Bloomberg News

Nowotny Says Consensus That Bank Deregulation ‘Went Too Far’

October 25, 2011

(Updates with Nowotny quotes from second paragraph, banks’ capital needs from fourth.)

Oct. 25 (Bloomberg) -- European Central Bank Governing Council member Ewald Nowotny said there was a consensus in Europe that deregulation of financial markets was excessive.

“There is an absolute consensus that deregulation went too far,” Nowotny said in a lecture at the Vienna University for Economics and Business today without elaborating.

Should banks not be able to get funds on capital markets, “then it is necessary for the public sector to become involved,” Nowotny also said. “On the European level there is a wide consensus that such an involvement would be in return for common shares” rather than non-voting capital, he said, adding that the U.S., the U.K. and Sweden had already used this model.

European banks may need about 100 billion euros ($139 billion) in capital after marking their sovereign debt holdings to market values in an examination by Europe’s top banking regulator, a person familiar with the discussions told Bloomberg News on Oct. 22.

The European Banking Authority told finance ministers in Brussels that the region’s lenders would need to raise that amount to reach a core tier 1 capital level of 9 percent, said the person, who declined to be identified because discussions are private. Talks with policy makers are still ongoing so the final number may change, the person said.

Nowotny, who also heads the Austrian central bank, said today that he doesn’t expect Austrian banks to necessarily require additional government funds.

--Editors: Zoe Schneeweiss, Peter Branton

To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net


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