Bank bailout could top £86bn

EUROPEAN banks may need more than £86 billion to withstand the sovereign debt crisis, Ireland has warned.

Irish finance minister Michael Noonan spoke out yesterday as President Nicolas Sarkozy held talks with IMF chief Christine Lagarde, and German Chancellor Angela Merkel.

The eurozone’s problems multiplied after international ratings agency Fitch downgraded the sovereign credit status of Italy and Spain – two of the eurozone’s biggest economies – while Moody’s downgraded 12 banks in the UK and nine in Portugal on Friday.

Noonan said the capital needed to bolster the banks’ cushions would have to come from a variety of sources – and the bill would be large. “I think there is general agreement that it will be significantly in excess of 100 billion [euros],” he said. “I know that some of the big German banks that I was talking to personally intend raising money on the market, so it will be private funding.

“Other banks would like to avail of the EFSF fund.

“Other banks will rely on their sovereign governments to provide the capital so there is going to be a range of ways of doing it,” he said.

Just how the EFSF, the eurozone’s £350bn rescue fund, is to be used will be a key part of the talks.

Paris is keen to tap the EFSF to recapitalise its own banks, but Berlin insists it should be used only as a last resort.

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