02 December 2008

Commission to publish guidance on recapitalizations under state aid rules

Member States are now increasingly focusing on the risk of a credit crunch, Commissioner Kroes said. This is raising a new challenge in the design of recapitalization schemes and is calling for a refinement.

Commissioner Kroes announced to publish a communication giving guidance on how to assess recapitalisations under the State aid rules. "Member States are now increasingly focusing on the risk of a credit crunch”, she said. “This additional objective is raising a new challenge in terms of how to design recapitalization schemes and is calling for a refinement of the Commission's State aid approach.”

 

Mrs Kroes said that the level playing field has to be maintained. State recapitalisations must not become a permanent feature of European financial markets, she warned.

 

The Communication is based on some broad principles:

Ø       The individual situation of each bank should be taken into account. In any case, a viability plan must be notified to the Commission within 6 months.

Ø       Schemes must include incentives for the State capital to be redeemed, once market conditions have returned to normality.

Ø       Behavioural safeguards are needed to limit distortions of competition. State capital should not be there to increase profits or distort competition.

 

“It is my goal that the Commission will approve before Christmas a series of additional aid possibilities”, Kroes said. “The new temporary framework include subsidised loans for environmentally friendly products, State aid for risk capital and State guarantees. These measures will complement and enhance the support given to banks.”

 

A meeting of experts from Member States is scheduled for 8th December.

 

Press release

 

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