European banks are told they must raise €108bn in new capital

Leaders agree on figure, but there are doubts whether it will be enough to convince the markets

European banks will be told to move their capital ratios up to 9 per cent by the end of June 2012, according to EU officials. But doubts remain about whether this will be sufficient to convince markets of the solvency of the continent's financial sector.

The European Banking Authority has calculated that European banks need to raise €108bn to lift their capital to this new target ratio after marking down their holdings of eurozone sovereign bonds to their present market values. But the €108bn figure falls well short of some other estimates of the size of the capital needs of the continent's banks. Last month, the International Monetary Fund published research that pointed to a €200bn hole in the balance sheets of European banks. And last week analysts at JPMorgan Cazenove said Europe's lenders would need to raise between €230bn and €243bn to bring their capital ratios up to 9 per cent.

Uncertainty also remains about whether banks will have access to official support from the European bailout fund, the European Financial Stability Facility (EFSF), in order to reach the new ratios. Italy, Spain and Portugal are reported to have resisted signing up to the new agreement on capital ratios without guarantees over the availability of assistance.

But eurozone leaders have yet to decide which banks will have recourse to the EFSF in the event that they fail to raise new capital in the private markets. The bloc's governments do seem to have come to an agreement, however, that banks should cease paying bonuses to staff and dividends to shareholders while they are attempting to raise new capital. Anders Borg, the Swedish Finance Minister, said: "The first solution is withholding dividends and tapping profits." A document was also circulated among the EU leaders at the weekend outlining a possible guarantee scheme to help banks secure access to wholesale funding at a time when many are being shut out of inter-bank lending markets.

Greek bonds remain a sticking point. An analysis from the EU and the IMF on Friday showed that unless Greece's €350bn debt mountain is written down by about 60 per cent, it could balloon in the coming years to €444bn. But the banking sector is still resisting demands for a sizeable write down on the face value of Greek bonds in the market, beyond the 21 per cent they agreed to in July.

Charles Dallara, director of the Institute of International Finance, a lobby group, said: "Discussions are making progress, albeit limited. We remain open to explore options on a voluntary approach built on a realistic outlook for the Greek economy and restoration of Greece's market access."

Eurozone finance ministers have appointed Vittorio Grilli, the head of the EU's economic and finance committee, to negotiate with Greece's creditors over the size of the writedown.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones