recapitalisation

The Irish central bank governor has repeated that recapitalisation will be needed by Ireland’s two largest banks. (He had said the same on February 22.) Claire Murphy at Herald.ie reports:

CENTRAL Bank governor Patrick Honohan has indicated that Anglo Irish Bank and Bank of Ireland will require additional recapitalisation “very soon” … It is expected that fresh cash will be provided to the two main Irish banks within the next two months as the toxic loans are transferred to NAMA … The Government has already provided a total of €11bn into Bank of Ireland, Allied Irish Banks and nationalised Anglo Irish Bank … [Anglo Irish Bank] is expected to reveal losses of up to €12bn within the next few weeks.

Brussels has just approved €6.9bn of ‘urgent rescue aid’ for ABN Amro and Fortis Bank. The cash is destined to separate Fortis from both its Netherland unit and its (2007-acquired) ABN Amro operations. The separated parts will then be merged. The various units have insufficient cash to achieve the reconstruction by themselves.

Meanwhile the Irish government is set to acquire further stakes in its top banks as a result of loans being transferred to the country’s “bad bank”, central bank governor Patrick Honohan said today. “It is pretty clear the government will be acquiring additional equity stakes,” Mr Honohan told an event at Trinity College Dublin.

Norwegian banks will be overcapitalised and British banks undercapitalised under the new Basel rules.

So says research from Matrix Group, which considered the fate of European retail and corporate lending banks under the regulations.

The paper concludes that changes to bank capital under new Basel regulations will be a ‘game changer’ for the sector, and will “increase the quantum of capital in the system, improve its quality, force out complexity from balance sheets and ultimately drive down ROE”.

That seems to be a thumbs-up for the new rules, which are intended to create a safer system at the expense of shareholder return. But it’s not good news for Lloyds or HSBC, two of the three British banks studied. Read more >>

Austrian stress tests have shown that the country’s top banks would lack capital if the global economy were to double dip. Central bank supervisor Andreas Ittner said the Tier one ratio of the six biggest banks would drop to 5.8 per cent by the middle of 2011 under the scenario. “Our stress tests show that capital adequacy levels must be raised further in the medium term.  This applies to both the quality and the amount of banks’ own funds,” he said. The tests show Austrian banks being particularly hard hit in Eastern Europe.

Separately, the Austrian government took full control of Hypo Group today. A $2.2bn bail-out is expected, from both government and shareholder capital.

Russia has lowered rates and Vietnam has raised them. This is the ninth cut since April for Moscow – they are trying to slow the appreciation of the rouble and revive lending. Hanoi has devalued the dong by more than five per cent and raised rates by a full percentage point in an effort to curb inflation. The Vietnamese move is not the start of the mooted currency war.

Rising bank failures pushed the FDIC rescue fund into debt as of September 30, 2009. Read more >>