- CNTV English - CCTV News

EU finance ministers focus on shoring up bank reserves

05-04-2012 16:27 BJT

Watch Video

Play Video

European Union finance ministers met in Brussels on Wednesday in the wake of the downgrade by Standard and Poor’s of eleven Spanish banks at the start of the week.

European finance ministers arrive in Brussels to decide how much money banks should be forced to keep in reserve to avoid needing bailouts when too much debt turns toxic.

EU Commissioner for Economic and Monetary Affairs Olli Rehn (L) talks with Spanish Economy
Minister Luis de Guindos Jurados prior to a meeting meeting, May 2, at EU headquarters. EU
finance ministers inched closer Thursday to an agreement to beef up capital rules for banks
against future crises after a heated debate between British-led nations and a Franco-German
bloc (AFP Photo/John Thys)

Anders Borg, Swedish Finance Minister, said, "Either we have strong banks or the tax payers take the risks and I would prefer to have strong capital in the banks than to take risks with the taxpayers."

It’s not just Spanish financial institutions that remain shaky. Right across the EU banks are in trouble, even in large economies like Britain and France.

How much capital banks should keep in reserve has become a key question in the financial crisis, which has seen many of Europe’s largest banks bailout out by governments. But the EU’s 27 member states remain divided over just how much money financial institutions should set aside to protect themselves against risky debt.

Policy experts warn reserves will need to be well above the so-called Basel 3 levels being discussed at the meeting if the banks are to be protected against bad private debt as well as enormous holdings in troubled government bonds.

Danies Gros, director of Center for European Policy Studies, said, "Whether they have under the Basel rules five percent or perhaps eight percent it doesn’t help. Because we have seen in the case of Greece that if things go wrong with a sovereign as we saw in the case of Greece then things go really wrong and higher capital requirements are neither here nor there."

There is also wrangling over whether governments should be allowed to force their banks to set even higher reserve limits than the ones that will be agreed at an EU level.

Britain and Sweden think this should be the case, but countries like France believe countries should be forced to keep the reserve limit at the level set by Brussels.

France argues a higher reserve would make British and Swedish banks appear more secure and could lead to a flight of capital to these two already strong financial centers. And governments also need to agree on a way to get banks to boost their reserves without halting lending.

That could exacerbate an existing credit crunch, further slowing the economy of a trading block with 8 of its member states officially in recession. Finance ministers have until June to finalize the new reserve rules.


Editor:Zhang Dan |Source: CNTV.CN

Hot Videos view more

The celebrations are still continuing as the victorious coach, Joachim Loew, has been honored for his achievement in his hometown of Freiburg.
Germany coach Loew honored in hometown of Freiburg

Chinese men´s national team continued its preparations for next year´s Asian Cup, as they managed a one-all draw against visitors Jordan during a football friendly in Harbin, the capital city of Northeast China´s Heilongjiang Province.
China held to 1-1 draw by Jordan

The defending world champs came into the contest with a perfect 6-and-oh record, but they would be in for a tough first half before opening things up in the second.
USA beat Slovenia 119-76 in quarter-finals

Hot Stories more

UK authorities believe killer of James Foley is a British national

Across the UK the hunt is on for James Foley’s killer, who authorities believe is a British national. As Richard Bestic reports from London, Prime Minister David Cameron cut short his summer break to lead his government’s response.

Israeli war jets renews Gaza strike as truce talks stalled

Three Palestinians were killed and 40 others wounded in the intensive Israeli war jets´ airstrikes on the Gaza city on Tuesday night, shortly before an end of a 24-hour ceasefire in the Gaza Strip,

Missouri police arrest dozens after violent night

As the protests in the town of Ferguson, Missouri turned violent with police facing ´heavy gunfire´ from some ´criminal elements´, cops fired tear gas, stun grenades and arrested 31 demonstrators on Monday night.

Picture in news more

More Video News

Choose TV Program