Europe’s banks have raised an extra 205 billion euros in fresh capital since December in a bid to meet new rules aimed at strengthening the ailing sector, an EU regulator said Wednesday.
The European Banking Authority estimated in December that of 71 banks it monitors, 37 needed an extra 115 billion euros in reserve capital to ensure they could survive a serious economic and financial crash. In a report Wednesday, the EBA said the banks increased the reserves mainly by issuing new capital, withholding dividends and reducing holdings of risky assets.
“Banks are now in a better shape to finance the real economy,” said Andrea Enria, chairman of the EBA. Europe’s banking sector is a key link in the continent’s financial crisis because the lenders’ large holdings of government bonds have made them vulnerable to investor concerns about excessive public debt. This has been made worse by real estate loans and assets that were turned toxic by a collapse the region’s property markets.