EU protectionism blocking bank recapitalisation: Zhu

Protectionism in Europe is hampering the recapitalisation of the region's banks and the stabilisation of the financial sector, IMF adviser Min Zhu said on Sunday.

"The key issue to stabilise the financial sector is to raise capital," Zhu told a conference in southern France. "The capital raising process in the banking sector in this region is being left behind the other countries in the world. Why? Because there is still protectionism."

He cited state ownership of banks and barriers to cross-border mergers and acquisitions as two significant obstacles to recapitalisation.

"If we can solve this issue, then the banking sector will be able to raise money from the private sector and raise their capital ratios," he said.

IMF sources told Reuters this week that Zhu, a Chinese national who was a special adviser to former IMF Managing Director Dominique Strauss-Kahn, was expected to fill a new deputy managing director post to be created by the Fund's new chief, Christine Lagarde.