European Banks May Need €90B

Following the U.S. subprime mortgage collapse which paralyzed credit markets, Goldman Sachs Group Inc. says that European banks may need to raise as much as €90 billion ($141 billion) to restore their capital, Bloomberg News reports.

European banks have already raised $115 billion from investors to replenish capital after reporting $134 billion in writedowns, Goldman analysts led by Christoffer Malmer said in a note to clients today.

They may now seek more than €60 billion to increase their Tier 1 capital, a measure of financial strength, to about 9%, the analysts said. They could need to raise as much as €90 billion were credit losses to rise to levels last seen in the recession of the early 1990s.

``Regulatory pressures and a sharp turn in the European credit cycle are the two main causes for concern,'' the London-based Goldman analysts wrote in their note.

The European banks Goldman tracks have lost $900 billion of their market value since the credit crisis began last year. Anshu Jain, head of global markets at Deutsche Bank AG, said this week that that contagion is ``by no means over,'' and Europe's banks have lagged behind

the U.S. in raising money from investors.

The Goldman analysts cut their recommendations on Carnegie & Co. and Swedbank AB of Sweden to ``sell'' from ``neutral.'' Banco Santander SA, Spain's largest bank, was downgraded to ``neutral'' from ``buy.''

Goldman's analysts said in their report that ``access to liquidity, capital adequacy and post-crisis profitability are the key areas of near to medium-term uncertainty'' for European banks.