European banks need to avoid a fire-sale of assets over the next few years that could stymie already fragile growth rates in the eurozone, Ireland's head of banking supervision said on Wednesday.
"It is incredibly worrying to us that in a wave of deleveraging which is calculated to be in excess of 2 trillion euros ($2.7 trillion) in the next couple of years that this wall of deleveraging will continue to add additional pressure onto the European economy," John Moran told a banking conference in Dublin.
"We really need to avoid a situation where we are dumping assets at any cost," he said. "In order to do that Europe, needs to work hard to find a stable mechanism to fund this type of deleveraging." Separately, Ireland's finance minister said the country's banks, which have swallowed tens of billions of euros in capital, would not have to raise any additional reserves on the back of new health checks being rushed through by the European Banking Authority.
"My initial advice is that we won't have to do anything extra and that we are capitalised to fulfil the new rules they are coming forward with," Michael Noonan told reporters. "There are different ways of calculating core Tier 1 capital. There are items you can put in or leave out. They are putting in high figures but we are not clear if that is a trailer or a decision." European banks are looking to shed loans and beef up their balance sheets to protect themselves against a deepening sovereign debt crisis that has frozen normal funding channels.
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