European banks are repaying the money lent by governments; however, DG COMP has still a lot of work to do to control how the restructuring is carried out and to ensure that the level playing field is not distorted.
France is not the only country where such a process is under way. Lloyds, the UK's largest bank, is considering a rights issue so that it can reduce its participation in a government scheme to insure toxic assets, or withdraw from it entirely.
The Commission estimates that, since the economic crisis began, governments have provided €300bn for bank recapitalisations.
Many of these banks were in such poor condition that they needed this support (known in EU parlance as ‘rescue aid’) for longer than the six month period allowed under EU rules. As a result, several governments have applied to convert the money into ‘restructuring aid', a type of support that can be given over the longer term, but with more Commission strings attached.
The Commission is currently considering about a dozen applications from member states to provide restructuring aid to banks. The banks involved include Dexia, Northern Rock, Lloyds Banking Group, Royal Bank of Scotland (RBS), KBC, Hypo Real Estate, Bayern LB, HSH Nordbank and JSC Parex Banka.
Neelie Kroes, the European commissioner for competition (pictured), said in June that there is a ‘strong’ likelihood that the Commission will require Lloyds and RBS to make ‘significant divestments’ to minimise the distortions to competition caused by state aid.
Press release
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