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Europe’s Banks to Need $355 Billion in S&P Stress Scenario

Europe’s banking system would need as much as 250 billion euros ($355 billion) of new capital if faced with a “sharp” increase in yields and a “severe” economic contraction, Standard & Poor’s said in a report.

The ratings company imagines three stages happening from 2011 to 2015, including soaring yields triggered by an interest-rate shock, restricted market access for weaker sovereigns and a “very severe” downturn in the economies of Greece, Ireland, Portugal and Spain. Under this scenario, stress in Italy would be “substantial,” while in France, Germany, the U.K. and the rest of the European Union it would be “moderate,” according to S&P.