NEW YORK, NY -- (Marketwire) -- 10/31/11 -- European banks are finally turning their fortunes around as a Eurozone debt deal has been reached. Under the deal, banks must raise around 106bn euros in new capital by June 2012 to protect them against losses resulting from any future government defaults. Analysts say that it is the certainty around the level of capitalization that has boosted bank shares. The Bedford Report examines the outlook for companies in the Foreign Banking Sector and provides stock analysis on National Bank of Greece SA (NYSE: NBG) and Lloyds Banking Group PLC (NYSE: LYG) (LSE: LLOY). Access to the full company reports can be found at:
Last week Fitch Ratings said that Europe's plan to halt the spread of a debt crisis will help restore confidence in banks and should leave the senior debt ratings of even most of the weakest institutions unaffected. Fitch said it expects most major European banks that need to meet new capital requirements will do so without resorting to government capital injections or capital fund-raising.
Fitch Ratings says that conversion of existing debt instruments and sales of nonstrategic assets were among the methods banks have said they would use.
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Stefan Ingves, chairman of the Basel Committee on Banking Supervision, says that regulators' plan to require some banks to hold 9 percent in core reserves after sovereign debt writedowns will probably be enough to protect lenders from insolvency.
If banks have "valued their assets correctly, and in this case it's about valuing government bonds at market value, then something very different and extraordinary that we don't know about today, must happen for 9 percent not to be enough," Ingves said in an interview late yesterday. EU leaders "will work through" the debt crisis "step by step," said Ingves.
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