NEW YORK, NY--(Marketwire - Oct 13, 2011) - Fears that Greece and other highly indebted countries may default on their debts have hit banks across the Eurozone and United Kingdom in recent months. Earlier this week, investors finally received signals from the European Commission that solutions to the debt crisis are on the way with a possible round of bank recapitalizations. According to The Wall Street Journal, analysts warn, however, that recapitalizations could "dilute shareholders and result in governments holding large swathes of the banking sector." The Bedford Report examines the outlook for companies in the Foreign Banking Sector and provides stock analysis on National Bank of Greece SA (NYSE: [ NBG ]) and Barclays PLC (NYSE: [ BCS ]) (LSE: BARC). Access to the full company reports can be found at:

[ www.bedfordreport.com/NBG ]

[ www.bedfordreport.com/BCS ]

German Chancellor Angela Merkel and French President Nicolas Sarkozy put bank recapitalization at the top of the priority list in an Oct. 9 declaration in Berlin that triggered a flurry of consultations in European capitals. Meanwhile, European Central Bank chief Jean-Claude Trichet said that European banks and supervisors, including the EBA, should do everything they can to address the need for recapitalization and banks shouldn't be reluctant to accept state help when needed.

European Commission President Jose Manuel Barroso told the European parliament that the region "must urgently strengthen the banks." He said European Union member governments, the European Central Bank and the European Commission must coordinate efforts to recapitalize banks through private and state injections, provide full transparency on the sovereign debt exposures at all systemically important banks and introduce temporary, higher capital requirements after accounting for those government bond holdings. Banks falling short on capital under the measures should be barred by regulators from paying dividends or employee bonuses, Barroso said.

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The Commission also asked for a "prudent valuation of all sovereign debt, whether in the banking book or the trading book" of banks. The international body recently complained that many banks were not taking adequate writedowns on bonds that they plan to hold until they mature.

Barroso also called for a permanent bailout fund, the European Stability Mechanism, to come into force in mid-2012, one year ahead of schedule. The stability mechanism, in contrast to the current bailout fund, requires private investors to take losses on government bonds if a nation needs to write off some of its debt load.

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