September 22, 2011 / 9:36 PM / in 8 years

UPDATE 2-Europe bank recap plan stands, calls for action

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LONDON, Sept 22 (Reuters) - Europe’s banking regulator said there were no plans to force more than a dozen weaker mid-tier banks to raise capital quickly, saying an original time table remained in place despite pressure building for action.

The Financial Times said late on Thursday that European officials were set to speed up plans to recapitalize 16 banks that came close to failing this year’s pan-EU stress tests, citing European officials.

But the European Banking Authority (EBA) said a call on Wednesday from the European Systemic Risk Board, Europe’s super-watchdog, for a coordinated action to strengthen banks’ capital position chimed with the recommendation issued by the EBA in July after the stress test. [ID:nL5E7KM0YT]

“The time frame for assessing these actions and monitoring their implementation is also in the recommendation. There are no changes to that time line,” a spokeswoman for the EBA said.

Pressure is mounting on Europe’s politicians to bolster the strength of banks, which could face big losses on sovereign bonds if the euro zone’s debt crisis deepens.

A senior EU source said deadlines to recapitalise banks had not changed, although talks would continue in the coming days.

The need to recapitalise banks — including renewed calls this week from the International Monetary Fund for urgent action — has become increasingly political, however.

There are conflicting views on which countries and banks need to recapitalise, with big countries like Spain, France and Germany reluctant to inject fresh funds. France’s big banks are among those most in need of cash, analysts say.

Nine banks failed the EBA test in July and were told to raise more capital by the end of December.

The EBA also said banks who only narrowly passed the stress test — with a capital ratio of only just above 5 percent after a two-year recession scenario — and with significant exposure to sovereign debt in troubled euro zone countries should take action to strengthen their capital health.

The banks must tell their national supervisors by the end of October what steps they will take to beef up capital cushions.

The EBA will assess those steps and monitor implementation, which has to be completed by end of April 2012, and will publish a report on what has been done.

Banks are expected to try to raise capital privately and governments would step in if needed.

Europe’s planned new safety fund, the EFSF, could be used, but it would only logically be needed by those governments that can only get finance at a high cost in the market.

The “near pass” banks are mostly mid-tier lenders. Seven are Spanish, there are two each from Germany, Greece and Portugal, and there is one each from Italy, Cyprus and Slovenia.

The list includes Germany’s HSH Nordbank and Banco Popolare of Italy. Others include Spain’s Bankia, Sabadell and Bankinter, Portugal’s Millennium bcp and Espirito Santo, and Greece’s Pireaus. [ID:nL6E7IH01I]

Reporting by Steve Slater, Huw Jones, Julien Toyer, Chris Sanders and Burton Frierson; Editing by James Dalgleish and Andrew Hay

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