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Bank recapitalization plans are under way in Europe this morning. Reuters reports that three of Portugal’s largest banks — Millennium bcp, Banco BPI, and Caixa Geral de Depositos — will tap funds from the 78bn euro bailout package initially provided by troika creditors (the EU, ECB, and IMF) in May 2011. Millennium will use 3bn euros, while Banco BPI and Caixa Geral will use 1.2 billion and 1.65 billion euros, respectively.Portuguese banks, like others across the eurozone, face a significant headwind as capital requirements are being implemented to fulfil new Basel 3 regulation standards.
Reuters reports that “under Portugal’s bailout terms, the country’s banks need to have core Tier 1 capital ratios of 10 per cent of assets by the end of this year.” The recapitalization plan is in part to address these increased capital needs.
European banks have had trouble funding themselves in the private markets for debt issuance as increasing uncertainty over bank exposures to a Greek exit rises in the eurozone crisis, necessitating state intervention for recapitalizations.
Yesterday the BIS released their quarterly review, which highlighted the increasing trouble banks face as cross-border lending fell the most at the end of 2011 since the end of 2008 in the wake of the Lehman Brothers collapse.