Given that that book capital is already a meaningless number due to suspension of mark-to-market accounting and regulatory forbearance that allows for keeping zombie borrowers alive with extend and pretend tactics, this analysis is interesting from the perspective of the magnitude of the losses.
Few large eurozone banks would be left standing and the banking sector could face a €370bn (£298bn) loss if the euro crisis results in the single currency bloc breaking apart, according to one of the first indepth analyses of what might happen if the eurozone disintegrates.
The analysis by Credit Suisse estimates that up to 58% of the value of Europe's banks could be wiped out by the departure of the "peripheral" countries - Greece, Ireland,Italy, Portugal and Spain - from the eurozone.
Even if the single currency remains intact some €1.3tn of credit could be sucked out of the system as banks retrench to their home markets, unwinding years of financial integration, the Credit Suisse analysis warns. This represents as much as 10% of the credit in the financial system.Of course, this type of decline in credit would be armageddon for the real economy.
"We find that a Greek exit could be manageable ... but in a peripheral exit, few of the large listed eurozone banks would be left standing," the Credit Suisse report said.
The banking sector could need capital injections of as much as €470bn if the three scenarios considered by the Credit Suisse analysts - a Greek exit, an exit of the periphery countries and a situation where banks retrench domestically - happen at once....While the banks would need close to 500 billion euros to rebuild their book capital levels, this recapitalization could occur over several years by retention of 100% of pre-banker bonus earnings.
Fortunately, the EU has a modern financial system with deposit guarantees and access to central bank funding, so banks can operate for years supporting the real economy even while they rebuild their negative book capital levels.
The Credit Suisse analysts said that banks have been preparing for a potential Greek exit so the impact would be limited, so long as "it is an orderly event".
But if there is an exit of the five countries in the periphery the the consequences for the banks in those countries would be substantial"with some of them having their tangible equity largely wiped out". Among those which would fall into this category are Intesa Sanpaolo in Italy.