Friday

27th Jan 2023

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.

Opinion

Greece's spy scandal must shake us out of complacency

The director of Amnesty International Greece on the political spying scandal that now threatens to bring down prime minister Kyriakos Mitsotakis. Activists and NGO staff work with the constant fear that they are being spied on.

Opinion

Greece's spy scandal must shake us out of complacency

The director of Amnesty International Greece on the political spying scandal that now threatens to bring down prime minister Kyriakos Mitsotakis. Activists and NGO staff work with the constant fear that they are being spied on.

Latest News

  1. Official: EU parliament's weak internal rule-making body leads to 'culture of impunity'
  2. Red tape border logjam for EU's 1.3m 'frontier workers'
  3. Greece's spy scandal must shake us out of complacency
  4. Greek government in no-confidence vote over spying scandal
  5. The legal battle for justice against Kremlin's 'untouchables'
  6. UAE's fossil-fuelled high-tech mirage of a green future
  7. MEP harassment case sheds light on flimsy support for victims
  8. Big Agri's EU lobbying playbook on 'hunger' and a 'refugee crisis'

Stakeholders' Highlights

  1. European Parliamentary Forum for Sexual & Reproductive Rights (EPF)Launch of the EPF Contraception Policy Atlas Europe 2023. 8th February. Register now.
  2. Europan Patent OfficeHydrogen patents for a clean energy future: A global trend analysis of innovation along hydrogen value chains
  3. Forum EuropeConnecting the World from the Skies calls for global cooperation in NTN rollout
  4. EFBWWCouncil issues disappointing position ignoring the threats posed by asbestos
  5. Nordic Council of MinistersLarge Nordic youth delegation at COP15 biodiversity summit in Montreal
  6. Nordic Council of MinistersCOP27: Food systems transformation for climate action

Join EUobserver

Support quality EU news

Join us