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05 October 2011

FT: EU ministers examine bank aid plans


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Although the details of the plan are still under discussion, EU ministers meeting in Luxembourg had concluded that they had not done enough to convince financial markets that Europe's banks could withstand the current debt crisis.


European Union finance ministers are examining ways of coordinating recapitalisations of financial institutions, after they agreed that additional measures were urgently needed to shore up the region’s banks.

“There is an increasingly shared view that we need a concerted, coordinated approach in Europe while many of the elements are done in the Member States”, Olli Rehn, European commissioner for economic affairs, told the Financial Times. “There is a sense of urgency among ministers and we need to move on.”

“Capital positions of European banks must be reinforced to provide additional safety margins and thus reduce uncertainty”, Mr Rehn said. “This should be regarded as an integral part of the EU’s comprehensive strategy to restore confidence and overcome the crisis.”

In a sign that European governments were preparing to act, Wolfgang Schäuble, the German finance minister, said Berlin could, if necessary, reactivate support mechanisms it put in place in 2008 to recapitalise the banks. The mechanisms had expired and the German government had until now insisted they were not needed. “Everyone said the big concern is that worrying developments on the financial markets will escalate into a banking crisis”, Mr Schäuble said at a press conference.

Some of the biggest banks in France, Germany and Belgium hold tens of billions of euros in sovereign bonds from struggling peripheral eurozone countries, which have seen their bond values plummet amid fears Greece is close to defaulting on its debts. George Osborne, Britain’s chancellor, said: “It’s clear now that the European banking system needs to be strengthened and needs more capital”.

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