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16 April 2010

Almunia: There is a need to avoid "zombie banks" that stay alive but are too weak to lend to the real economy


Speaking at a conference on Europe 2020 strategy in Bonn, Commissioner Almunia said the Commission is currently discussing the restructuring measures with the German authorities and a number of German banks, including Bayern LB or HSH Nordbank. The measures include downsizing and divestment measures

Speaking at a conference on Europe 2020 strategy in Bonn, Commissioner Almunia said that EU competition policy – and in particular state aid policy – has played an important role in the context of the financial crisis. The Commission also adopted a Temporary Framework under the State aid rules to enable Member States to facilitate access to finance by the "real" economy, which is being squeezed as a result of the crisis.
He pointed out the following main issues:
·         EC State aid policy is contributing to a return to the normal functioning of the banking sector – for instance by insisting on restructuring measures for certain financial institutions that have received large amounts of aid and have unsustainable business models.
·         There is a need to avoid "zombie banks" that stay alive but are too weak to lend to the real economy, an experience Europe cannot afford.
·         The EC is currently discussing restructuring measures with the German authorities and a number of German banks, including Bayern LB, HSH Nordbank, Hypo Real Estate, Sparkasse KolnBonn, and West LB. The proposed measures under discussion include downsizing and divestment measures, or the transfer of certain toxic assets into a so-called "bad bank".  EC objective is both to mitigate the distortions of competition that result from the aid banks have received, and to ensure that these banks are in a position to return to viability, without state support.
·         State Aid must be phased out gradually, taking account of market conditions and the requirements of financial stability. But there should be no doubt about our goal: we want to achieve an exit from state support and a return to normal market functioning for all market players as soon as possible.


© European Commission


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