Leading European banks say they would rather sell assets than raise expensive new capital to meet compulsory demands from the European Union for higher capital ratios, threatening a further contraction of credit to the enfeebled eurozone economy, says the FT. This radical approach, led by French banks BNP Paribas and Société Générale, would be copied by lenders across Italy, Spain and Germany, bankers said. However, the banks’ “shrinkage” strategy is likely to prove controversial with politicians and regulators if it led to bankers lending less money to customers, jeopardising the eurozone’s fragile recovery, analysts warned. Also on Wednesday EC president José Manuel Barroso gave a broad outline of a compulsory recapitalisation for Europe’s leading banks, requiring “a temporarily higher capital ratio”, with restrictions on dividends and banker bonus payments in the interim. He stopped short of specifying the target ratio, which had earlier been reported by the FT as likely to be higher than expected at core tier 1 capital of 9 per cent, citing people close to the process. Speaking at a conference in Berlin on Thursday, Deutsche Bank CEO Josef Ackermann said that he doubts that capital boosts will succeed in containing the sovereign crisis, reports Bloomberg. Read more