08 December 2008

Commission guidance on bank recapitalisation

Commissioner Kroes announced to adopt the French and the Austrian scheme. However, with regard to Germany, the Commissioner requests adjustments ‘which should accommodate an agreed solution as regards Commerzbank’.

The guidance on how Member States can recapitalise banks avoiding excessive distortions of competition, in line with EU state aid rules. The guidance takes account of the fact that the credit crunch is now beginning to affect the real economy and that financially sound banks may need state capital to ensure an adequate level loans to companies.

 

Commissioner Kroes announced that the Commission will adopt the French and the Austrian scheme. However, with regard to Germany, the Commissioner requests adjustments ‘which should accommodate an agreed solution as regards Commerzbank’.

 

The guidance addresses the necessity of appropriate safeguards to ensure that the public capital is not used to finance aggressive commercial conduct to the detriment of competitors who manage without state aid.

 

The Communication establishes principles for the pricing of state capital injections into fundamentally sound banks.

 

Banks in distress that face a risk of insolvency should in principle be required to pay more for state support and to observe stricter safeguards. The use of state capital for such banks can be accepted only on the condition of a far-reaching restructuring restoring their long-term viability. 

 

Member States have the possibility of creating schemes for recapitalisation that are open to all banks if the rate of remuneration is set at a predetermined level which ensures an appropriate overall return over time.

 

The Commission will review the recapitalisation measures within six months. A report prepared by the Member State must also include an exit strategy for fundamentally sound banks and a restructuring plan for distressed banks. 

 

Press release

Speech Kroes

Commission Communication

 

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