Brussels, 1 Dec. – The European Commission says "yes" to state aid for troubled banks. The Brussels body has in fact extended the deadline for applying the anti-crisis rules for credit institutions. More specifically, it mainly concerns the clarification of the procedures to be followed to ensure that the State receives adequate remuneration in the event the Member States decide – as “will probably happen more and more often in the future” – to recapitalize the banks by resorting to instruments for which the remuneration is not fixed in advance, like ordinary shares.
Furthermore, on the basis of the package approved today, there is also an obligation for the banks to submit to Europe a restructuring plan for those credit institutions that intend to change their 'business model'. Still, he explained at the press conference Joaquin Almunia, Vice-President of the Commission and Commissioner responsible for competition policy, a revised methodology was agreed on the remuneration of guarantees for the financing needs of banks, which, Almunia recalled, represent "the majority of the support granted so far".
This is to ensure that the fees paid by banks reflect their inherent risk rather than the risk associated with the Member State concerned or the market as a whole. These rules, agreed with the European Central Bank (ECB) and the European Banking Authority (EBA) "they will apply for as long as market conditions require", i.e. as long as the sovereign bond market is in tension. Almunia used a medical comparison to summarize the situation and the tools used to deal with it, a comparison that gives a good idea of the delicacy of the moment. The extension of the bank-saving rules are an "artificial respirator", and "we do not want to prolong this assisted respiration". For this reason "we will disconnect everything when the situation has normalized".
Moreover, remarked the vice president of the EU Commission, "the escalation of tensions on sovereign debt markets has put further pressure on banks in the European Union, justifying the extension of the rules adopted in the context of the crisis". This is to "help implement the package agreed by the European Council in October aimed at restoring confidence and continuing the necessary restructuring of the sector". In this sense "we will continue to insist on the restructuring and consolidation of balance sheets where necessary, to break the vicious circle between the sovereign debt crisis and the weakness of the financial sector". In applying the rules, the EU Commission, Almunia said, "will take full account of the elements that indicate that banks can be profitable in the long term without the need for significant restructuring".
