European Banks need to raise 700+ billion in new capital

Morgan Stanley estimates that the 27 biggest European banks need to raise total requirement $732 billion to $777 billion by 2019.

That’s the equivalent of either shedding three JPMorgan banks or issuing new bonds that can be considered part of capital. Regulators are looking to have these banks add to core capital to ensure that in future crises the senior bond holders take losses and not taxpayers.

Equity is expensive. Suffice to say all of this will have an impact on future trade credit pricing. Right now, banks are still fighting for deals, and margins are particularly thin on supply chain finance deals.  See Mispriced Credit? Thin pricing around Supply Chain Finance structures

The graph captures the equity needed for a select few larger European banks:


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