A considerable number of European banks are confronted with assets on their balance sheet on which they are likely to incur losses, so-called "impaired assets" such as sub-prime mortgage-backed assets. A number of these banks will most likely require some sort of State aid to deal with this problem.
The European Commission has issued guidelines outlining a number of measures with regard to the disclosure and proper handling of foreseeable losses on impaired assets, notably (i) full disclosure on the foreseeable extent of the problem by each bank involved, (ii) the possible incorporation of "bad banks", to which all impaired assets would be transferred, and (iii) asset insurance schemes.
To ensure compliance with EU State aid rules the guidelines outline methods and procedures for evaluating the impaired assets and the amount the troubled banks would have to pay for access to an asset relief measure.
The design of the exact asset relief scheme will remain the responsibility of the individual Member States, but each scheme will be subject to a number of uniform assessment criteria outlined and checked by the Commission.
In each case, relief measures approved by the Commission will be granted for a period of six months. Within three months of accession to an asset relief programme, the Commission requires a viability assessment and restructuring plan from each "saved" bank.