Almunía extends bank state aid rules

Supported banks will have to draft restructuring plans.

Joaquín Almunia, the EU competition commissioner, has announced tougher state aid rules for banks.

Speaking on 1 December, Almunia said there would be a gradual phasing out of emergency state aid measures as the economy returned to normal.

He said: “The key message is that banks have to return to normal functioning without state aid.”

After almost two years of a specific crisis state aid regime, we need to prepare a gradual return to normal market functioning. Of course, the remaining risk of renewed stress is a valid reason to proceed with care and caution in the exit process.”

The European Commission extended by a year its programme set up in October 2008 which allowed member states to bail out banks.

However, as part of the stricter terms announced yesterday, every bank requiring state support in the form of capital or impaired asset measures from 1 January will have to submit a restructuring plan to the Commission.

Until now, this requirement was restricted to distressed banks that had received support above 2% of their risk-weighed assets.

The Commission has also extended state aid measures for the financing of small- and medium-sized enterprises (SMEs).

Almunia said: “Firms that started to have difficulties can benefit. We don’t consider that firms that started to have difficulties in 2011 can benefit from this regime but should go through normal restructuring guidelines.

“We hope that with this gradual phase-out we will continue to help firms, in particular SMEs, to move out of the crisis.”

He announced that governments could increase from €1.5m to €2.5m their investment in start-up companies because private equity investors had moved towards less risky investments during the global downturn.