European banks may need more capital – Commissioner Almunia
European Competition Commissioner Joaquin Almunia has admitted that more European banks may need to be recapitalised.
As the debt crisis deepens and banks in France and Germany exposed to countries like Italy, he said: "The worsening of the sovereign debt crisis, its impact on a fragile banking system and the continuing tensions in funding markets, all point to the possible need for further recapitalisation of banks on top of the nine that failed the stress tests earlier this year," Mr Almunia said.
The Commission is now expected to extend rules put in place at the time of the financial crisis of 2008 that will enable Governments to provide state aid to their banks after 2011, if necessary.
"Of course, banks should first try to finance themselves on the markets, and take all possible measures like the sale of subsidiaries and limitation of dividends, before they turn to the use of public backstops, which should be used as a last resort," he added.
"I would have preferred to go back to normal rules sooner and this was indeed my intention until the summer.
“But the situation we are facing these days calls for an extension of the existing state aid crisis regime."
The head of the International Monetary Fund, Christine Lagarde, insisted earlier this month that European banks needed extra capital.