Billions for banks

"The EU prepares cash injection for banks," says the Financial Times Deutschland. Everything must move quickly now. In order to avoid a collapse similar to that of Lehman Brothers in 2008, the head of European Commission José Manuel Barroso is scheduled to present, on October 12, a plan to recapitalise European banks. These could be forced to find new funds. The European Banking Authority (EBA) is, for its part, devising a new stress test to better evaluate their needs. More stringent than the one banks were subjected to this summer, the new test requires that core capital equal 7% of their loans against 5% required in July. In addition, the tests will take into account the possible default of indebted states. The recapitalisation could require several hundred billion euros, the FTD notes. The results of the stress tests will be published before the October 23 meeting of the European Council at which the Member States will decide on the measures now needed to fight the crisis.

"The sector is shaking," comments FTD, for whom it is the EBA which was made to look ridiculous this summer and which is in need of aid. "Given the EBA's history," the paper adds, "its anemic human resources, and its questionable methods - the banks themselves provide the data thus leaving the door wide open to fraud - one can expect the chaos in the markets and around the banks to increase rather than decrease".