EU finance ministers hope to align EU capital standards with Basel capital standards.
The EU's 27 members are divided over how much capital banks should hold in future to protect themselves against huge losses.
Similar losses have brought down dozens of lenders in Europe and the United States, often requiring bailouts funded by taxpayers.
The German Finance Minister Wolfgang Schaeuble warned not to expect a quick deal on the rules
European Union are struggling to reach a deal on forcing banks to set aside more capital to cushion future losses, with Spain saying the bloc had to dispel doubts about the strength of its lenders.
Spain, whose banks have suffered huge losses inflicted by a property crash that is continuing unabated, said new rules were vital for handling future turmoil.
"At this time of financial crisis, we need to clear up all doubts about the quality of European banks," Economy Minister Luis de Guindos said. "We need to guarantee a level of quality capital that is enough to face future crises," he told reporters as he arrived at the talks.
Many of the over 8,300 banks and financial institutions in Europe are struggling, and Standard & Poor's cut the credit rating this week of 11 banks in Spain, which has sunk into its second recession in just over two years.
Madrid has told Spanish banks to raise almost €54 billion in capital this year on top of a sharp rise in provisions against losses since the property bubble burst in 2008.
"A complex issue"
German Finance Minister Wolfgang Schaeuble said the issue was complex warning reporters "I don't think we will come to a conclusion today," he said before the meeting.
"If we have too little capital, then the banks carry risks for the financial system. In order to stabilise the financial system, which is something that we are successfully working on, the banks must have more capital."
Denmark, holder of the bloc's six-month rotating presidency, has stepped up efforts to find a deal and Schaeuble said he believed agreement was possible in the coming months.
The Danes want to achieve a consensus and strike an accord with the European Parliament by the end of June.
One compromise would be to allow a margin of flexibility so countries that want can require their banks to increase their capital buffers up to a certain limit, perhaps as much as 10% or 12% of risky assets for up to two years.
This compares with Basel's minimum of 7%. Yet there is a split over whether the green light is needed from the European Commission, the EU's executive arm, before a country can require capital levels above the Basel minimum.
ECB seeks to avoid too much flexibility in the rules
The European Central Bank cautioned against granting individual countries too much flexibility in imposing the rules. Vice President Vitor Constancio warned ministers this could create a "competition among countries".
Banks with higher than average capital, such as Switzerland's UBS AG, can look more attractive for deposits because they are seen as offering greater security.
But the capital question has been divisive and Britain's finance minister George Osborne said the EU risked failing to implement the rules properly because too many countries wanted concessions for their own banks. "If we walk from this table with 27 countries having got a little bit of a something... then actually we will have completely failed," Osborne told ministers in a part of the meeting aired publicly. "It won't be just be a political failure, it could be a very, very serious economic failure."
Handing more power to Brussels is anathema to Britain, which is fighting to maintain its autonomy in policing the City of London, Europe's financial capital.
Europe's capital regime, when decided, will be closely studied in the United States and may influence how policymakers there interpret the Basel standards, while investors are eager to see the EU repair its vulnerable banking sector.
At the heart of the dispute is the freedom EU states have to enforce capital rules. Britain and Sweden, which have two of the largest banking sectors in Europe relative to their economies, want the freedom to take extra steps to make banks safer.
London and Stockholm argue they need to protect the interests of taxpayers who could be called on to bail banks out if they face collapse.
France wants capital standards to be more uniform across the EU and is worried that international banks based in London could cut lending elsewhere in Europe if Britain forces them to raise their capital yet further.
Some diplomats suspect the dispute is fuelled by concern that deposits and other business might flow to British banks were they to be better capitalised than French and German rivals and thus safer in the eyes of investors.
