BRUSSELS (MNI) – The European Commission will be ready within days
to present a proposal for a common EU approach towards recapitalizing
banks, a spokesman for the Commission said on Friday.

The EU’s executive arm will present its assessment of the options
and recommendations in the “coming days”, he said. This is being worked
on by the EU’s Economics, Competition and Internal Market commissioners,
he said.

“What we need now is a clear assessment of the needs and then to
decide what instruments to use, in which formats and according to what
modalities,” the spokesman said.

EU authorities, including the European Banking Authority and
national banking authorities are “looking at the situation every week,”
he said.

“We thought that if there is a need for further recapitalisation
beyond the one already identified by the stress tests taken last July,
we will need to do that in a coordinated way. It would be pointless for
national government to act “in their own corner,” the spokesman argued.
“We need to do that with a European approach.”

But although a common approach is needed, ultimately, it is up to
individual governments to decide on whether and how to support their own
national banks, the Commission spokesman said.

After having argued against the need to raise more capital despite
the strong advice of the International Monetary Fund and the OECD, the
Commission now has accepted that the deterioration in the market over
the summer warrants a “new assessment of the situation. This is already
happening,” he said.

The stress tests conducted by EU banking regulators in July have
been criticized by investors and the IMF for being “too mild” and
ignoring key market fears such as the possible impact that a Greek
default would have on banks that hold Greek bonds.

As Belgian-French banking group Dexia was pushed to seek aid from
its government shareholders because of its heavy exposure to stressed
government bonds, EU policymakers including Germany’s Chancellor Angela
Merkel, have begun pushing for EU governments to prepare backstops to
insulate their banks from problems in the sovereign debt market.

The issue could be on the agenda of the EU leaders summit of 17-18
October, Merkel said earlier this week.

–Brussels Bureau, +324-952-28374; pkoh@marketnews.com

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