Merkel Says Bank Capitalization to Be EU Summit Topic
October 07, 2011, 11:55 AM EDTBy Tony Czuczka and Jim Brunsden
(Updates with comments from European Commission, European Banking Authority starting in ninth paragraph.)
Oct. 7 (Bloomberg) -- European Union leaders will discuss banks’ capital at their summit on Oct. 17-18, with finance ministers left to carry out the “implementation,” German Chancellor Angela Merkel said.
Merkel, speaking to reporters in Berlin today after talks with Dutch Prime Minister Mark Rutte, reiterated that she is willing to look into bank recapitalization. Even so, using the enhanced European rescue fund for banks should only be permitted as a measure of last resort, she said.
“This summit should deliver a signal related to the way we proceed on bank recapitalization,” Merkel said. “The finance ministers will have to work out the details and the implementation. In any case, I believe we will discuss it.”
Merkel’s comments are her most explicit backing yet for European steps to help shelter banks from the spillover effects of the region’s sovereign-debt crisis centered on Greece.
“We agree that we will follow the advice of the experts that if there are proposals on how we could recapitalize the banks, then we will of course do that,” Merkel said. The European Banking Authority should make proposals on capital, she said.
Luxembourg Prime Minister Jean-Claude Juncker, who held closed-door talks with Merkel this morning, said yesterday that international auditors will probably present their next report on Greek finances on Oct. 24 and that he expects them to recommend paying the next tranche of aid.
Not Central Role
“Greece shouldn’t have a central role in this summit as best I can tell right now,” Merkel said, since the so-called troika won’t have reported on Greece by then.
Merkel also backed the creation of a special post of EU commissioner to enforce budget discipline.
“The further parameters” of bank recapitalization including “how this needs to be done, what conditions are put in place” have to be provided by the relevant authorities in Europe, Merkel said.
“In the first instance, that means the European Banking Authority,” Merkel said. The EBA is “the institution that can tell us something,” she said.
Decisions to refinance banks have “to be taken by member states on the basis of national supervisors’ assessments” coordinated with the EBA, Olivier Bailly, a spokesman for the European Commission, told reporters in Brussels today.
‘New Assessment’
The EBA carried out stress tests in July on the EU’s banking sector to “assess the capacity or ability of banks to face future shocks,” Bailly said. “Since the summer we have witnessed some negative evolution on the markets that require a new assessment of the situation. That is already happening.”
The EBA “is looking at the situation every week with the national regulators,” Bailly said. “The national regulators are in contact with all the banks registered in the member states. This assessment is going on.”
The commission will soon propose ways for the EU to coordinate possible recapitalizations, Bailly added.
The EBA hasn’t received a formal request from governments to carry out renewed assessments on bank capital to gauge the effect of higher losses on sovereign debt, Franca Congiu, a spokeswoman for the authority, said today in a phone interview.
--With assistance from Ben Moshinsky in London and Jim Brunsden in Brussels. Editors: Alan Crawford, James Hertling
To contact the reporters on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net; Jim Brunsden in Brussels at jbrunsden@bloomberg.net.
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net
