– Europe’s debt funding gap more than doubles to USD 182bn, as the European Banking Authority’s (EBA) new capital reserve ratios increase the gap by USD 107bn
– Countries with previously small debt funding gaps like France, Germany, Italy and the Netherlands are impacted most by the new rules over the next two years
– This EBA-triggered increase is countered by new non-bank lending activity, which is estimated to total USD 75bn in the same 2012-13 period
– USD109bn of new equity is available for Europe, which is just sufficient to bridge the USD 107bn net debt funding gap for the region
– On a global level, the ratio of available equity of USD 276bn versus the global net debt funding gap of USD 141bn is twice as favourable as in Europe.
DTZ Research today released its latest Global Debt Funding Gap report, estimating that nearly 85% of the USD 216bn global gross debt funding gap will be in Europe over the next two years (2012-2013). Compared to previous reports , the most significant changes are centred on the European markets. This is predominantly the result of the European Banking Authority’s (EBA) new rules and the emergence of new non-bank lenders in the region.
The EBA’s new tier one capital reserve ratio of 9% applies to 65 European banks that are under its review. A recent analysis from the International Monetary Fund (IMF) estimates the impact of this rule on banks’ loan assets as between a 6 and 10% reduction over the next two years. Based on this, DTZ’s analysis assumes that under the IMF’s “current policies” scenario a 7% reduction in commercial real estate loan assets would be implemented over the same period. DTZ’s report applies this 7% EBA loan reduction in combination with the original limited LTV refinancing analysis. This allows us to differentiate the impact for each country of the new EBA rules.
