Bloomberg News

EU’s Barroso to Make Bank Recapitalization Proposal Tomorrow

October 11, 2011

(Adds FT report in sixth paragraph. Click EXT4 <GO> for more on the European debt crisis.)

Oct. 11 (Bloomberg) -- European Commission President Jose Barroso said he’ll present proposals tomorrow on the recapitalization of banks as Europe’s leaders struggle to tackle the region’s debt crisis.

“I hope that tomorrow the proposals the commission puts forward will be an important contribution for the European Council and the euro-area summit on Oct. 23,” Barroso told reporters after meeting with Dutch Prime Minister Mark Rutte in The Hague today.

German Chancellor Angela Merkel and French President Nicolas Sarkozy put bank recapitalization at the top of the priority list in an Oct. 9 declaration in Berlin that triggered a flurry of consultations in European capitals. The European Banking Authority should make proposals on capital, Merkel said on Oct. 7.

European Central Bank chief Jean-Claude Trichet said on Oct. 6 that European banks and supervisors including the EBA should do everything they can to address the need for recapitalization and banks shouldn’t be reluctant to accept state help when needed.

Barroso will probably make the announcement at the European Parliament at 3 p.m. in Brussels, European Commission spokeswoman Pia Ahrenkilde-Hansen said by telephone today.

‘No New Stress Test’

Banks may be forced by the EBA to raise their core tier one capital ratios to 9 percent after its board of supervisors approved the idea in principle, the Financial Times reported, citing senior regulators.

The EBA asked lenders for more information on sovereign debt holdings as part of its review of financial industry capital levels, four people familiar with the situation said today. The information will be drawn from banks’ first-half results, said one of the people, who declined to be identified because the process is private.

“This is no new stress test,” Ben Fischer, a spokesman for German financial regulator Bafin, said in an interview. “It’s more an update of numbers on foreign exposure, a follow- up to the old stress test.”

A spokeswoman for the London-based EBA, which coordinates the work of national regulators in the European Union, declined to comment.

--With assistance from Jim Brunsden in Brussels and Ben Moshinsky in London. Editors: Ben Livesey, John Simpson

To contact the reporter on this story: Jurjen van de Pol in The Hague at jvandepol@bloomberg.net

To contact the editor responsible for this story: James Ludden at jludden@bloomberg.net


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