S&P sees €95bn capital shortfall in euro zone banks

The euro zone banking sector’s capital shortfall may total slightly more than 1 per cent of the region’s economic output, or about €95 billion, a senior Standard & Poor’s official said today.

Banks in the 17-nation region will undergo an asset quality review and balance sheet assessment by the European Central Bank next year and stress tests by the European Banking Authority to determine how the value of their assets could change in an adverse scenario.

Euro zone leaders have said they stand ready to help recapitalise their banks if the exercise reveals a shortage of capital, because they are keen to finally clean up the sector and restore investor confidence.

“Our...estimate is that the overall capital shortfall in the euro area as a whole is slightly over 1 per cent of GDP,” Frank Gill, S&P’s Director of European Sovereign Ratings told a bond conference in Brussels.

That would come to about €95 billion based on a Reuters calculation.

The results of the bank capital survey will be released in October 2014. (Reuters)