EBA to give new estimate of EU bank recapitalisation needs

29th November 2011, Comments 0 comments

The European Banking Authority, the EU's financial regulator, will present a new estimate of banking recapitisation requirements to finance ministers on Wednesday, an EBA spokesman told AFP.

The EBA had said in October that EU banks needed an extra 106 billion euros ($147 billion) to meet new capital requirements under a deal to tackle the eurozone debt crisis.

"As stated on a number of occasions, the recapitalisation plan is just one of the elements of a broader package agreed at the last EU summit," an EBA spokesman said on Tuesday.

"For its part, the EBA has made progress in the finalisation of the capital exercise. A final update will be presented to the next ECOFIN meeting for further discussion and final clearance.

"Following the ECOFIN meeting, the EBA's Board of Supervisors will finalise the recapitalisation package and agree on a publication date," he added.

There is concern in financial circles that some banks may find themselves squeezed between requirements for strengthened shareholders funds and a big increase in the risk rating of bonds they hold which have been issued by some eurozone countries.

A rise in the risks on the asset side of their balance sheets raises the need for them to strengthen their shareholder funds in any case in order to respect risk-funds ratios.

If such banks believe that they may have difficulty in raising the extra shareholder funds needed, they may respond by reducing the risks they take on, and this could reduce lending to businesses and individuals and push lending rates up, analysts say, warning that there are signs that this is already happening.

© 2011 AFP

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