European banks 'require €108bn in fresh capital'

24 October 2011

The largest banks in Europe will require an additional €108 billion ($150 billion) in new capital, it has been suggested.

European Union (EU) officials have advised lenders to move their capital ratios up to nine per cent by the end of June 2012, with the European Banking Authority providing the above figure after marking down their eurozone sovereign bond holdings to current market values.

Finance ministers from the 27 EU member states backed a prediction of a capital shortfall that was greater than that previously calculated.

It is hoped the new deal - which is to also feature measures to enable bank funding through state guarantees for new bank bonds - will serve to strengthen the banking system across the continent.

However, fears remain that lenders may lack access to official support from the European Financial Stability Facility - a body created by the euro area member states in 2010.

By Asim Shah

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