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Spanish banks face capital hike watchdog deadline

Source: Reuters - Fri 20th Jan 2012
Spanish banks face capital hike watchdog deadline

A total of 31 European banks must tell their national regulators by Friday how they plan to fill a gaping capital hole, part of the continent's efforts to deal with its debt crisis once and for all.

Collectively, the banks need to fill a 115 billion euros gap, and while a few are still attempting to raise the money privately, most have said they have already found other ways to boost their capital buffers.

Europe has told the lenders they must hold core capital of at least 9% of risk-weighted assets, and fill any shortfall by the end of June, to

As far as Spain is concerned, the country's Bankia and Banco Popular require further capital.

Banks have several options to find the capital required. They can retain earnings, shrink loans to customers, convert hybrid debt into equity, buy back their own bonds, sell assets, and cut dividends or staff pay.

They have to tell their regulators about their plans, which need to be approved before they are passed on to the European Banking Authority (EBA), which will review the plans on Feb 8/9. They are not however, required to publish their plans.

The plans to raise capital are part of a three-pronged plan crafted in October to deal with the euro zone's debt crisis once and for all that also dealt with a second Greek bail-out and the ramping up of Europe's EFSF bail-out fund.

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