A drive to lift bank capital across Europe by up to 110 billion euros ($153 billion) is expected to include the roughly 46 billion euros already pledged to Ireland, Greece and Portugal to help their lenders, EU sources told Reuters.
If over a third of the EU's bank recapitalisation drive, which investors hoped would inject more than 100 billion euros of fresh money, is accounted for under old bailout programmes markets are likely to react with disappointment.
It would effectively shrink the overall package, designed to protect EU banks from the fallout of a Greek default and ease their borrowing difficulties amid a creeping credit freeze, from more than 100 billion euros to something around 60 billion.
It would also rest the burden for EU bank recapitalisation in large part on Spain, Italy and France, which one official said together accounted for roughly 45 percent of the overall shortfall found in recent checks of EU banks by supervisors.
At a meeting of finance ministers on Saturday, the head of the EU's banking watchdog said countries already receiving emergency aid from EU/IMF bailouts -- Ireland, Greece and Portugal -- accounted for 38 percent of the overall bank capital shortfall which he put at up to 110 billion euros, one official told Reuters.
Ireland, Portugal and Greece will get a combined 46 billion euros under their programmes from the euro zone and IMF earmarked to reinforce their weak banks. Some of this has already gone to banks.
Another official confirmed the intention to count money already earmarked for banks in Ireland, Greece and Portugal in any recapitalisation plan.
"The banking needs for all countries under programmes is fully accounted for in programmes," said a third.
The matter is due to be discussed in the run-up to Wednesday's second summit of European leaders and countries may yet change tack to increase the planned boost for banks.
"The problem with shock and awe numbers is that it implies that the money is there," said one official, reflecting on ministers' reluctance to set public goals for recapitalisation. "But governments don't have the money."
Spain and Italy, worried that they will be forced to seek a rescue programme from the euro zone and IMF, yesterday voiced concerns about plans to recapitalise banks at a meeting of finance ministers, one diplomat said.
That meeting of ministers sent a paper to leaders on Sunday, telling them to allow governments to offer guarantees to help banks struggling to borrow, a measure that would complement any capital drive.
Among the models of guarantees that leaders examined, a senior official said a scheme to coordinate state guarantees under the watch of the EBA had a good chance of being accepted.
"Right now, it is the preferred model," he said.