Finance ministers yesterday discussed plans for recapitalisation of EU banks to protect them against losses of holdings of eurozone sovereign bonds. Jacek Rostowski, Poland’s finance minister, who chaired the meeting, said that the exercise should involve a fixed amount of capital and should not be understood as a capital- adequacy ratio. Rostowksi explained that it was important to stress this difference in order to send a message to banks that they should not improve their capital ratios by winding down existing business. “De-leveraging is not a way of achieving capital strength,” he said.
Rostowski’s comments reflect concern that banks could cut back on lending to households and businesses and cause a credit squeeze in order to meet the recapitalisation target of raising €109 billion by June next year. Rostowski said that ministers had discussed schemes to guarantee bond issuance by banks. They had agreed, he said, that there would be national schemes but that they would have to comply with guidelines to be drawn up by the European Commission.
Ministers also heard a presentation by Mario Monti, Italy’s prime minister and finance minister, on planned economic reforms.