Banks in the European Union don't need a huge injection of capital, despite the challenges of the region's sovereign debt crisis, the bloc's banking watchdog said on Tuesday.

The European Banking Authority is not calling for an urgent and massive recapitalization of EU banks, the EBA said in an emailed statement.

The stress test recently conducted by the EBA showed that EU banks have significantly strengthened their capital positions and are able to withstand adverse macroeconomic scenarios, a view not changed by the additional disclosure of sovereign exposures, it added.

The watchdog was responding to a report in Financial Times Deutschland on Tuesday that said EBA Chairman Andrea Enria was apparently concerned about the thin capital structure of EU banks and might ask for stronger powers.

International Monetary Fund head Christine Lagarde also said on Saturday that European banks needed a mandatory substantial capitalization to prevent a renewed world recession.

The EBA said it was closely monitoring the risks for EU banks and submitting to EU institutions its views on possible policy options.

The main EU banks have significantly strengthened their liquidity buffers, lengthened the maturity profile of their liabilities and covered most of their funding needs for 2011. However, going forward it will be important that normal access to medium and long-term funding markets is restored, the EBA said.

Eight European banks failed the EU stress test in July and have to raise a total of 2.5 billion euros of capital, far less than had been expected before the tests. A further 16 banks were seen as barely passing and will also have to take action.

Some market participants still believe EU banks face a capital headache.

European banks are in the deepest hole of all. Over the past five years, the European financial sector has shed 900 billion euros in capitalization and two-thirds of its value, said Jacques Chahine, chairman of European investment firm J.Chahine Capital.

Although the sector has raised 450 billion euros in capital over the same period, this has clearly been inadequate to cover increased risk on sovereign debt. We believe banks will have to be recapitalized by an additional 450 billion euros to cover that risk, Chahine said.

(Additional reporting by David Brett; Editing by Will Waterman)