Official: EU banks have to raise $140 billion

October 25, 2011 - 4:20 AM
CORRECTION Belgium Europe Financial Crisis

CAPTION CORRECTION, CORRECTS SURNAME FROM JUNCKER TO TRICHET - Greek Finance Minister Evangelos Venizelos, left, speaks with ECB President Jean-Claude Trichet during a meeting of EU finance ministers at the EU Council building in Brussels on Saturday, Oct. 22, 2011. Eurozone finance ministers said Saturday they have agreed that banks should accept substantially bigger losses on their Greek bonds, with a new report suggesting that writedowns of up to 60 percent may be necessary. (AP Photo/Virginia Mayo)

BRUSSELS (AP) — European Union finance chiefs are close to agreeing upon new rules that would force banks to raise just over euro100 billion ($140 billion) in new capital to be able to sustain worsening market turmoil, a European official said Saturday.

EU leaders are expected to sign off on the new guideline for the continent's biggest banks at a summit Sunday, said the official, who spoke on condition of anonymity because the discussions were still ongoing.

Strengthening Europe's banks is seen as a key precondition to cutting Greece's massive debt and finally getting a grip on Europe's worsening debt crisis. European officials want banks to accept more losses on their Greek bonds than the 21 percent they had previously agreed to, and that move would cut into banks' reserves.

The new rules would force systemically important banks to raise their core capital ratios to 9 percent, compared with just 5 percent to 6 percent they needed to pass EU stress tests this summer.

The ratio measures the amount of capital banks hold compared to their risky assets.