European banks strengthen their efforts to increase their available capital and optimize the use of their assets. Eventually, when pressure from regulatory agencies and investors increases, the financial sector makes little choice of action. This is what Nicholas Komfart, Elena Logutenkova and Ben Moczynski said of "Bloomberg".
Deutsche Bank AG, the largest bank in Germany, has taken steps to shrink its balance sheet after turning to shareholders for funds in April this year.
Meanwhile, Barclays Plc, the second largest credit institution in the UK, is preparing to issue new shares worth 5.8 billion pounds of funds to raise capital and reduce not so effectively used assets.
BNP Paribas SA in France and Commerzbank AG in Germany did the first published data on the financial statements that present equity capital of companies as a share of total assets.
The U.S. also new rules are tightened around the financial sector. But we must not forget, of course, that the Federal Reserve required all large U.S. banks to "clean up" their balance sheets in 2009 and it was only a few months after the defeat of Lehman Brothers. From this perspective, the U.S. is a step forward in adapting to the requirements of regulatory agencies. Europe, on the other hand, allowed banks to lower levels of capital concerns not to cut lending to private and corporate clients.
Assets of U.S. banks fell by about 10% in 2009 and 2010 For reference, in Europe they declined by 5%. These data were published in a special report of Ernst & Young in July this year.
One of the reasons the European banks hold so tight its available assets are concerns about changes affecting the powers of the European Central Bank (ECB). In 2014 the ECB will tighten its grip on the financial sector by becoming an official supervisor. Over the next few months, all the major banks will be thoroughly investigated, which could enhance the process of releasing a certain amount of assets. In calculations of Ernst & Young, assets worth about 1.5 trillion euros must be removed.
In the UK and Switzerland regulatory agencies follow in the footsteps of the Federal Reserve, realizing the importance of a minimum leverage ratio * in proportion to the level of gross loans. According to the Bank of England, about 140 billion to be realized by 2019 to succeed the British banks to fit the norm.
"It is a wind of change in Europe," said Martin Helmik, a professor of risk management at the Frankfurt Business School of Finance and Management. "He who fails to meet the requirements first, gets an advantage. Investors will reward compliance with more money at a small price for the bank. "
BNP Paribas, the bank with the largest market value in France, reaching the highest value of the shares for the last two years. Referring to "Bloomberg", the value per share as at 16 August is around 50.5 euros. In comparison, during the same period in 2012 the price was around 33 euros per share. The main reason for this was precisely the argument that the bank will be able to save the formal requirements without further reduced its assets.
The value of the shares of Commerzbank does increased by 21% last week after the company announced a significant higher than expected results. I mention that it will fit into the norms regarding its capital and leverage, investors were quick to show their enthusiasm.
In Switzerland, UBS, the largest Swiss bank, reported the highest growth in market value for more than two years. The Bank not only meets the requirements and is the first among European investment banks, but also plans to raise more capital. This will happen through the redemption of fund specially created with public funds as a rescue plan in 2008
Logically, the most closely meet the new norms banks are the most expensive for the investors. Four Swedish banks reported an average increase of about 31% this year. Of course, none of this would be the case if compliance was actually easy.
Banks have great difficulties to meet the standards in the meantime, do not reduce the amount of funds allocated to businesses and private clients. Economic situation in the state was a really big challenge for the international creditors. Concerns about the future of the euro has had a strong banks in countries like Spain and Italy. Multibillion-dollar international aid for Greece, Ireland, Portugal and Cyprus also does not make the task easier.