BRUSSELS, July 7 (Global Risk Regulator) – European Union finance ministers today attempted to forge a plan to strengthen banks’ balance sheets to ward off future shocks amid calls from Germany for a temporary relaxation of capital requirements to support lending, Reuters news agency reports.

“In October we will propose a mechanism to mitigate pro-cyclical effects …. on banks,” EU internal market commissioner Charlie McCreevy said at a meeting of the bloc’s finance ministers in Brussels.

EU finance ministers say that in the light of the global financial crisis banks need to build stronger capital buffers in good times to provide for future losses. However, a number worry that if lenders are forced to put aside too much too soon, it will deepen the economic crisis.

In a provisional statement the finance ministers, meeting as the EU’s Economic and Financial Affairs Council (Ecofin), said they agreed that the absence of counter-cyclical buffers and the lack of flexibility of accounting rules in allowing for so-called “through-the-cycle” provisioning were important factors in the amplification of the financial crisis.