European banks expect rough times ahead


BLOOMBERG: Several large banks lack the capital to avoid similar financial strife as was the case in 2008.

Share this article!

BLOOMBERG: Several large banks lack the capital to avoid similar financial strife as was the case in 2008.

Those are the conclusions of analysts at the Danish Institute for International Studies and data from Keefe, Bruyette & Woods Inc. showing what would have happened if the European Central Bank had applied a leverage minimum that will be introduced next year. A study by the Brussels-based Centre for European Policy Studies showed Deutsche Bank and BNP Paribas above the cutoff, while 28 other banks that passed the stress test failed.

The new standard requires banks around the world to have capital equal to 3 percent of total assets, complementing a system that weights them for risk. If the ECB had used that yardstick and demanded the highest quality capital, 12 big European banks that passed the stress test would need to raise an additional 66 billion euros ($82 billion), according to Jakob Vestergaard, a senior researcher at the Danish institute.

Read more here.