European banks have 84 billion euro capital shortfall, OECD estimates: report

FRANKFURT/PARIS Sat Jan 25, 2014 10:15am EST

Logos are seen on a Credit Agricole branch in Paris, November 7, 2013. REUTERS/ Jacky Naegelen

Logos are seen on a Credit Agricole branch in Paris, November 7, 2013.

Credit: Reuters/ Jacky Naegelen

FRANKFURT/PARIS (Reuters) - European banks have a combined capital shortfall of about 84 billion euros ($115 billion), German weekly WirtschaftsWoche reported, citing a new study by the Organisation for Economic Cooperation and Development (OECD).

French bank Credit Agricole (CAGR.PA) has the deepest capital shortfall at 31.5 billion euros, while Deutsche Bank (DBKGn.DE) and Commerzbank (CBKG.DE) have gaps of 19 billion and 7.7 billion respectively, the magazine reported in a pre-release of its Monday publication.

Financial regulators have been pushing banks to hold more capital to weather potential financial headwinds.

It was not clear whether the OECD had looked at the listed entity Credit Agricole S.A., which is less well-capitalized than its parent, Credit Agricole Group, an unlisted network of cooperative retail banks, which the Bank of France will regulate in terms of solvency ratios.

Although it used a different method of calculating the shortfalls, the OECD said it expected the European Central Bank would come to the same conclusion later this year in its audit and bank stress tests, the magazine quoted the study as saying.

The OECD and Credit Agricole could not be reached for comment outside regular business hours. Commerzbank and Deutsche Bank declined to comment.

Deutsche Bank said earlier this month its common equity tier 1 capital ratio was 9.7 percent while its leverage ratio had reached 3.1 percent as of December 31.

Credit Agricole, which will report fourth-quarter results on February 19, reported a core tier 1 ratio of 9.4 percent as of September 30, while Commerzbank had a core tier 1 ratio of 12.7 percent on that date.

Commerzbank is due to report its results on February 13.

(Reporting by Harro ten Wolde, Olaf Brenner in Frankfurt and Leila Abboud, Lionel Laurent in Paris; Editing by Hugh Lawson)

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Comments (3)
Afrodo wrote:
Is g a m b l i n g, the # 1 occupation among the R i c h ?

Jan 25, 2014 4:02pm EST  --  Report as abuse
SeniorMoment wrote:
The US Federal Reserve is requiring higher capital requirements than observed by bank regulators in Europe, which is a better approach even though I own some big USA bank stocks that are underperforming their potential because of past mistakes, such as the mortgage foreclosure errors. Staying in business though is even for shareholders, far more important than quarterly returns. Bankruptcy normally wipes out all shareholder values, although not for the holding companies, but only for their subsidiaries.

The shortfall in Europe must certainly be greater than stated based on past European choices. Europeans seem to like to sweep problems under the rug.

I can wait for better returns from the bank stock shares I own, but I would like the banks to stay in business during even a repeat of the Great Depression. That means maintaining enough financial reserves. In the USA the Federal Reserve Board has not in the past relied heavily enough on changing reserve requirements as it should have. Instead it has tried to directly influence interest rates.

Jan 25, 2014 6:18pm EST  --  Report as abuse
Laster wrote:
You can say tier 1 capital, but what is tier1 capital really comprised of?
If European regulators had previously lowered the standards for what qualifies as tier1 capital, banks could be booking their collection of S&H Green Stamps for all we know.

Jan 26, 2014 9:15pm EST  --  Report as abuse
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