The EBA’s contribution to the overall package focuses on the capital and term funding needs in the EU banking sector, against the backdrop of the increasing concerns regarding sovereign debt.
Term funding guarantee scheme
Notwithstanding the European Central Bank’s (ECB) support for banks short-term funding needs, additional steps are required to restart the term unsecured funding market. Public guarantee schemes should be set in place where appropriate to support banks’ access to term funding at reasonable conditions. A coordinated approach at EU level is needed, especially in terms of entry criteria, pricing and conditions.
Measures to strengthen banks’ capital positions
Banks are required to strengthen their capital positions by building up a temporary capital buffer against sovereign debt exposures to reflect current market prices. In addition, banks are required to establish a buffer such that the Core Tier 1 capital ratio reaches 9 per cent. Banks will be expected to build these buffers by the end of June 2012.
Banks will be required, by the end of 2011, to submit to their respective national authorities their plans detailing the actions they intend to take to reach the set target. These plans will have to be agreed with National Supervisory Authorities and discussed with the EBA.
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