The European Commission has published guidelines on Member State restructuring aid to banks. The guidelines are based on three main principles:
- aided banks must be made viable in the long term without further state support
- aided banks and their owners must carry a reasonable proportion of the costs of restructuring
- measures must be taken to preserve the competitiveness of the Single Market.
The guidelines, which will be in force until the end of 2010, explain how the Commission intends to apply these principles against the backdrop of the current financial crisis. The aim is to help return the European banking sector to viability.
These guidelines complement existing Commission guidance on the assessment of state aid concerning guarantees, recapitalisation and the treatment of impaired assets.
The Commission emphasises the importance of banks stress testing their businesses in order to devise strategies for sustainable on-going operations. The guidelines also deal with the risk of distortions to the competitive environment arising from state aid prolonging a bank’s inadequate or excessively risky behaviour.
Competition Commissioner Neelie Kroes said:
"The financial crisis may not be over yet, but we need to start working seriously with Member States to restructure European banks. We need to make banks viable again without state support and to re-invigorate competition in the Single Market. The guidelines adopted today will be a useful tool for banks and Member States by explaining the criteria the Commission will apply to restructuring aid for banks in the current period. It complements our previous guidance on state guarantees, recapitalisation and the treatment of impaired assets".