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Deutsche Bank Said to Be Ordered by EU to Close $1.7 Billion Capital Gap

By Nicholas Comfort
October 28, 2011 11:55 AM EDT 4 Comments
Deutsche Bank AG's headquarters in Frankfurt.
Photographer: Hannelore Foerster/Bloomberg
Deutsche Bank AG's headquarters in Frankfurt.

Deutsche Bank AG (DBK), Germany’s largest lender, was told by the European Union’s top banking regulator that it needs to raise about 1.2 billion euros ($1.7 billion) as part of efforts to recapitalize European banks, according to two people briefed on the matter.

The number is a preliminary estimate from the European Banking Authority, said the people, who spoke on condition of anonymity as the matter is private. Christian Streckert, a spokesman for Deutsche Bank, directed questions on the bank’s recapitalization needs to the EBA.

The EBA said Oct. 26 that German banks need to raise 5.18 billion euros in fresh capital to reach a required 9 percent core Tier 1 ratio after sovereign debt writedowns starting in mid-2012. The regulator didn’t identify the banks.

Commerzbank AG said the EBA deems it needs 2.94 billion euros while Norddeutsche Landesbank Girozentrale said it will raise 660 million euros and Landesbank Baden-Wuerttemberg said the regulator identified a 364 million-euro shortfall. The companies commented in individual statements yesterday.

Deutsche Bank said Oct. 25 that it can raise its core Tier 1 capital ratio to more than 9 percent by the end of June without measures beyond those scheduled to take effect at the end of 2011.

Germany’s biggest bank won’t need to ask the state for funds, Chief Financial Officer Stefan Krause said on a conference call this week where he presented the analysis, which is based on external analyst estimates for the company’s prospective profits.

European leaders persuaded bondholders Oct. 26 to take 50 percent losses on Greek debt and boosted the firepower of the region’s rescue fund to 1 trillion euros to try to stop the crisis from spreading. Europe also struck the accord on bank recapitalization at the summit.

To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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