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Schaeuble Says Bank Recapitalization Part of Crisis Effort

October 14, 2011

(Updates with Schaeuble comments from fourth paragraph. See EXT4 <GO> for more on the debt crisis and GMEET <GO> for the G-20 meeting.)

Oct. 14 (Bloomberg) -- German Finance Minister Wolfgang Schaeuble said efforts to strengthen banks’ finances is part of European leaders’ fight against debt-crisis contagion risks.

“We’re taking measures to fight the dangers of contagion,” Schaeuble told reporters today in Paris, where he’s attending a Group of 20 meeting of finance ministers and central bankers. “The recapitalization of banks is part of this effort.”

European officials are under pressure to find a solution to their debt crisis, which is roiling financial markets and threatening to tip the global economy back into recession. U.S. Treasury Secretary Timothy Geithner, who is attending the G-20 meeting in Paris, has criticized Europe for indecisiveness.

“We will tell our colleagues that we’re on a path to taking clear measures to fight the risk of contagion, part of which is to better ensure that all systemically-important banks are equipped with the necessary capital,” Schaeuble said.

Concerned that banks lack the capital to absorb a shock in sovereign debt, European authorities are working on a plan that may force financial institutions to raise at least 100 billion euros ($138 billion) in additional capital, according to analysts’ estimates. That money would come either from existing investors -- who are signaling they may resist providing it --or state funding that may come with strings attached.

“Systemically-relevant banks will have time to fulfill capital requirements,” Schaeuble said. “If they can’t do that by their own means, they would be helped by the governments as a last resort.”

Schaeuble said it’s important for Europe to “fight the causes of this crisis,” which he said are “a lack of financial market regulation and an abundance of government deficits and debt.”

The policy of budget consolidation “has to be continued where debts are too high,” Schaeuble said.

--Editors: Matthew Brockett, Simone Meier

To contact the reporter on this story: Rainer Buergin in Berlin at

To contact the editor responsible for this story: James Hertling at

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