Tuesday 13 November 2018 2:55 pm

Big three eurozone investment banks Deutsche Bank, Societe Generale and BNP Paribas face €11bn threshold after EU stress test

Top European investment banks would have to raise €​11bn (£9.57bn) to meet the informal threshold implemented by the central bank following a stress test.

Deutsche Bank, Societe Generale and BNP Paribas would need to raise the funds, according to Reuters calculations, after the European Central Bank (ECB) said eurozone banks with capital worth less than nine per cent of their assets should increase capital.

ECB vice president Luis De Guindos said the banks “should increase robustness and enhance capital positions,” which would involve Societe Generale, Deutsche Bank and BNP raising €5.4bn, €3.4bn and €2.5bn respectively.

Speaking at an event in Brussels last week former Spanish economy minister Guindos said: “Finally, banks with core capital ratios in the adverse scenario below 9 per cent display a weaker, though still satisfactory, capital position.

“These 12 entities, representing almost 40 per cent of total assets of the sector, should increase robustness and enhance capital positions to face challenges ahead and will thus be closely monitored.”

Barclays and Lloyds were two of the worst performing lenders in the EU's banking health check, which tested European banks and their ability to withstand a hypothetical market shock, as the British banks saw their loss-absorbing buffers plunge to what investors consider to be the bare minimum. 

Commenting on the results of the stress test, published at the beginning of the month, ECB economic analysis and statistics director Mario Quagliariello said: “The outcome of the stress test shows that banks’ efforts to build up their capital base in the recent years have contributed to strengthening their resilience and capacity to withstand the severe shocks and material capital impacts of the 2018 exercise.

“The results will be used by supervisors as part of their wider assessment of banks’ vulnerabilities and input to their supervisory decisions.”