights Says

October 25, 2011

Oct. 25 (Bloomberg) -- Banks in Europe have to refinance 655 billion euros ($911 billion) of senior bonds next year and may need government backing if the debt crisis continues to block access to markets, according to CreditSights Inc.

“Unless funding access eases, we might see banks having to use government guarantees again, and it will add to the pressure on them to reduce assets in order to lower refinancing needs,” said Simon Adamson, an analyst at the independent research firm in London. “I would think only a small proportion has been pre- funded, given that the markets have been virtually closed since July.”

Western European lenders raised about 80 billion euros of senior unsecured debt this year, according to data compiled by Bloomberg. That’s down from 97 billion euros for the same period in 2010, as investors worry that banks, the biggest holders of sovereign debt, will face losses as the crisis escalates.

European Union leaders, who hold a second summit in four days tomorrow, are seeking an agreement on bolstering the region’s rescue fund, recapitalizing banks and providing debt relief to Greece to avoid contagion spreading to Italy and Spain.

“Everybody agrees we need a coordinated scheme to recapitalize the banks and improve their funding,” European Union President Herman Van Rompuy said Oct. 23.

The extra yield investors demand to hold banks’ senior bonds instead of benchmark government debt soared to a record 360 basis points on Oct. 4, according to Barclays Capital’s Euro Aggregate Banking Senior Index.

The measure was 318 basis points yesterday, compared with the peak of 325 basis points in the aftermath of Lehman Brothers Holdings Inc.’s failure in 2008. Deutsche Bank AG reopened the market for senior unsecured debt on Sept. 29, after more than two months without a single benchmark sale in euros, the longest period on record without a deal.

--Editors: Michael Shanahan,

To contact the reporters on this story: Ben Martin in London at; David Goodman in London at

To contact the editor responsible for this story: Paul Armstrong at

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