Bloomberg News

EU to Propose Law Giving Watchdogs More Powers in Capital Plan

November 09, 2011

Nov. 8 (Bloomberg) -- Bank regulators may get more powers to enforce a European Union plan to recapitalize lenders, including the ability to ban weaker banks from paying bonuses, under a proposal from the European Commission.

The commission, the EU’s executive arm, will propose the law “in the coming days,” Michel Barnier, the EU’s financial services chief said today.

Europe’s banks will need to raise 106 billion euros ($146 billion) in fresh capital under tougher rules being introduced in response to the euro area’s sovereign-debt crisis, the European Banking Authority said last month. The extra reserves are needed to meet a temporary requirement for lenders to hold 9 percent in core reserves, after sovereign-debt writedowns.

“We need a European regulation, which will be presented in the coming days, to give these means to all the national supervisors so that all the banks which are under their authority are capable of putting in place this objective of nine percent,” Barnier said in an interview in Brussels.

Policy makers want banks to use funds from withholding bonuses and dividends to reach the capital target, rather than reducing the size of their balance sheets.

The EBA will “ensure that there isn’t deleveraging, and in particular also that there isn’t deleveraging in host countries in which trans-national groups operate as a result of the need to achieve certain capital levels,” Polish Finance Minister Jacek Rostowski said in a speech in Brussels.

--Editors: Christopher Scinta, Peter Chapman

To contact the reporters on this story: Jim Brunsden in Brussels at jbrunsden@bloomberg.net; Ben Moshinsky in London at bmoshinsky@bloomberg.net.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net


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