Bloomberg News

EU Watchdogs Said to Notify Banks on Capital Plans by Today

March 09, 2012

European bank supervisors will have notified 28 banks by the end of today whether their plans to raise capital satisfy requirements, according to three people familiar with the discussions.

A minority of the lenders will have to give more details on how they intend to sell assets and retain earnings to meet the European Banking Authority’s 9 percent goal for core Tier-1 capital ratios, said one of the three people, who all declined to be identified because the talks are private. The banks may also have to provide contingency plans to raise capital, the person said.

“I think a lot of banks thought they would be able to sell performing portfolios and were unsuccessful,” said Simon Gleeson, a financial regulation partner at Clifford Chance LLP in London, speaking of assets that aren’t distressed.

The EBA told banks to raise 114.7 billion euros ($151.6 billion) in fresh capital by the end of June as part of measures introduced to respond to the sharp fall in the value of securities issued by euro-area governments. The authority required banks to keep a core Tier-1 capital ratio of 9 percent and hold additional reserves, called a sovereign buffer, against the debt of weaker euro-area countries, based upon the market price of the bonds.

Noncompliance

The EBA will host a meeting next month in London of the 27 national bank supervisors of the European Union. The meeting will examine the plans of banks that haven’t yet complied, according to the people familiar with the talks.

The EBA and national supervisors met last month to discuss the proposals from the 28 largest banks participating in the capital-raising exercise.

Banks submitted their plans to raise capital in January and the EBA said in December that lenders aren’t allowed to reduce lending to hit the target ratios.

Commerzbank AG (CBK), Germany’s second-largest lender, rose about 15 percent on Jan. 19 after the bank said it’s more than halfway to reaching a 5.3 billion-euro capital goal without resorting to government aid.

Banco Santander SA (SAN), Spain’s biggest bank, was required to plug a 15.3 billion-euro shortfall. Santander said Jan. 9 it met the EBA’s requirements by selling stakes in South American lenders, issuing new stock in exchange for preferred equity and paying dividends in shares.

To contact the reporter on this story: Ben Moshinsky in London at bmoshinsky@bloomberg.net

To contact the editor responsible for this story: Christopher Scinta at cscinta@bloomberg.net


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