October 13, 2011
The European Commission on Wednesday set out proposals to shore up European banks in the face of the region's escalating sovereign-debt crisis, calling for a more-stringent review of the banks that will likely result in a broad recapitalization program.
The much-anticipated release, labeled a "comprehensive response" by the commission, contains a number of old ideas that had already been announced and a few new ones. Most importantly, the commission said tougher reviews of the region's banks using a temporary higher capital ratio, an indication of their ability to absorb losses, is needed.
Banks with inadequate capital will need to raise it, from private sources if possible and from governments as a last resort, the commission said.
All holdings of EU sovereign debt, marked at "prudent" valuations, should be included in the new reviews, the commission said.
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