Goldman Sachs Survey Shows EU-Tested Banks May Raise $42 Billion

Monday, 06 Jun 2011 12:47 PM

 

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Banks in the European Union may have to raise 29 billion euros ($42 billion) following this year’s stress tests, according to a survey by Goldman Sachs Group Inc.

Nine of the 91 lenders examined may fail, London-based analysts Jernej Omahen, Peter Oppenheimer, Christian Mueller- Glissmann and Peter Skoog wrote in a report today, citing the average response in a survey of 113 participants from the financial industry. Spanish, German and Greek banks would need to raise the most new capital, according to the poll. The share of participants saying they expect results of the stress test to be “credible” was smaller than last year.

The European Banking Authority has said banks have to maintain a core Tier 1 capital ratio of at least 5 percent under this year’s scenarios. The exams include a review of how lenders would handle a 0.5 percent economic contraction in the euro area in 2011 as well as a 15 percent drop in European equity markets. The publication of the results may be delayed until July, an EBA official said last week.

“A month ahead of the results release, there appears to be little consensus about how much might have to be raised and what the impact will be,” the Goldman Sachs analysts said. Only 22 percent of respondents signaled they were confident in the test’s outcome, compared with 35 percent a year ago who said the results would be a “credible reflection” of resilience in an economic slowdown, according to the analysts.

About 67 percent of survey participants came from Europe, 27 percent from the U.S., 2 percent from Asia and 4 percent from elsewhere, Goldman Sachs said. Of those surveyed, 57 percent said a sovereign-debt restructuring for Greece was “almost certain,” compared with 16 percent for Ireland and 13 percent for Portugal.

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