Bloomberg News

EBA Should Give Banks More Time to Boost Capital, ABI Says

December 06, 2011

(Updates with economist’s comment in fourth paragraph.)

Dec. 6 (Bloomberg) -- The European Banking Authority should give banks more time to raise capital to comply with its targets, said Giovanni Sabatini, director general of Italy’s banking association.

The measures required by the EBA were inappropriate in their “method, merit and timing,” Sabatini said in Rome today, comments that were confirmed by an ABI spokeswoman.

Banks by Christmas Day must present plans on how they will reach the regulator’s target of 9 percent of core Tier 1 capital by June, after marking their sovereign debt to market prices. Lenders are struggling to find investors that will back their capital-raising needs, leaving banks little choice but to cut government bond holdings or lending, threatening economic growth and worsening of the sovereign-debt crisis.

“It’s very, very difficult for banks to raise capital right now,” Gregorio De Felice, Intesa Sanpaolo SpA’s chief economist, said in an interview. “Giving banks more time to raise funds would be a positive move. We’ve said all along that these measures have a multiplying effect on the sovereign-debt problem. The aim should be to contain the issues.”

The EBA estimated in October that the region’s financial institutions need 106 billion euros ($142 billion) to reach its capital goals by mid-2012. The regulator plans to release updated figures on how much capital lenders should raise to absorb losses from euro-area bonds as soon as this week, three people with knowledge of the matter said previously.

The updated figures take into account sovereign holdings through the end of September, rather than the estimates, which used June data. Italy’s top five lenders needed to boost capital by 14.8 billion euros, the London-based EBA said in October.

--With assistance from Sonia Sirletti in Milan and Ben Moshinsky in Brussels. Editors: Steve Bailey, Jon Menon

To contact the reporter on this story: Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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