Banks, whose shares as measured by the 46-member Bloomberg Europe Banks and Financial Services Index have fallen 30 percent this year, oppose the plan partly because it would dilute the value of existing shares. In addition, Deutsche Bank AG (DBK)’s Chief Executive Officer Josef Ackermann and Banco Santander SA Chairman Emilio Botin say capital injections won’t address the real problem, which is sovereign debt.
“Since private investors will certainly not be providing the funds for such a recapitalization, governments would ultimately have to raise such funds themselves, thus only exacerbating their debt situation,” Ackermann, who’s also chairman of the Washington-based Institute of International Finance, said at a conference in Berlin on Oct. 13.
via EU Banks Vow to Slash Assets by $1 Trillion – Bloomberg.
That indeed is the rub. Borrow more money from the taxpayer to boost the banks. That will cause a lot of riots if the bondholders and shareholders aren’t wiped out.