And transfers would have been needed to recapitalize the periphery banks.

This scheme for recapitalizing banks has three advantages over others that have been suggested by economists and politicians.

The pace of recapitalization needs to be stepped up, and the new round of stress tests for European banks will mark a clear line in the sand.

And bank bailouts, involving the direct use of public money to recapitalize failing institutions, are even more costly and politically unpopular.

At the same time, the best way to contain financial contagion would be to implement a pan European plan to recapitalize eurozone banks. This implies using official resources like the EFSF not to backstop an insolvent Greece, but to recapitalize the country s banks and those in Ireland, Spain, Portugal, Italy, and even Germany and Belgium that need more capital.

The Stability and Growth Pact has been relaxed in order to increase governments capacity to borrow to recapitalize their banks.

The government has established a new agency, Central Hujin Investment Company, to manage and re capitalize big state owned banks before they are sold.

At the same time, the best way to contain financial contagion would be to implement a pan European plan to recapitalize eurozone banks.

In some countries, the threat of bank recapitalization with public funds has resulted in a drop in market confidence and a huge rise in interest rates.

Worse still, much of the money flowing into the banks to recapitalize them so that they could resume lending has been flowing out in the form of bonus payments and dividends.

In this regard, we welcome the recent decision by Spain to seek financial assistance from the European Union to recapitalize its banks as required.

The eurozone needs a banking union a European deposit insurance scheme in order to stem capital flight, a European source for financing bank recapitalization, and eurozone wide supervision and regulation.

Of course, national governments would have had to use taxpayer funds to recapitalize northern European banks especially in France and Germany that lent too much to the periphery.

The two Cypriot banks then found themselves obligated to seek recapitalization in the capital city, Nicosia .

The European Banking Disunion

Taming Europe s Banks

But China s rulers know that their highly repressed banking system is vulnerable as the country continues to pursue gradual financial liberalization, and that foreign currency reserves may be needed for recapitalization.

Runs by panicked investors have required central banks to undertake unprecedented lender of last resort operations. Extensive loan losses have required expensive bank recapitalization operations.amp 160

Extensive loan losses have required expensive bank recapitalization operations.amp 160

Central Banking s New Face

The End of Banks?

Central Banks Outdated Independence

Celebrity Central Bankers

Central Banking s New Club Class

The reaction among national politicians, central banks, and banks themselves was not universally favorable.

A combination of financial sector recapitalization and rapid expansion of the Fed s balance sheet prevented a complete credit lockup.

None of this means that banks should be granted a regulatory holiday and forget the need to recapitalize.

Are Bad Banks a Good Idea?

The market share of state owned banks is 85 .

Central bankers or markets?

Control of banking is the simplest.

Fifteen of the largest banks choose Russia

A second possibility is that banks worry about having enough resources to meet their own creditors demands if they lock up funds in long term loans. But the many central bank lending facilities that have been opened around the world should assuage these concerns, especially for large and well capitalized banks.

The bailout of banks led to a wave of mergers.

The majority of big banks are introducing this system.

New Managing Director Christine Lagarde s recent call for forced recapitalization of Europe s bankrupt banking system is a good start.

Yes, the principle of regulating bank capital seems sensible. Borrowing increases risk in any business you can t go bankrupt if you have no debt.

But it is not enough to have many small banks.

There are many ways of curbing big banks excesses.

Rather, it will increase banks excess reserve balances.

Thatcher was certainly no friend of central bankers.

Many banks weaknesses are simply being masked by government guarantees.

Yes, the principle of regulating bank capital seems sensible.

(Indeed, stricter banking regulation has been endorsed by all.)

Faced with credit losses, a central bank can either dig its way out through inflation or await recapitalization by taxpayers.