Deutsche Bank AG Chief Executive Josef Ackermann said Monday that many European banks wouldn’t be able to absorb losses from sovereign bonds if the securities were valued in line with market prices, but insisted that a forced recapitalization of the sector isn’t needed.
“It is obvious, not to say commonplace, that many European banks wouldn’t cope with having to mark the sovereign debt held in their banking book down to market value,” Ackermann told a banking conference.
He said this was why support was put in place by the European Union for troubled states and that the forced recapitalization of European banks would send a signal that politicians no longer had faith in the measures they themselves initiated.
International Monetary Fund Managing Director Christine Lagarde in late August called for the urgent recapitalization of European banks. The proposal stirred a mixed reaction from banks, regulators and analysts.
The European Commission said it saw no current need for additional support for the region’s banks and that this discussion had already taken place between the EU and the IMF.
The European Banking Authority confirmed that it was sending its views to European Union institutions on various “policy options” for helping Europe’s banks, but didn’t confirm a report by Financial Times Deutschland that its recommendations included the direct recapitalization of individual banks by the European Financial Stability Facility.
The German and French banking associations rejected the proposal of a direct financial injection into banks by the EFSF. Meanwhile, the British Bankers’ Association said it was apparent that banks in some European countries must raise fresh capital, whether through the EFSF or other sources, to complete the reparation of the European banking system that has largely already taken place in the U.K. and U.S. since the financial crisis. Analysts said the forced recapitalization should be limited to peripheral euro-zone banks.
Frankfurt, September 5, 2011, (Dow Jones)
