New capital rules will speed up European bank withdrawal from Asia
The European Banking Authority order for banks to raise $153 billion will speed up their asset sales outside of Europe, as will a downgrade of European sovereign ratings. December 09, 2011 | Peter HoflichThe European Banking Authority said that 30 banks in 12 countries need to raise $153.8 billion to cover potential capital shortfalls they may have based on its stress test scenarios. The figure is roughly in line with projections made in October, and as a result Spanish and Italian lenders will need to raise the most capital, at $35 billion and $20.6 billion respectively. The hardest hit banks, however will be German banks, which were told the need to raise $17.5 billion, more than double the October forecast of $6.7 billion. On top of this, a potential ratings downgrade from Standard and Poor’s of 15 countries’ sovereign rating on December 12th, which has a 50-50 chance of happening, would raise the cost of funds of all banks in those markets, cast a deeper funk on domestic economies, and imperil Europe’s monetary union even further. The call to raise capital, and the possibility of a prolonged economic crisis on the potential failure of a political solution to the crisis and the attendant downgrade, is bringing European banks to sell off overseas loan portfolios as a way to minimise the eventual need to capital through rights issues and the sale of new shares. Banks are already doing this: Crédit Agricole is reportedly selling 64 loans made to Asian corporates worth $1.1 billion, and HSBC 17 worth $370 million, while Banco Santander and Société Générale are both believed to be doing the same. Local banks are expected to take on some of these opportunities where their balance sheets or availability of funding on wholesale markets allow them to, with the Japanese banks possessing the most firepower (and the strongest currency) to come in for the type of high-quality, low risk assets that they like. The most effected markets in Asia will be Singapore and Hong Kong, where foreign banks have the biggest market shares for lending, says Ritesh Maheshwari, lead analytical manager of Asia-Pacific financial services ratings at Standard and Po... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Capital & Strategic Issues, Hong Kong, SingaporeCapital & Strategic Issues,HK,Singapore, Capital & Strategic Issues,Hong Kong,Singapore, , Capital Marketscapital, Capital Markets, Keywords:Banco Santander, Société Générale, Crédit Agricole, Standard And Poor’s, European Banking Authority, Capital Rules Banco Santander, Société Générale, Crédit Agricole, Standard and Poor’s, European Banking Authority, Capital Rules
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