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08 December 2008

Kroes – Commission not powerless


Commissioner Neelie Kroes stressed that the Commission is ‘not powerless’ in dealing with the state aid issues arising out of the current financial crisis. There is ‘no rubber stamping exercise’ for state aid rules, she warned.

Commissioner Neelie Kroes stressed that the Commission is not powerless in dealing with the state aid issues arising out of the current financial crisis. There is "no rubber stamping exercise" for state aid rules, she warned.

 

The guidance will be based on the following principles:

  1. The individual situation of each bank should be taken into account. Some banks may be recapitalised because they are on the verge of insolvency. Some others because they are exposed to distrust in the market. Some banks finally may be recapitalised to support lending to the real economy. Ex-ante differentiation may be possible on the basis of some indicators, but in all cases viability plans will have to be notified to the Commission within 6 months. The Commission accepts the pricing formula proposed by the ECB for fundamentally sound banks at a minimum price, but this has to be adjusted upwards depending on the risk profile of each beneficiary bank.
  2. The schemes must include incentives for the State capital to be redeemed, once market conditions have returned to normality.
  3. Behavioural safeguards are needed to limit distortions of competition. If the objective of recapitalisation is lending to the real economy, I would therefore expect commitments to lend from the banks benefiting from State aid. In any case, the State capital should not be there to increase profits or distort competition.

 

Mrs Kroes will present a new guidance document on recapitalisation by 11 December when EU leaders meet in Brussels.

 

Full speech

 



© European Commission


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