Commission authorises recapitalisation scheme implementing the Hellenic Financial Stability Fund for credit institutions
03 September 2010
The Fund's capital is €10 billion and is part of the Euro Area/IMF financial assistance to the country. The EC found the recapitalisation scheme to be compatible with EU rules.
The European Commission has authorised a scheme for the recapitalisation of credit institutions in Greece by the Hellenic Financial Stability Fund (FSF).
“The Financial Stability Fund is part of the financial assistance provided by the Euro Area and the IMF to Greece and is destined to safeguard the financial stability of the credit institutions in Greece and thus the provision of credit to the national economy. I am satisfied that the conditions under which Greece may use the Fund are in line with the rules on support schemes for the financial sector during the crisis which have been authorised previously in Greece and many other EU countries", said Joaquín Almunia, Commission Vice President in charge of Competition Policy.
The creation of the Financial Stability Fund is provided for in the May 3rd Memorandum of Understanding (MoU) on Specific Economic Policy Conditionality between the Greek Government, the European Union, the European Central Bank and the International Monetary Fund. The FSF is set to last until 30 June 2017. Although the MoU and the FSF were agreed at the highest level in the Euro Area, the Commission must check that the conditions under which the banks will be recapitalised, for those that need it, comply with the rules on the recapitalisation of financial institutions during the crisis.
On 21 July 2010, Greece sent the Commission a request for approval of the recapitalisation scheme under the FSF until 31 December 2010. This time limit is due to the fact that the crisis-related state aid schemes are approved for six-month periods, whether they concern recapitalisation, loan guarantees or treatment of impaired assets, to be able to re-assess the situation according to the evolution of the financial markets. In any event, the limitation is without prejudice to the existence of the Fund, which is established under Greek law until 2017.
The objective of the Fund is to safeguard the stability of the Greek banking system when capital is not available through normal, generally private, solutions. It will provide equity capital to credit institutions by acquiring preference shares and, under certain conditions, common shares in respective banks. In case of preference shares, the scheme requires a remuneration of 10 % of the shares and insists on several behavioural restrictions such as a dividend and a coupon ban. Moreover, in principle all banks benefitting from the fund will need to present a restructuring plan to the Commission.
The measure is compatible with Article 107(3) (b) of the Treaty on the Functioning of the EU, which allows state aid to remedy a serious disturbance in the economy. It is also in line with the Commission's Recapitalisation Communication. To this end, the conditions for the recapitalisations under the Fund are aligned with the current Greek recapitalisation scheme and consistent with the other recapitalisation schemes in other Member States.
© European Commission
