Recapitalisation of EU Banks

European Banking Authority: Final Report on the Recapitalisation of EU Banks

On October 3, the European Banking Authority (EBA) published its final report on the recapitalisation of EU banks.  It also published a set of accompanying questions and answers.  The report confirms that, as of end-June 2012, the majority of the banks within the sample have reached the required 9% core tier 1 ratio, which was first recommended to national supervisory bodies by the EBA in December 2011.  Meeting the required ratio has led to a €115.7 billion recapitalisation of 27 banks across the EU.

The report also includes an announcement that the EBA will issue a new capital conversion recommendation once proposals relating to the fourth Capital Requirements Directive (CRD IV) have been finalised.  This will require that banks maintain a nominal amount of core tier 1 capital which corresponds to the end-June 2012 level of 9%.  Banks will be permitted to go below the required level of capital in only certain limited circumstances, such as de-risking or restructuring.  The ECB will also require that banks submit plans to their supervisory authority explaining how they will implement CRD IV.