EU Banks Warned Not to Cut Lending, Alter Capital Definitions

European regulators warned banks not to cut lending or inflate capital levels artificially as they ordered the region’s financial firms to raise 114.7 billion euros ($153 billion).

The European Banking Authority told lenders yesterday to bolster their Core Tier 1 capital ratios to more than 9 percent of risk-weighted assets by the middle of next year to reassure investors the region’s banks can withstand the debt crisis. The EBA told banks to raise the money from investors, retained earnings and lower bonuses. Failing that, companies may sell assets, provided the disposals don’t limit overall lending to the “real” economy, the EBA said in a statement.