Rumors that French banks were in trouble proved overstated today, but the microscope revealed that Germany, Spain and Italy are in worse shape than previously suspected.
A report in the French newspaper Le Monde started the story by warning that French banks need to make up a total shortfall of 7 billion euros (roughly $10 billion) to meet tougher capital requirements designed by the European Banking Authority.
The EBA standard requiring a ratio of 9% in core Tier 1 capital relative to risk-weighted assets was set in order to help stabilize the euro zone and stem its sovereign debt crisis.
But while the initial reports indicated that France's two largest banks, BNP Paribas SA ( BNPQY , quote ) and Societe Generale SA ( SCGLY , quote ), needed to come up with about $7 billion, today's official numbers from the EBA revealed that they are actually well capitalized to withstand whatever the euro crisis may bring.
However, Germany's biggest banks are in worse condition than previously suspected. They need to raise over $17 billion to meet the EBA's new requirements -- and the biggest, Deutsche Bank ( DB , quote ) and Commerzbank ( CRZBY , quote ) need to come up with 65% of that cash on their own.
Berlin plans to make funds available to make sure its lenders have the capital they need, forcing it on them if necessary. Essentially, this could turn into a European version of the U.S. TARP program.
Spanish lenders need to come up with roughly $35 billion and Italian banks need another $20 billion.
In all, the continent's lenders are $152 billion short of EBA requirements.
This, in itself, reveals two things. First, the situation has gotten a bit worse than it was in October, when the EBA expected banks would need to raise $143 billion to make the grade.
Second, while French banks have accumulated the capital they needed, the rest of the continent has evidently either stalled or simply failed to do so.
In any event, the continent's leading financial institutions plunged another 8% to 11% today.
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