EU watchdog urges banks to maintain capital levels

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Banks in the European Union must maintain capital levels they were told to reach a year ago or say how they will top up their buffers, the bloc's banking watchdog said on Monday (22 July).

The European Banking Authority (EBA) said it has extended a requirement it made in December 2011 for 61 banks to hold certain amounts of capital by June 2012.

Banks raised over €200 billion to meet that deadline, but regulators are keen for lenders to maintain these cushions to help restore investor confidence in the sector.

"Preserving capital in European banks is essential for maintaining the flow of lending to the real economy," EBA Chairman Andrea Enria said in a statement on Monday (22 July).

The banks must update their supervisors by 29 October on their capital buffers. Banks whose buffers have fallen below the nominal amount that was set for them must present "credible plans" to restore their capital base.

"When reviewing capital plans, national authorities should discuss and challenge banks' assumptions and consider the potential impact of stress events," EBA said.

The 61 banks that took part in an EU-wide "stress test" held just over a €1 trillion in core capital in June, above the overall capital floor of €903.4 billion.

EBA is due to hold a new round of stress tests of banks next year as tougher bank capital rules known as Basel III are phased in globally, though many big lenders already meet or exceed them.

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