Europe insists there is no dash to strengthen banks


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European regulators and officials yesterday insisted plans to strengthen banks' balance sheets had not been accelerated in light of the market turmoil as fears mounted over a second financial crisis.

The European Banking Authority (EBA), which announced results of its stress tests for banks in July, said there was no difference between its timetable and a call by the European Systemic Risk Board (ESRB) super-regulator for co-ordinated action to boost banks' capital buffers.

A spokeswoman for the EBA said: "The EBA recommendation is fully in line with the ESRB statement. There are no changes to that time line."

Nine banks failed the EBA's stress tests and were told to raise more capital by the end of December, either in the market or from their governments. Another 16 small banks thatcame close to failing and had large exposures to troubled sovereign debt were given longer to boost their protection against losses.

Since July, the Greek and wider eurozone debt crisis has worsened, raising fears that banks which have big holdings of government debt will face huge losses if those countries default. The International Monetary Fund has issued a call for Europe's banks to recapitalise.

But Olivier Bailly, a European Commission spokesman, said: "The recapitalisation of European banks is something that is ongoing. It is something that is already happening. There is no big European plan to recapitalise banks in Europe.

He added that eurozone banks had already received €420bn (£366.57bn) to help boost their buffers since 2008.

Goldman Sachs' analysts said that recapitalising the near-miss banks would not ease the financial crisis because they were relatively insignificant and not at the core of the market's fears.

Big French banks such as Société Générale and BNP Paribas have been at the centre of the turmoil because of their big holdings of Greek debt.

"The current bank crisis is a symptom of markets' scepticism in sustainability of European public finances. To this recaps do not provide an answer," the analysts said.