Raising capital "impossible" for Europe banks: SocGen CEO

SHANGHAI (Reuters) - Raising capital has become "fundamentally impossible" for European banks, the chairman and CEO of France's Societe Generale said on Friday, in a stark reflection of the concern over the health of banks in the region.

"Investors lack confidence," Frederic Oudeahe told a financial forum in Shanghai. "Raising capital today is fundamentally impossible."

Europe's widening debt crisis has left many of the continent's banks strapped for cash and dependent on the European Central Bank.

Global bank rules meant to increase the amount of reserve cash held by banks are hitting just as some European financial institutions struggle to manage their finances as the debt crisis stretches into its third year.

Oudea said the banking sector recognized that overall profits would have to come down as business models adapt to new rules, but he said conflicting demands on the sector were exacerbating its problems.

For one, the definition of liquid assets under the Basel III liquidity rules was too narrow, Oudea said, adding that requests were being made to diversify the range of assets available to meet the requirement.

"Banks are convinced of the need for a new financial governance framework," Oudea said. "What we are saying is that we should review the rules in light of the euro crisis."

Meanwhile, the implementation of the rules should take into account the difficulties facing European banks and timelines should be extended, he added.

Another problem, he noted, was that Basel would force deleveraging, but banks were being called upon at the same time to increase lending to the struggling economy.

In addition, liquidity requirements forced banks to purchase more government bonds, but doing so exacerbated the vicious cycle in which problems with sovereign debt lead to questions about bank solvency, he said.

Oudea's comments joined a chorus of banks calling for more flexibility and less stringent requirements during a difficult time for the sector.

(Writing by John Ruwitch; Editing by Kazunori Takada & Kim Coghill)