Brussels, 06/10/2011 (Agence Europe) - On Thursday 6 October, President of the European Commission José Manuel Durão Barroso called on the European Union to take coordinated action to recapitalise its banks, under pressure from the sovereign debt crisis. Speaking on the Euronews TV station, he also called on the member states to ensure their banks got rid of any toxic assets on their books. A little later, coming out of a meeting with Finnish Prime Minister Jyrki Katainen, Barroso added that it was clear that coordinated action was essential when it comes to recapitalising banks. Referring to the European Commission's powers to enforce EU state aid rules, he added that coordinated action did not mean that all member states had to do the same thing.
Barroso listed the work the EU is doing to increase European bank solvency. In July 2011, EU Internal Market Commissioner Michel Barnier unveiled the draft CRD IV legislation to increase the quality and quantity of bank finance (see EUROPE 10423). The 2011 bank stress tests identified the 25 weakest banks, which have ten days to submit to the banking supervisor in their country details of how they plan to boost their capital (see EUROPE 10455).
The woes facing Franco-Belgian bank Dexia are increasing the sense of urgency and Barroso admitted that more action might be needed and that the Commission was working closely with the European Banking Authority (EBA). The Financial Times says that the EBA is looking at how European banks are coping with the slump in the sovereign debt markets. Barroso said he had several ideas up his sleeve, but now was not the right time to unveil them. In Brussels on Wednesday, German Chancellor Angela Merkel said that the matter would be discussed by the EU's leaders at the 17-18 October European Council (see EUROPE 10467). The IMF, one of the first bodies to call for urgent recapitalisation of European banks, says a further €100bn to €200bn is required. On Thursday, the head of the ECB, Jean-Claude Trichet, refused to comment on how much money would be needed (see separate article). (MB/transl.fl)