Business World

Tuesday 21 November 2017

50 European banks may be forced to raise capital levels


IMF head Christine Lagarde reacts during a news conference at the G20 meeting in Paris at the weekend
IMF head Christine Lagarde reacts during a news conference at the G20 meeting in Paris at the weekend

Emmet Oliver

As many as 50 European banks could be named in public and forced to take capital under plans being put together by the European authorities. The latest moves came after a weekend G20 meeting in Paris.

The "systemically important" banks will be included on a list, drawn up by Financial Stability Board chairman Mario Draghi, to be published in time for a G20 leaders meeting in Cannes, France, on November 3-4, Bloomberg reported yesterday.

Regulators have said the banks named will be forced to take on more capital.

Meanwhile, EU economic and monetary affairs commissioner Olli Rehn said member states were set to agree on a "very serious plan" to recapitalise the region's lenders .

"I expect that in the coming days, we'll have more clarity on this," Mr Rehn said.


"Member states and banks need... to put recapitalisation in place as swiftly as possible."

With a summit looming on October 23, European leaders are groping toward a master plan for dealing with Greece's oversized debt, insulating the Spanish and Italian markets, and shielding banks from the fallout.

There's a "strong sense of urgency" among leaders, Mr Rehn said. "The EU is acting very hard in order to put together a comprehensive strategy to overcome the sovereign debt crisis and banking-sector fragilities, which are severely intertwined."

Banks may be required to maintain a 9pc capital buffer to absorb sovereign risks, up from the 5pc core capital level used in July's stress tests, a person with knowledge of discussions at the authority, the EU's top banking regulator said last week.

Europe's revamped strategy to beat its two-year sovereign debt crisis won the backing of global finance chiefs, who urged the region's leaders to deal "decisively" with the turmoil.

European officials outlined the initiatives they're considering at a meeting in Paris of finance ministers and central bankers from the Group of 20 economies. With the continent's fiscal woes rattling financial markets and threatening the world economy, governments were urged to complete the plan at the summit and to tame the threat of contagion by maximising the firepower of their €440bn bailout fund.

"The plan has the right elements," US treasury secretary Timothy F Geithner said in Paris.

Policymakers held out the possibility of rewarding European action with more aid from the IMF, while splitting over whether the Washington-based lender needs a fillip of cash.

ECB President Jean-Claude Trichet said EU heads of state must take "appropriate measures" at the summit to shore up confidence in the region's debt markets and banks. The "measures to be taken will be difficult," Mr Trichet said yesterday.

"The decisions to be taken at the EU meeting will have to be appropriate measures to protect the sovereign debts and appropriate measures to protect the financial system."

Mr Trichet also said the euro-area economy "probably" grew in the third quarter. For the fourth quarter "we will see", he added.

Irish Independent

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