October 6, 2011- Banks in Europe are being re-examined by the regions number one banking regulator to reevaluate the strength of each. The European Banking Authority is handling the reevaluation and may identify up to $266 billion in capital shortfalls throughout the system. This in turn may cause many banks to be recapitalized.
Jose Manuel Barroso, President of the European Commission said, “We want member states to come up with actions to require the recapitalization of banks in order to rid banks of some of their bad assets.”
Belgian authorities tried to reassure depositors on Thursday that Dexia bank deposits were protected. The Franco-Belgian bank is amidst a huge financial crisis.
A final decision has not been taken as to the possible action for recapitalizing by EU officials but talks are continuing. A number of officials are worried other banks may suffer what Dexia has even though they, like another 91 banks, passed a stress test performed by the EBA in July.
In those July tests, only eight banks did not pass and needed a collective injection of over $3.3 billion. However, the International Monetary Fund says its thinks banks in the EU need over $266 billion.
Finance ministers from the EU discussed the possibility of the recapitalization earlier in the week but no plan was agreed to.