EU bank watchdogs demur on tighter stress test

FRANKFURT Fri Dec 2, 2011 12:03am GMT

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FRANKFURT (Reuters) - Europe's banking watchdogs have agreed to refrain from a further tightening of the "stress test" rules for the region's banks, who are struggling to boost the capital buffers by a mid-2012 deadline, a German newspaper reported.

The European Banking Authority (EBA) and national supervisors from the EU's 27 member states reached an accord on Wednesday after a telephone conference lasting several hours, Handelsblatt newspaper said in an excerpt of an article to be published on Friday, citing a person familiar with the talks.

The agreement is expected to be formally approved by the EBA at a meeting next week, the paper said.

"It is unlikely that something will change," the paper quoted a regulatory source as saying.

The paper said German banks looked likely to need a total of 9.6 billion euros ($12.9 billion) in extra capital by the end of June next year to meet the EBA's target for building up capital buffers against financial setbacks, with Commerzbank (CBKG.DE), Deutsche Bank (DBKGn.DE), landesbanks LBBW LBBW.UL and NordLB NDLG.UL and cooperative lender DZ Bank requiring the cash.

The figure chimes with that reported by Reuters last month from regulatory and banking sources and is significantly higher than the 5.2 billion euro capital shortfall assumed following EBA stress tests in October.

German banking supervisors had been concerned that sharpening the definition of capital used by the EBA in calculating the funds banks would need to obtain could have led to an even higher shortfall among the country's lenders.

Many banks are expected to slash risk-weighted assets to reach the target, which some observers fear may result in tighter lending conditions, exacerbating the already difficult euro zone debt crisis.

($1 = 0.7424 euros)

(Reporting by Jonathan Gould and Alexander Huebner)

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