German banks want more time to raise capital

24th November 2011, Comments 0 comments

German banks appealed Thursday for more time to submit plans on raising their cash reserve levels to meet strict new capital requirement rules, according to a letter seen by AFP on Thursday.

The letter, sent by the German Banking Industry Committee to the European Banking Authority (EBA) in London, said: "Banks are required to submit capital plans ... before December 25 if they exhibit a capital shortfall."

The complexity of the issues means, however, that "some banks, at least, will find it extremely difficult, if not impossible, to meet the envisaged deadline," it said.

"We therefore propose January 13, 2012, as an appropriate submission date which will allow adequate time for a nonetheless speedy preparation of capital plans," the letter continued.

The EBA is preparing to publish a highly anticipated report into the recapitalisation requirements of banks, probably by the end of the month.

Until now, the EBA has estimated that German banks need to raise some 5.2 billion euros ($7.0 billion) in new funds, more than half of which would be required by Commerzbank, the country's second biggest bank.

The EBA has said Commerzbank would need additional capital of 2.9 billion euros by mid-2012.

But on Tuesday, rumours circulated that Commerzbank's needs may now have swelled to around five billion euros, sparking a sell-off in the bank's shares.

By June 2012, European banks will need to raise their so-called Tier 1 capital ratio -- core funds which they can access easily -- equal to nine percent of their asset base.

"Speculation is mounting that the German government will need to inject cash for recapitalising Commerzbank, one of the largest banks in the country," said ING analyst Alessandro Giansanti in a research note Thursday.

Fears the bank may need far more capital than once thought to meet EU requirements pushed its stock down 15 percent Tuesday to a historic low.

© 2011 AFP

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