Europe's chief bank regulator said Italian banks should boost their capital, in an interview published in Il Sole 24 Ore on Sunday. European Banking Authority chairman Andrea Enria also said he did not agree with a decision by EU finance ministers last week to drop plans for a pan-EU guarantee scheme for banks, saying it would have helped solve the sovereign debt crisis.
He also dismissed criticism from Italian lenders over the EBA's request they value large holdings of domestic government bonds at market prices.
"The crisis has reached a systemic dimension," Enria was quoted as saying by the Italian business daily. "Unfortunately there has been no European response: the decision has been to provide a guarantee only at the national level." Enria said this left banks reliant on the credit standing of their sovereign state. "This is a paradox. Only a Europe-wide response would be able to break the vicious circle linking banks' balance sheets to sovereign debt, helping solve the crisis."
On Wednesday, EU finance ministers abandoned the idea of a pan-EU guarantee scheme for banks and the announcement of details of a bank re-capitalisation plan. The ministers were due to sign off details of the 106 billion euro ($142 billion) plan to re-capitalise banks, but a backlash from countries like Italy has raised doubts over the programme.