Lagarde's speech challenged in Europe

BRUSSELS, Aug. 29 (UPI) -- A high-profile speech by the new director of the International Monetary Fund was met by a call for clarity, a bank official said.

The Financial Times reported Monday that European officials "rounded on" Christine Lagarde after a speech she made in Jackson Hole, Wyo., Saturday.

Lagarde cited an "urgent" need for banks to increase their capital reserves to protect themselves in event of a downturn.

Lagarde said there were "chains of contagion" across the European banking system.

But an unnamed bank official said funding was the "key issue."

"Banks in some countries have had trouble securing liquidity in recent weeks and that pressure is going to mount," the official said.

"To talk about capital is a confused message. Everybody -- politicians, regulators, other officials, is quite concerned."

Lagarde hinted during the weekend that the $638.3 billion European Financial Stability Fund could be put to use to recapitalize banks.

Officials, however, said support for liquidity would be more useful.

"The idea that we could have a liquidity problem in Europe (is) plain wrong," Jean-Claude Trichet, president of the European Central Bank, said in a separate speech.

Liquidity refers to the ease in which a given asset can be sold.