- POSTED: 12 Dec 2013 23:36
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The 50 biggest European banks need a total of 110 billion euros (US$151 billion) to ensure that their shareholders' funds are strong enough to sustain their credit ratings, Standard & Poor's (S&P) said on Thursday.
PARIS: The 50 biggest European banks need a total of 110 billion euros (US$151 billion) to ensure that their shareholders' funds are strong enough to sustain their credit ratings, Standard & Poor's (S&P) said on Thursday.
S&P acknowledged in a statement that the banks had acted to boost their ratios of shareholder funds to risks, by retaining part of their profits or by reducing their balance sheets.
But the rating agency warned that the European banking system still bore the marks of the eurozone debt crisis, and that this was particularly the case in southern Europe and in Ireland.
The agency also said that the shortfall of shareholders' funds at European banks amounted to 60 per cent of a total shortfall of 185 billion euros for all banks with S&P credit ratings.
The agency said: "In the first half of 2013 these (50) banks shrunk their balance sheets by 1.1 trillion euros, which we estimate reduced the shortfall by up to 34 billion euros.
"Nevertheless, banks' capital generation and positions relative to regulatory requirements diverge widely, and our analysis also reveals significant differences in the quality of capital among the top 50 European banks."
S&P said that five European countries alone accounted for 39 per cent of the overall global shortfall. They were Portugal, Italy, Spain, Greece and Ireland.
Referring to so-called stress tests on the strength of bank balance sheets by the European Central Bank under new regulatory procedures in the light of the eurozone debt crisis, S&P said it hoped that in coming months this would encourage banks to reduce their balance sheets and to increase shareholder capital.
Auditing group PricewaterhouseCoopers (PwC) has estimated that European banks overall will need 280 billion euros in new capital in 2014 if they are to meet new regulatory standards and pass the ECB's tests.