European banks 'will require $186bn of capital'

6 October 2011

Banks across Europe may require in excess of €140 billion ($186 billion) of capital to help them through the current crisis engulfing the region.

This is the prediction of Morgan Stanley, which suggested lenders in the continent might benefit from a project similar to the Troubled Asset Relief Program (TARP) adopted in the US.

Analysts at the organisation - which has acted as advisor to governments, investors and companies since 1935 - noted policy makers are hoping to construct a significant solvency buffer, adding: "We think banks in core Europe need to be recession proofed and banks in the periphery depression proofed."

According to the team, institutes in major European nations may require recapitalizing to an eight per cent core Tier One capital level.

In addition, countries such as Portugal, Greece and Ireland - after the application of European Banking Authority stress tests - are likely to need similar action but to the tune of 12 per cent.

By Tony Aynsley

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