Friday

30th Sep 2022

Europe's banks need €110 billion to keep credit ratings

  • Europe's banks need €110 bn to keep their credit ratings (Photo: Images_of_Money)

Europe's 50 biggest banks need capital injections of up to €110 billion to remain strong enough to sustain their credit ratings, Standard and Poor's has said.

In a report published Thursday (12 December), the rating agency warned that bank balance sheets, particularly in the EU's crisis countries, were still vulnerable.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The report comes just weeks before the European Central Bank will begin its 'stress tests' of Europe's banks in early 2014 to assess how robust their capital positions are.

Credit ratings dictate how easily a bank can borrow on the financial markets.

"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," said the agency.

Meanwhile, banks in Portugal, Italy, Spain, Greece and Ireland, accounted for 39 percent of the overall global shortfall, according to the report. Slovenia, widely tipped as the next eurozone country that could require a rescue package, revealed on Thursday that it would have to find €4.8 billion to recapitalise its banks to cover bad debts.

Standard and Poor's report underscores the continued weakness of Europe's banks despite the ECB offering hundreds of billions of euros in cheap loans since the 2008 banking crisis began. The ECB has also dropped interest rates to a record low of 0.25 percent.

However, the agency conceded that the bloc's banks were in a healthier position than in last year's review. EU governments claim that the capital positions of banks have been strengthened by €200 billion since 2012.

"In the first half of 2013 these banks shrunk their balance sheets by €1.1 trillion," the agency said, adding that this has reduced their capital funding gap by €34 billion.

For its part, audit firm PricewaterhouseCoopers (PwC) has estimated that European banks overall will need €280 billion in new capital in 2014 to pass the stress tests.

In a nod to the eurozone's nascent recovery which has seen a growth rate of 0.2 percent for the first nine months of 2013, Standard and Poor's commented that the Frankfurt-based bank would "have to play the role of the patient gardener in watering those green shoots that have emerged in the eurozone since the middle of the year.”

The ECB should offer a new long-term loan facility to banks to ease the recovery, the ratings agency commented.

Banks still eurozone's weak link, OECD warns

The eurozone's banks are in urgent need of extra capital if the bloc is to stabilise its fragile economic recovery, according to research by a leading economic thinktank.

Feature

Why northeast Italy traded in League for Brothers of Italy

EUobserver spoke with several business figures and all confirmed they voted for Georgia Meloni's Brothers of Italy because it promised stability, less bureaucracy and tax cuts. Matteo Salvini's anti-EU rhetoric scared them, while they trust Meloni has "more common sense".

Feature

Why northeast Italy traded in League for Brothers of Italy

EUobserver spoke with several business figures and all confirmed they voted for Georgia Meloni's Brothers of Italy because it promised stability, less bureaucracy and tax cuts. Matteo Salvini's anti-EU rhetoric scared them, while they trust Meloni has "more common sense".

News in Brief

  1. EU ministers adopt measures to tackle soaring energy bills
  2. EU takes Malta to court over golden passports
  3. EU to ban Russian products worth €7bn a year more
  4. Denmark: CIA did not warn of Nord Stream attack
  5. Drone sightings in the North Sea 'occurred over months'
  6. Gazprom threatens to cut gas deliveries to Europe via Ukraine
  7. New compromise over EU energy emergency measures
  8. 15 states push for EU-wide gas price cap

Stakeholders' Highlights

  1. The European Association for Storage of EnergyRegister for the Energy Storage Global Conference, held in Brussels on 11-13 Oct.
  2. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos
  3. European Committee of the RegionsThe 20th edition of EURegionsWeek is ready to take off. Save your spot in Brussels.
  4. UNESDA - Soft Drinks EuropeCall for EU action – SMEs in the beverage industry call for fairer access to recycled material
  5. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”
  6. EFBWW – EFBH – FETBBConstruction workers can check wages and working conditions in 36 countries

Latest News

  1. Going Down Under — EU needs to finish trade deal with Australia
  2. MEPs worry Russian disinfo weakens support for Ukraine
  3. Everything you need to know about the EU gas price cap plan
  4. Why northeast Italy traded in League for Brothers of Italy
  5. How US tech giants play EU states off against each other
  6. Deregulation of new GMO crops: science or business?
  7. The European shipping giants plying Putin's fossil-fuels trade
  8. Russian ideologue and caviar on latest EU blacklist

Join EUobserver

Support quality EU news

Join us