Brussels, 27/01/2014 (Agence Europe) - The Organisation for Economic Cooperation and Development (OECD) says that European banks have a capital shortfall of €84 billion.
The European Commission and the European Central Bank (ECB) refused to comment on Monday 27 January, noting that the assessment of bank asset quality by the ECB and the stress tests by the European Banking Authority (EBA) will soon be carried out on the 130 or so big banks in the eurozone that will be directly supervised by the ECB in November. The results are expected in the autumn, before the bank supervision mechanism (SSM) comes on stream in November 2014.
People at the Commission point out that the banks can raise funds more easily on the money markets, where the lending criteria have become more relaxed. They add that the OECD uses a different deficit calculation method. The OECD was expecting this argument, and says that the ECB will in fact reach the same conclusions as the OECD in November. The OECD's research was published by German newspaper WirtschaftsWoche. It says that the biggest shortfall in capital, of the order of €31.5 billion, is at French bank Crédit Agricole, followed by Germany's Deutsche Bank and Commerzbank with shortfalls of €19 billion and €7.7 billion respectively. The head of the Eurogroup, Jeroen Dijsselbloem, said last week in Davos that he hoped that there would be bad news when the results came out because that would give him the impression that the tests had been good (referring to the previous bank test results that had undermined the ECB's credibility). He said the point was not to hide matters or to say that everything was going well.
If banks have a capital shortfall, they will have to start by trying to raise the cash themselves from the market. If unable to do so sufficiently, the country where the bank is registered may provide aid that complies with the EU's revised state aid guidelines, which says that junior bond holders must contribute. The final link in the chain would be possible intervention from the eurozone's bailout fund. (EL/transl.fl)