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European Leaders to Weigh New Capital Requirements for Banks

BRUSSELS — European Union finance ministers are expected to wrangle on Wednesday over how much capital the Union’s 8,300 banks should be required to hold, a further demonstration of the difficulties of managing a 27-member economic bloc.

Britain is among the countries likely to press for the right to require its banks to hold more capital than the E.U. minimum to try to reduce the risk that its taxpayers will be called on to finance future bailouts.

But other countries argue that allowing governments the latitude to raise capital requirements could undermine parts of the European banking sector and might push banks to tighten their belts when they are already wary of lending because of the shaky economy. That, in turn, could further dent sluggish growth prospects in Europe.

The discussions also come amid signs that Spain may require some form of bailout, partly because its banking sector is heavily exposed to the country’s troubled real estate sector.

The debate in Brussels is expected to focus mainly on Britain, where large swaths of the banking sector have come under state ownership in the wake of the financial crisis.

Last year, an independent commission on banking led by John Vickers, a former chief economist of the Bank of England, suggested raising capital requirements for British banks.

An E.U. diplomat, speaking at a private briefing, suggested that British officials were among those who were particularly wary of how “banks may be international in life but national in death.”

That worry underlines the central issue raised by the proposals: While rules can be set at a European level, national governments must pay for banks that run into trouble.

Sweden, with its large banking sector, is expected to support Britain’s position. But countries led by France disagree and instead want a single rule book for the European banking sector.

The European Commission, the European Union’s executive arm, which drafted the proposal last year, shares that concern and has warned that capital for shoring up bank reserves is limited.

Giving added discretion to the national authorities could have a severe impact on countries, particularly in Eastern Europe, where the banking sector is dominated by subsidiaries of banks based elsewhere in the Union, according to the commission.

There could be “several potential negative spillover effects,” the commission has warned in an internal briefing paper. A “home member state could choose to apply higher capital requirements selectively to banks with high exposure in certain host member states,” it added, and that “would lead to a reduction of credit in host member states with adverse consequences for employment and growth.”

Austrian banking regulations have already had a negative impact on Hungary, an E.U. official said, speaking on the condition of anonymity because of the sensitivity of the issue.

Some countries including Germany are also wary of higher capital requirements because they could put some of their banks’ balance sheets under further strain.

A number of British banks also oppose their government’s position, but British officials so far have held firm, warning that the financial sector is such a large part of the national economy that the risks associated with future banking failures must be minimized.

The discussions in Brussels follow an agreement among major economies, known as Basel III, to raise the requirement for the minimum amount of highest-quality capital held by banks so they can absorb sudden losses, like those associated with the collapse of Lehman Brothers in September 2008. The minimum required by Basel III is for banks to hold 7 percent of so-called Tier 1 capital by 2019.

But ministers could make progress on Wednesday. Officials from Denmark, which holds the current rotating E.U. presidency, have proposed a compromise allowing member states to impose higher capital requirements of as much as 3 percentage points without prior approval of the E.U. authorities.

Ministers must also resolve a fierce debate over whether banks with insurance arms should be regulated more lightly, and a deal will probably come in the middle of this month. The European Parliament must also agree to any proposal before it can become law.

Another focus for ministers on Wednesday is likely to be the future leadership of the European Bank for Reconstruction and Development.

But an even more sensitive job is not on the formal agenda.

Jean-Claude Juncker — Luxembourg’s prime minister, who leads meetings of the Eurogroup, which comprises the euro zone’s finance ministers, and whose mandate runs out in June — has expressed support for the German finance minister, Wolfgang Schäuble, to become his successor.

A version of this article appears in print on  , Section B, Page 6 of the New York edition with the headline: Europe Finance Chiefs Are Divided on Bank Capital Requirements. Order Reprints | Today’s Paper | Subscribe

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