EU warns that banks could need extra cash
European banks may need to raise extra cash or turn to governments for help as the sovereign debt crisis intensifies, the EU's competition chief has said.
Nine banks have been told to raise at least €2.5bn by mid-October to fill capital holes identified in last July's EU-wide stress test, but EU Competition Commissioner Joaquin Almunia has said that even more may be needed to restore the financial system to health.
"The worsening of the sovereign debt crisis, its impact on a fragile banking system and continuing tensions in funding markets all point to the possible need for a further recapitalisation of banks," he said.
Mr Almunia made the revelation as he announced an extension of the EU's crisis regime for banks, an indication that the bloc is gearing up for further government intervention.
The regime allows governments to fast-track aid or pledge guarantees to ailing lenders without falling foul of the bloc's competition rules, as long as banks promise to restructure.
Mr Almunia's comments come as the International Monetary Fund said that the July tests "did little to stabilise bank stocks " and that investor jitters remain despite a pledge by eurozone leaders to boost the powers of their €440bn rescue fund and offer Greece a second bailout.