BRUSSELS - European Commission president Jose Manuel Barroso called Wednesday for an urgent recapitalization of European banks, warning that those refusing to comply could lose bonuses and dividends. Barroso said banks "urgently" need to increase their core tier one capital ratios.
He did not give a figure but a European source said the commission wants bank to raise their capital to 9.0 percent.

Barroso said banks should first try to tap the private market to beef up their capital, with support from governments if necessary. If such support is unavailable, the eurozone's rescue fund, the European Financial Stability Facility (EFSF), could provide loans.

Barroso told the European parliament that EU leaders head into a summit on October 23 amid the "threat of systemic crisis now unfolding."

He called on the eurozone to increase the firepower of the EFSF, without forcing governments to provide new guarantees.

"We should maximize its capacity," he said.

Barroso also said the EU should bring forward the creation of the EFSF's successor, the European Stability Mechanism (ESM), to 2012.

The ESM would have a lending capacity of 500 billion euros, compared to 440 billion euros for the EFSF. His appeal came as Slovak political parties reached a deal to hold a second parliament vote on approving an expansion of the EFSF, one day after it was rejected in a first vote. (AFP)