04 November 2008

Commission approves Spanish rescue package

The Commission approved the Spanish fund for acquisition of financial assets from financial institutions to stabilise financial markets. The measures consist of reverse auctions with a government-sponsored fund purchasing assets either outright or on a temporary basis via so-called repurchase agreements.

So far, the Commission had been reluctant to allow Member States to buy financial assets from banks outright, as the credit crisis makes it difficult to value assets properly and there is a risk to provide undue advantages to banks. However, the Spanish measure has been designed specifically to avoid such distortions of competition, in so far as the government-sponsored fund can only purchase AAA rated covered bonds through an auction. These covered bonds have very special characteristics which significantly limit the credit risk for the government-sponsored fund, while providing liquidity for participating banks.

Press release

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