Europe’s banks face 280 b euro capital shortfall in 2014: PwC
Monday, 2 December 2013 00:00
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LONDON (Reuters): Pressure from the European Central Bank (ECB) and national regulators will leave Europe’s banks with a 280 billion euro ($ 380 billion) capital hole to fill in 2014, accountants PwC said in a report published on Thursday.
Banks in the eurozone will have their books scrutinised by the ECB next year, a process that could reveal capital shortages if banks are found not to have set aside enough to cope with bad loans.
Elsewhere in Europe, regulators are enforcing tough new national standards, including Switzerland’s and Britain’s recent efforts to set a “leverage ratio” that forces banks to hold high-quality equity equal to a set percentage of their total assets.
“European banks are facing another turbulent couple of years,” said Miles Kennedy, financial services partner at PwC. “For banks outside the scope of the ECB, the challenges are no less intense.”
Banks such as Deutsche Bank and Barclays have already raised billions in extra capital but the PwC findings underscore market expectations of more to come.
PWC said banks could make up some of the gap through self-help measures, such as selling assets, but that most of the hole would be filled by raising about 180 billion euros of new equity.
“Although regulators will likely give banks some breathing space to execute their plans, the markets will apply more urgent pressure,” said Kennedy.
“We expect 2014 to mark a big shift of emphasis, from de-leverage on the asset side - disposal and de-risking of assets - to de-leverage on the liability side - capital raising and restructuring.”
The ECB review, which comes before the central bank takes over as the eurozone’s financial supervisor in late 2014, is billed as the toughest assessment banks have ever faced and is designed to banish lingering investor fears about their health.
