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EU finance chiefs agree capital plan

<div>EUROPEAN Union finance ministers have agreed to make changes to capital requirements on financial institutions, to ensure that they build up greater cash cushions during good times.<br /><br />The plans, which will form the basis of legislation to be drafted in October, is intended to prevent banks lending recklessly when growth is strong and allow them to lend during a recession.<br /><br />&ldquo;The council agrees that further work is necessary to mitigate pro-cyclicality by creating counter-cyclical capital buffers, i.e. to be raised in good times and to be drawn in downturns,&rdquo; the ministers said in a statement following their monthly meeting in Brussels.<br /><br />The changes are targeted at preventing a repeat of the current financial crisis, when banks were caught unawares by the sub-prime mortgage woes emanating from the US.<br /><br />The plans chime with proposals to be revealed today by chancellor Alistair Darling in his white paper on financial regulation. Darling wants the Financial Services Authority to impose higher capital requirements on banks that take the largest risks.</div>