The European banks would be required to raise EUR 106 billion as capital under the new recapitalization plan agreed by EU leaders at yesterday's summit, the European Banking Authority (EBA) said Thursday.
Under the plan, banks are required to establish a buffer such that the Core Tier 1 capital ratio reaches 9 percent. Banks will be expected to build these buffers by the end of June 2012. The EBA said that it expects to disclose the final capital shortfall by November.
Spanish banks need EUR 26.2 billion and Italian banks require EUR 14.8 billion in core tier 1 capital, according to EBA. French and German banks must raise EUR 8.84 billion and EUR 1.58 billion respectively, EBA said in a statement.
Greek banks will need an extra EUR 30 billion of capital, though this was covered by an existing aid program.
Banks will be required to submit their plans detailing the actions they intend to take to reach the set target to their respective national authorities by the end of 2011. These plans will have to be agreed with National Supervisory Authorities and discussed with the EBA, according to the statement.
The targets will have to be achieved avoiding excessive deleveraging, while they are expected to withhold dividends and bonuses to attain the target, the statement said.
The capital needs should be met only with capital of the highest quality. For private instruments, only new issuances of very strong convertible capital will be accepted if in line with strict and standardized criteria to be defined by the EBA, the EU's banks watchdog said.
by RTT Staff Writer
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