European banks may need recapitalisation: EU Commission

BRUSSELS: More European banks may need to be recapitalised as the eurozone debt crisis deepens, European Competition Commissioner Joaquin Almunia said on Tuesday.

"The worsening of the sovereign debt crisis, its impact on a fragile banking system and the continuing tensions in funding markets, all point to the possible need for further recapitalisation of banks on top of the nine that failed the stress tests earlier this year," Almunia said in a speech.

Almunia said he would propose later this year to extend rules that were put in place during the 2008 financial crisis to enable governments to provide state aid to their banks, if necessary, beyond 2011.

"Of course, banks should first try to finance themselves on the markets, and take all possible measures like the sale of subsidiaries and limitation of dividends, before they turn to the use of public backstops, which should be used as a last resort," he added.

"I would have preferred to go back to normal rules sooner and this was indeed my intention until the summer. But the situation we are facing these days calls for an extension of the existing state aid crisis regime."

Copyright AFP (Agence France-Presse), 2011