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Call for more robust EU banks
Source: Agencies |
September 19, 2011, Monday
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Print Edition
Print Edition
EUROPEAN Union finance ministers agreed over the weekend that European banks must be strengthened in the follow-up to July stress tests as a report said a "systemic" crisis in sovereign debt now threatened a new credit crunch.
"We reached the conclusion that we need to make our financial system more robust," Spanish Economy Minister Elena Salgado told reporters after a meeting of EU finance ministers in the Polish city of Wroclaw.
"There is a consensus that it would be good for our financial institutions to strengthen their capital to comply with Basel III requirements and to face any eventuality of the moment," she said.
However, the agreement does not mean European banks are likely to get large, additional capital injections from public coffers - it is more an acknowledgement of the results of the European bank stress tests in July.
The tests showed a financing gap for banks of only 6 billion euros (US$8 billion) - a sum many investors believe could be much higher if the debt crisis worsens.
European banks are therefore struggling to borrow amid growing alarm among United States money market funds, and other traditional dollar lenders, about the effect of a feared Greek debt default on European banks' books.
Persistent jitters over French banks' exposure to Italy and Greece hammered the shares of BNP Paribas and Credit Agricole.
Last Wednesday, Moody's Investors Service downgraded Credit Agricole and Societe Generale, citing increased concerns about their funding and liquidity profiles in light of worsening refinancing conditions. It left the ratings of the biggest French bank BNP on review for downgrade.
"From our perspective, we see a clear need for bank recapitalization," Swedish Finance Minister Anders Borg said on leaving the meeting.
"I think the IMF has spelled it out very clearly. The EU banking system needs better backstops, and that's basically a matter of capital," he said.
A document prepared for the meeting said banks should raise their capital.
Guidelines for the stress tests stipulate banks should announce measures to boost capital, if needed, within three months of the results and carry out the increase, preferably financed by private investors, within six months.
"We reached the conclusion that we need to make our financial system more robust," Spanish Economy Minister Elena Salgado told reporters after a meeting of EU finance ministers in the Polish city of Wroclaw.
"There is a consensus that it would be good for our financial institutions to strengthen their capital to comply with Basel III requirements and to face any eventuality of the moment," she said.
However, the agreement does not mean European banks are likely to get large, additional capital injections from public coffers - it is more an acknowledgement of the results of the European bank stress tests in July.
The tests showed a financing gap for banks of only 6 billion euros (US$8 billion) - a sum many investors believe could be much higher if the debt crisis worsens.
European banks are therefore struggling to borrow amid growing alarm among United States money market funds, and other traditional dollar lenders, about the effect of a feared Greek debt default on European banks' books.
Persistent jitters over French banks' exposure to Italy and Greece hammered the shares of BNP Paribas and Credit Agricole.
Last Wednesday, Moody's Investors Service downgraded Credit Agricole and Societe Generale, citing increased concerns about their funding and liquidity profiles in light of worsening refinancing conditions. It left the ratings of the biggest French bank BNP on review for downgrade.
"From our perspective, we see a clear need for bank recapitalization," Swedish Finance Minister Anders Borg said on leaving the meeting.
"I think the IMF has spelled it out very clearly. The EU banking system needs better backstops, and that's basically a matter of capital," he said.
A document prepared for the meeting said banks should raise their capital.
Guidelines for the stress tests stipulate banks should announce measures to boost capital, if needed, within three months of the results and carry out the increase, preferably financed by private investors, within six months.
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