Banks in the European Union don't need a huge injection of capital, but the sovereign debt crisis continues to raise challenges for the sector, the region's banking watchdog said today.

"The European Banking Authority is not calling for an urgent and massive recapitalisation of EU banks," the EBA said in an emailed statement.

"The stress test recently conducted by the EBA showed that EU banks have significantly strengthened their capital
positions and are able to withstand adverse macroeconomic scenarios, a view not changed by the additional disclosure of sovereign exposures."

The watchdog was responding to a report in Financial Times Deutschland today that said EBA chairman Andrea Enria was apparently concerned about the thin capital structure of EU banks and might ask for stronger powers.

Reuters