Big capital revamp for EU banks
Published 14/10/2011 | 05:00
EUROPE'S largest banks will face sovereign debt writedowns and a temporary increase in capital levels to as much as 9pc under plans being drawn up by the bloc's banking watchdog.
The final terms of the latest capital review will be available "in the coming days", sources close to the talks said yesterday, and are likely to include the size of the hit banks must take on their sovereign bonds and other assumptions the tests will make.
A spokesperson for the European Banking Authority stressed that a decision on the new minimum capital levels would be taken "at political level" by a meeting of EU leaders on October 23.
EU officials are calling the recapitalisation a "bazooka" move to avert further speculation on lenders' solvency.
"We need to deliver a solution to break the vicious circle between doubts over the sustainability of sovereign debt, the stability of the banking system and the EU's growth prospects," said European Commission (EC) chief Jose Manuel Barroso.
Earlier in the week, the EC's director of financial stability, John Berrigan, told a Dublin conference that banks would have to be capitalised "to what the markets believe are adequate levels".