The EBA is about to make some of the EU’s largest banks uncomfortable, as the struggle to met capital requirements. Some of these banks may not have there wherewithal to raise the money to meet the agencies benchmarks.
The regulator said in December that 30 banks needed to boost capital by an aggregate €115bn to reach a 9 per cent target for core tier one capital, a key measure of financial strength
According to one person close to the process, as much as half of the measures outlined in those plans do not look credible. There are two particularly contentious tactics being employed – shifting the way in which a bank calculates the risk-weighting of its assets; and promising asset sales that are unlikely to attract buyers. Projected profits for the period to June also appeared over-confident in some cases, given the worsening outlook for the eurozone economy.
Since there is no ready solution to the problem, it adds to the overall finanical problems of the region which are currently dominated by the sovereign debt crisis.