October 17, 2011 / 7:00 PM / in 6 years

UPDATE 1-Europe banks need 9 pct capital ratio by '13-Paris

3 Min Read

By Daniel Flynn and John Irish

PARIS, Oct 17 (Reuters) - European governments will ask banks to have a 9 percent capital ratio by 2013 at the latest as part of a comprehensive package to tackle the euro zone's debt crisis, though talks are underway to accelerate the calendar, French officials said on Monday.

Government spokeswoman Valerie Pecresse, who is also budget minister, said French banks would be recapitalised even though they were fundamentally solid as part of a European strategy to restore confidence in the markets.

"We are going towards a collective European solution," Pecresse said told RMC radio. "We will ask all European banks to have 9 percent capital ratios by 2013 to be more solid to face risk.

"We want French banks to rely on private capital and that means less bonuses, no dividends, and they can also ask private investors. The state is only a last resort."

French officials say that Europe is studying accelerating the timetable toward meeting the stricter capital ratios under the Basel III accord, as part of a strategy to stem the euro zone crisis to be agreed by European leaders next weekend.

"The European initiative will define a calendar with a level of capital which will be between Basel II and Basel III: we will be at Basel 2.5 on the level of capital demanded," said one senior French official.

"Will it be the same 9 percent level in a shorter calendar? That is one of the subjects under discussion."

Bank of France Governor Christian Noyer said in an interview late on Sunday he believed the accelerated deadline for meeting higher capital levels in the progress toward meeting Basel III criteria would be summer 2012.

"We need to go faster in raising capital levels. The exact rules for Europe are still being finalised ... French banks should be able to make it because we are talking about a period of about 9 months from here to next summer," Noyer told TV5 Monde.

"We will ask from next year very significant steps in that direction so banks respond to the concerns in the market" about capitalisation levels, he said.

French banks should be able to meet the new levels by retaining earnings or by restricting dividends, Noyer said.

EU leaders are expected to unveil plans at a summit in Brussels on Sunday to make Greece's debt sustainable via higher 'haircuts' for private bondholders, increasing the firepower of the EFSF rescue fund and recapitalising the region's banks.

Market speculation over the solidity of France's banks pummeled their share prices over the summer, prompting BNP Paribas and SocGen to announce a slew of asset sales to strengthen their balance sheets.

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