At their monthly meeting this morning, finance ministers on the EU Economic and Financial Affairs Council (EcoFin) announced their agreement to guidelines for handling impaired assets on banks’ balance sheets, stating that “the priority is to fully restore the functioning of credit channels.”
The finance ministers agreed that measures dealing with European governments’ handling of impaired bank assets must (i) safeguard financial stability and restore lending to the economy, (ii) ensure a “level playing field within the single market,” and (iii) contain the impact on public finances.
Agreeing that a “common and coordinated approach” was necessary to assist struggling banks burdened with impaired assets, the finance ministers established the following set of principles:
- Correct and consistent approach of valuation to maintain a level playing field;
- Banks receiving government assistance should bear some of the risks, and specific restrictions should be imposed on bank management;
- Flexibility and full transparency in choice of asset selection; and
- Close monitoring of implementation of measures dealing with impaired assets.
Further details on any European plan for handling troubled assets are likely to be released in the upcoming weeks.