Reuters: Financial Services and Real Estate: RPT-UPDATE 1-ECB's Visco says firewall may ease capital buffer needs

Reuters: Financial Services and Real Estate Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

RPT-UPDATE 1-ECB's Visco says firewall may ease capital buffer needs Mar 31st 2012, 15:54 Sat Mar 31, 2012 11:54am EDT (Fixes spelling) COPENHAGEN, March 31 (Reuters) - Bank of Italy governor Ignazio Visco said on Saturday the European Banking Authority could eventually relax the compulsory capital buffers it requires banks to maintain now that the euro zone had agreed on its crisis firewall. But he said any softening in the regulator's stance was a prospect for the medium term and could only come if the volatility affecting government bond yields in the euro zone eased. "The European Banking Authority itself declared that the creation of a proper European firewall would be a necessary condition for a review of the capital buffer requested to the European banks to hedge exposure risks on sovereign debt holdings," he told reporters after a meeting of euro zone finance ministers and central bank governors in Copenhagen. "Now, with the compromise on the firewall, I believe we cannot exclude an action (from the EBA) on this issue. We have to look at spreads on government bonds as well. At the moment they are still too high," he said. Italian banks have been lobbying regulators for easier rules on filling a 15 billion euro shortfall in the capital of the four institutions, Unicredit, Banca Monte dei Paschi di Siena, Banco Popolare and UBI. They argue that Italian bond yields are now lower than they were when banks were forced to mark-to-market their sovereign debt holdings although they have so far made little headway. National central banks have been collecting recapitalisation plans formulated by banks in response to the EBA requirements and will be discussing them with the regulator next week, before a deadline for implementation of the plans in June, Visco said. "In the domestic banking systems (in the euro zone) the response to EBA exercise was good," he said. He said the authority's chairman Andrea Enria had told finance ministers that the recapitalization effort had not caused any significant deleveraging by banks. However he said the Italian banks must press on with restructuring efforts to cut the cost of lending and improve efficiency. Visco, a member of the European Central Bank governing council, said market turbulence had hit Italian government bonds but there was no fundamental reason for the risk premium over benchmark 10 year German bonds to be at their current levels of over 333 basis points. "Market turbulence on government bond could be temporary, there are no reasons why spreads between Italian and German government bonds should be so high both on the 2-year and 10-year benchmarks," he said. Visco said the Italian economy had suffered "the start of a credit crunch between November and December", but now "tentative signs of credit crunch easing have been emerging since the start of this year", thanks to the soothing effect on liquidity by the European Central Bank's long term refinancing operations. "Now conditions are in place for lending to the economy to start to grow again," he said. However he said Italy faced a year of recession that was not likely to ease until the end of 2012 or beginning of 2013. The Italian central bank has previously forecast the economy will contract by 1.5 percent this year. (Reporting by Francesca Landini, editing by James Mackenzie, Ron Askew) Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions