By Francesco Canepa
FRANKFURT (Reuters) - The euro zone's top three investment banks are facing an 11 billion euro (9.57 billion pounds) question from their supervisor.
That's how much capital Germany's Deutsche Bank (DE:DBKGn) and France's Societe Generale (PA:SOGN) and BNP Paribas (PA:BNPP) would have to raise if they were asked to meet a new, higher threshold informally set by the European Central Bank after a health check of the sector.
A decade after the start of the financial crisis, supervisors are still trying to make the banking sector more robust and avoid a repeat of the meltdown that started on trading floors and brought low the whole euro zone economy.
ECB Vice President Luis De Guindos said after results of the Europe-wide stress test were published on Nov. 2 that the job was not done. The 12 euro zone banks left with capital worth less than 9 percent of their assets after the simulation "should increase robustness and enhance capital positions", he added.
On that metric, Soc Gen, Deutsche Bank and BNP show the biggest shortfalls, at 5.4 billion euros, 3.4 billion euros and 2.5 billion euros respectively, according to Reuters calculations.
That is more than the combined deficit of the other nine banks falling short of the mark, which include Spain's Sabadell (MC:SABE) and BBVA (MC:BBVA), Italy's UBI Banca (MI:UBI) and Germany's Nord-LB.
With the euro zone economy slowing, financial markets in turmoil and banking shares already under the cosh, analysts were quick to latch onto De Guindos's comments.
"I believe supervisors are ready to shift their focus ... and market risk is the obvious candidate," said Marco Troiano, a director at ratings agency Scope.
"This could turn the heat on banks with large security portfolios, especially when not fully marked to market."
UNDER PRESSURE
While heightened market scrutiny would be nothing new for Deutsche Bank, whose battered shares hit all-time lows last month, it would mark a change for the likes of BNP and Soc Gen.
Shares in these two global lenders with large investment banking operations have outperformed the rest of the euro zone's banking sector since the financial crisis began.
They have also been spared the brunt of the ECB's drive to rid banks of bad loans, which are concentrated in domestically focused lenders in countries hit hardest by the crisis, such as Cyprus, Greece, Portugal and Italy.
But things are starting to change.
This year, for the first time, the European Banking Authority included complex derivative contracts known in market parlance as Level 2 and 3 assets in its tests.
It found a 21 billion euro impact on the capital of banks across the European Union.
The ECB has also made these assets, which are the preserve of top investment banks, one of its priorities for the year.
"This is right for banks that have complex portfolios and lots of level 3 assets," said Alberto Gallo, a portfolio manager at Algebris Investments.
"The timing is unfortunate, however, at this point of the economic cycle."
The 9 percent mark cited by De Guindos is not a formal requirement. These are set for each bank by a separate arm of the ECB, the Single Supervisory Mechanism.
And the European Banking Authority's stress tests do not take into account any measure that banks could take to preserve their own funds, such as selling assets or tapping shareholders, making a shortfall against that threshold purely hypothetical.
Their results nevertheless feed into "guidance" on how much capital a bank should have, which is not legally binding but can lead to intensified scrutiny and corrective measures by supervisors if not met.
"Until banks highlighted above shore up their capital positions, they will remain under pressure," analysts at Natixis said of the 12 banks coming up short of 9 percent.
The list also includes Italy's Banco BPM (MI:BAMI), France's La Banque Postale, Germany's DZ Bank, Austria's Erste (VI:ERST), the Bank of Ireland Group (I:BIRG).