EU leaders are actively looking for ways recapitalize European banks in a coordinated plan, according to an FT report.
Finance ministers concluded that banks are suffering from funding concerns and that markets will need to be convinced they can withstand the crisis. "Capital positions of European banks must be reinforced to provide additional safety margins and thus reduce uncertainty," Olli Rehn told the FT. "This should be regarded as an integral part of the EU’s comprehensive strategy to restore confidence and overcome the crisis.”
While Rehn and others have admitted to funding problems in European banks before, this time he suggests that Europe — rather than just member states individually — must take "a concerted, co-ordinated approach" to stem bank fears.
German Finance Minister Wolfgang Schaeuble added that Berlin could reactivate capitalization mechanisms put into place in 2008.
The Dow was down over 200 points when this report surfaced at 3:19 PM. It ended up over 150 points on the day. Bank stocks also made a complete turnaround on the news, with Morgan Stanley up over 10% in 40 minutes. Even though markets are bouncing back, however, the details of any plan to recapitalize the banks are unknown. Any coordinated measures would likely need approval from national governments, something that the finance ministers meeting today can't promise.
Therefore, this incredible comeback seems overblown, considering the immaturity of any plans to actually go ahead and recapitalize the banks and wealth of rumors about a eurozone endgame flying around over the last few weeks.
Just earlier today, these same finance ministers were not saying positive things about bank recapitalization or expanding the EFSF.
