EU banks raise 200 billion euro capital cushion: regulator

Europe's major banks raised over 200 billion euros ($258 billion) of fresh capital between December last year and June to cushion against future financial crises, the EU's banking regulator said Wednesday.
"The European Banking Authority discloses today the final report on its EU-wide recapitalisation exercise and the data on all individual banks. Overall, the exercise led to an increase of banks' capital positions of more than 200 billion euros," the London-based EBA said in a statement.
It said that 27 banks with an initial shortfall and that submitted capital plans had strengthened their capital position by 116 billion euros in meeting a new requirement that top quality capital amount to 9.0 percent. The EBA had reported in December 2011 at a particularly critical point in the eurozone crisis, that 27 banks had a total shortfall of 76 billion euros. These banks had to meet the new target by the end of June.
"European banks have made significant progress in boosting their capital positions and in strengthening the overall resilience of the European banking system," EBA head Andrea Enria said in a statement on Wednesday. "Banks are now in a better shape to finance the real economy but must continue on the path designed by the new regulatory environment," he added.
A European Union Summit agreed in October last year that a package of measures including capital increases was needed to reassure investors about the ability of banks to withstand any further shocks. The 200 billion euros of capital includes injections made by Greek banks and one Spanish lender, the EBA added. "Banks' capital strengthening has been achieved mainly via new capital measures such as retained earnings, new equity and liability management," it said.
The new EBA rule required so-called core capital to amount to 9.0 percent of the risks being carried by the bank, subject to a weighting of each category of risk. This is higher than new international rules in response to the financial crisis, known as Basel Three, which require 7.0 percent. Previously, on a different basis, banks had to have a capital ratio of about 5.0 percent.
The EBA reached its initial assessment of the strength of bank capital after two rounds of so-called stress tests, but these have been discredited in some circles, and by German Chancellor Angela Merkel, because they excluded risks posed by government debt held by banks.