We’ll resist any further “spillover” jokes as we pass along the main points from this earlier article by our colleagues in Europe, which for mysterious reasons appears to have prevented today’s selloff from being worse:
European officials look set to speed up plans to recapitalise the 16 banks that came close to failing last summer’s pan-EU stress tests as part of a co-ordinated effort to reassure the markets about the strength of the 27-nation bloc’s banking sector.
A senior French official said the 16 banks regarded to be close to the threshold would now have to seek new funds immediately. Although there has been widespread speculation that French banks are seeking more capital, none is on the list.
And here’s who made the cut. Or rather didn’t make the cut… Whatever, these are the banks that will be raising funds with a quickness:
The list includes Germany’s HSH Nordbank and Banco Popolare of Italy…
The other 14 banks on the list are: Espirito Santo and Banco Português of Portugal; Piraeus Bank and Hellenic Postbank of Greece; Banco Popular Espanol, Bankinter, Caixa Galicia, BFA-Bankia, Banco Cívica, Caixa Ontinyent, Banco De Sabadell of Spain; Nova Ljubljanska Banka of Slovenia; Cyprus’s Marfin Popular Bank and Norddeutsche Landesbank of Germany.
The article notes that if private sources of funds are unavailable, then some governments (reportedly including the French) favour allowing the EFSF to inject capital into the banks. Other governments are less keen on the idea and want the individual nations to invest themselves. So there’s some fractiousness over the issue — shocking.
Anyways, we’re not really sure how meaningful this is. The scale of the recapitalisation being described seems tiny in comparison to what the IMF wants (which the ECB and eurozone economies find excessive).
Maybe the “European officials” cited chose to get this out in the open to calm markets in a week when volatility has been especially heightened and European banks have been crushed.
But we doubt it will work — and we also wonder how shares in the individual banks will react tomorrow given that they’ve been named. This might backfire yet, and we’re keeping our tin hats at the ready.
The IMF can make your €200bn capital hole disappear in days! – FT Alphaville
IMF and eurozone clash over estimates – FT