The European Union's executive proposed coordinated recapitalization of banks on Thursday as the bloc's regulators met to review capital buffers of stressed lenders.

We are now proposing member states to have a coordinated action to recapitalize banks and so to get rid of toxic assets they may have, European Commission President Jose Manuel Barroso said in a television interview relayed on YouTube.

It was the most explicit statement yet from a top EU official on coordinated action to help restore confidence in a banking sector that is increasingly shunned by investors as a result of the euro zone debt crisis.

European shares <.FTEU3> extended their gains after Barroso's comment.

EU officials said nothing has been finalized and discussions are continuing on the shape of any possible coordinated action.

The European Banking Authority, which concludes a two-day meeting on Thursday, said it was examining the resilience of lenders' safety cushions against the backdrop of the current situation.

The EBA is reviewing banks' capital positions, the authority said in an emailed statement.

Many banks are facing severe funding pressures due to market worries about their exposures to government debt from Greece and other peripheral euro zone countries.

Belgium sought on Thursday to reassure depositors in crisis-stricken Franco-Belgian bank Dexia that their savings were protected.

The EBA is preparing the technical ground by determining which lenders should be included in any coordinated recapitalization that its members would oversee.

Markets and industry officials say the key missing piece is whether enough money can be found fast enough to stop contagion from Greece or Dexia.

The euro zone knows what it needs to do and should just get on with it, a UK banking industry official said.

The EBA said it has not announced a new round of stress tests and there are no updates to the figures on sovereign debt and other bank exposures it published with results of its 2011 stress test of 91 lenders in July.

That test showed only eight banks failed and that they needed a collective 2.5 billion euros -- a fraction of the 200 billion euros the International Monetary Fund believes EU banks require.

The EBA, made up of regulators and central bankers from EU member states, said it was called on by the European Systemic Risk Board last month to coordinate efforts to strengthen bank capital.

The EBA is under heavy pressure after its chairman Andrea Enria admitted on Tuesday that this year's stress test, in which Dexia passed with flying colors, failed to reassure investors.

(Reporting by Huw Jones in London and John O'Donnell in Brussels; Editing by Hans-Juergen Peters and Jane Merriman)

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