Heard on the Street

European Bank Buffers Offer Little Comfort

October 12, 2011

Just how much more capital European banks need is the subject of fierce debate, especially as France and Germany weigh the latest rescue plan for Europe. And Dexia's collapse shows that some measures of financial strength can paint misleading pictures of how much additional firepower is needed. ‪

As recently as July, the Franco-Belgian lender passed European bank stress tests. Its core Tier 1 ratio, a key measure of capital strength, was a sturdy 10.3% at the end of June. But capital ratios can mask absolute leverage...

Available to WSJ.com Subscribers