In mid-afternoon, European stock markets accelerated upwards driven by bank stocks. The rain of purchases came following the spread of some news and rumors. First, the green light of the Bundestag to the negotiations for strengthen the European State Rescue Fund (EFSF).
Chancellor Angela Merkel obtained the mandate from the German Parliament by a large majority to advance the European agreement on this front. The discussion will resume during theeuro-summit expected in less than two hours in Brussels.
Furthermore, a rumor has begun to circulate on the markets relating to a possible agreement between the leaders of the Old Continent regarding the recapitalization of the banks. According to the draft document of the summit in circulation in these hours, the governments of the EU will give their willingness to support institutions with guarantees to avoid a credit crunch.
However, the text does not specify any total figures for the operation. Before injecting fresh capital, however, governments will give banks up to nine months to assess whether or not they are able to raise funds through private means.
It seems that an agreement in principle is also on its way raise the minimum Core Tier 9 capitalization requirement to 1%.. Lenders should comply by 2012, limiting dividends and bonuses until the goal is reached.
In recent days, fears had spread on the markets that Europe would set a much stricter ceiling, considering that many banks already exceed the 9% threshold. Finally, other rumors reveal that institutions could also be allowed to take into account hybrid securities such as coco bonds to recapitalize themselves.
