European banks need more capital as buffer – Barroso
Published 12/10/2011 | 15:37
EUROPEAN banks must strengthen their capital bases in a bid to ride out the sovereign debt crisis and win back confidence, European Commission President Jose Manuel Barroso said today.
Mr Barroso added that Government funding for banks should only be used as a last resort while institutions that require help will not be allowed to pay bonuses and he also called for the swift payment of a sixth €8bn bailout loan to bankruptcy potential Greece.
“Reactive and piecemeal responses to different aspects of the crisis are no longer sufficient,” Mr Barroso said. “We now need to get ahead of the curve.”
He added that financial institutions need to have a “significantly higher capital ratio of highest quality capital” to buffer themselves following the latest bailout of Franco-Belgian bank Dexia.
His comments come ahead of an October 23 leaders summit which has been set as a deadline for a concrete plan to combat the crisis.
Already, the International Monetary Fund has said European banks, which passed stress tests less than six months ago, need over €200bn in capital.
It is understood that European banks will be required to maintain a much higher capital buffer compared with the 5pc used in July’s stress tests.
European stocks had already risen ahead of his comments.
This afternoon the FTSE 100 was up over 1pc, the CAC in France 2.6pc and Germany’s DAX 2.6pc.
But the spectre of a Greek defaults hangs over Europe.
The head of Germany’s Central Bank Jens Weidmann told publication Bild that a Greek debt restructuring can’t be ruled out.