* Banks successfully meet new capital requirements
* 7 banks required government help
* Banks hiked capital by combined $116 bln
* Banks needed to fill 76 bln euro shortfall
* "This is not a silver bullet" -Enria
By Matt Scuffham and Steve Slater
LONDON, July 11 The European Banking Authority
said there remained significant challenges ahead for Europe's
banks having just cleared the first hurdle to bolster their
The EBA said that 27 banks had hiked their combined capital
by 94.4 billion euros ($115.7 billion) to meet the expectations
of the watchdog and fill a 76 billion euro shortfall to help
make them strong enough to withstand the euro zone debt crisis.
Europe's banking watchdog had given banks until the end of
June to hold core Tier 1 capital of 9 percent of risk weighted
assets as part of efforts to restore confidence in the sector.
EBA Chairman Andrea Enria said the recapitalisation had been
a "necessary and important step" but cautioned that banks had a
long way to go to recover from the financial crisis and comply
with new global regulations.
"A lot still needs to be done," Enria told Reuters in an
interview on Wednesday. "I'm very much aware this is not a
silver bullet to resolve the difficult situation of the European
banks. It's a very complex crisis we are in and we don't want to
sound too upbeat on this"
The EBA's recapitalisation plan was part of a three-pronged
approach that also deals with sovereign debt exposures and
improving access to funding.
"We have always said this is one component of a more
comprehensive package of measures that needs to be put in place
to bring stability to the European banking sector," he added.
Those measures include attempts by the EU to break the
mutual dependency between weak banks and over indebted
"We know very well that having strengthened the capital
position of the banks this does not solve the problem of the
interconnection of the banks and the sovereigns and does not
re-open access to funding markets," Enria said.
Euro zone leaders have also agreed to create a single
banking supervisor for the area's banks, seen by some observers
as the first step towards a European banking union.
"The banking union in the euro area is an important
component of the overall strategy to restore confidence in the
European financial sector," Enria said.
The EBA conducted a stress test of banks in July 2011,
following up with a review later in the year when additional
requirements were imposed on some banks.
That test had a pass mark of 5 percent core tier 1 capital,
the main benchmark of a bank's health. As the euro zone debt
crisis worsened last year, a recapitalisation exercise was later
carried out with a tougher threshold set for lenders.
Enria said banks had come up with around 230 billion euros
of capital strengthening in the past 18 months, including
capital raised for last year's stress test, the latest
recapitalisation and additional packages being deployed in
Greece and Spain.
Regulators and governments are concerned that aggressive
deleveraging by banks is squeezing credit and hurting economic
growth. Bank of England Policymaker Adam Posen said on Wednesday
British banks were being excessively cautious in their lending
The EBA said banks had complied with its latest
recommendation without having to reduce lending to households
and companies or resort to a fire sales of assets.
Banks had achieved 76 percent of the total capitalisation
through measures such as retaining more of their earnings,
issuing new equity and managing liabilities, the EBA said.
Deleveraging measures had accounted for a reduction in banks'
risk-weighted assets of only 0.6 percent compared with September
last year, it said.
Seven banks needed government help to meet the new
threshold. Those banks were Portugal's Caixa Geral de Depositos,
Banco Comercial Portugues and Banco BPI,
Slovenia's Nova Ljubljanska Banka, Italy's Banca Monte dei
Paschi di Siena and Bank of Cyprus and Cyprus
The EBA did not include Spain's Bankia in the review
following its bailout by the Spanish government. It had said in
February that Dexia, WestLB and Austria's Volksbank
would be excluded because they were in the midst of
restructuring. Greece's banks, which are receiving capital as
part of a bailout, were also excluded.