EU advises bank reserves boost

13 October 2011

The European Union (EU) has recommended banks throughout Europe seek to bolster their reserves to help safeguard against losses associated with sovereign debt.

Jose Manuel Barroso, president of the European Commission (EC), detailed proposals that would see lenders across the continent increase capital in an effort to restore confidence to the sector.

The industry figure - whose political career began in 1980 when he joined the Social Democratic Party in Portugal, before later being named its president - also suggested the 17 EU countries that currently use the euro make the most of the capacity of their €440 billion ($600 billion) bailout fund.

He explained the major European institutes should not be allowed to pay out bonuses or dividends until they have elevated their capital buffers to the required level.

The EC also requested a "prudent valuation of all sovereign debt, whether in the banking book or the trading book" of banks.

By Asim Shah

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