The European Banking Authority noted banks within the 27-nation European Union need to raise €114.69 billion ($152.8 billion) by June of next year in order to meet the authority's capital requirements. That amount is €8.24 billion, or 7.18 percent, more than the supranational regulator had noted on October 30.
The balance sheet apparently worsened at certain banks, most notable in Germany, Belgium and Austria. The shortfall at German banks went up by over 152 percent to €13.1 billion, making that country's banking sector the third worse-capitalized in Europe, after those of Italy and Greece. Belgian banks' cash hole grew 52.38 percent to €6.31, while Austrian banking's own capital deficits rose 33.58 percent to €3.92 billion.
Capital shortfalls were reduced in other countries' banking sectors, most notable in France, where the amount of cash the authority says must be raised by next year fell 17.19 percent to €7.32 billion, from €8.84 billion slightly over a month ago. The amount of capital shortfall at banks in two Northern European countries, Sweden and Denmark, fell to zero.
The sudden increase in capital shortfall at German banks seemingly comes from the methodology the European Banking Authority has chosen to apply, which does not reward them for holding German government debt in the way these banks had hoped. Citing "people familiar with the situation," the Dow Jones Newswires attributed most of the capital shortfall increase to Commerzbank AG (XETRA:CBK), one of the largest German banks.
Banks who improved their capital positions when compared to the EBA's last reading, mainly British and French institutions, were quick to send out press releases noting so. Lloyds Banking Group (London:LLOY) and the Royal Bank of Scotland (London:RBS), British institutions owned largely by the U.K. government, noted they did not need to raise further capital to meet the EBA's stress tests. Others, like French bancassurer Société Générale (Paris:GLE) and Spanish giant Banco Santander said their shortfalls were being overestimated by the European Banking Authority.
The news added to the beating the global banking sector was taking in the equity market Thursday. The Dow Jones Banks Titans 30 Index, a benchmark index which tracks the largest banks in the world, and was at 54.65 when the EBA estimates were released, lost .35 percent of its value and was recently quoted at 54.46. The index is down 2.85 percent for the day.