German banks told to find €11bn more in new capital

EU banks need to raise €114.7bn (£97.9bn) to shore up their stability, the European Banking Authority (EBA) said yesterday, revising up its estimate of German banks’ shortfall by €11bn.

The total in new capital required for the continent’s lenders was revised up from its €106bn estimate in October, but all of the increase was due to a deterioration in Germany’s banks and some other states’ totals actually decreased. The data used was updated from June to September numbers.

Commerzbank was told to raise €5.3bn, up from €2.9bn while Deutsche Bank has been told it must raise €3.2bn, which is thought to be significantly above the previous amount.

Banks have until June next year to reach a core tier one capital ratio of nine per cent after writing down the value of their sovereign debt holdings to market levels.

But the EBA has said that the capital requirement is a temporary crisis measure “to provide a reassurance to markets about the banks’ ability to withstand a range of shocks”.

It also declared that lenders “should not be allowed” to reach the target by deleveraging but will have to tap up private markets for cash.

That will be seen by many analysts as highly unrealistic, given investors’ reluctance to commit more cash to banks.