EU bank recap could be only €80bn / Markets lose faith in bank recap plan / Banks face penalties in return for bail-outs

Article reports that the EU's grand plan to strengthen its banking system was set to fall well short of market expectations, identifying a capital shortfall of less than €100bn that must be made up over the following six to nine months, according to the latest official estimates issued in October 2011.

The European Union’s estimate of the necessary recapitalisation effort compares with an Inernational Monetary Fund report that identified a €200bn hole in banks’ balance sheets stemming from sovereign debt writedowns. It also fell far short of analyst estimates that banks might have a capital deficit of up to €275bn.

ESO: Background information: German banks attack recapitalisation plan http://www.europeansources.info/record/german-banks-attack-recapitalisation-plan/

ESO: Background information: EU banks could shrink to hit capital rules http://www.europeansources.info/record/eu-banks-could-shrink-to-hit-capital-rules/

Website: European Banking Authority (EBA) http://www.eba.europa.eu/

EBA: EU-wide stress testing http://www.eba.europa.eu/risk-analysis-and-data/eu-wide-stress-testing

Open Europe: Press Release, 19.10.11: New Open Europe briefing: EU banks could need up to €370bn in event of painful, but necessary eurozone debt restructuring http://www.openeurope.org.uk/media-centre/pressrelease.aspx?pressreleaseid=179

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