Saturday 25 November 2017

Banks may be weaned off government aid by 2012 under EU plans

EU antitrust commissioner Joaquin Almunia. Photo: Bloomberg News
EU antitrust commissioner Joaquin Almunia. Photo: Bloomberg News

Banks may be weaned off government help by the end of next year under plans to be presented by the European Union’s antitrust commissioner today.

Joaquin Almunia will say how he plans to phase out state support for banks when he extends crisis aid rules due to expire at the end of this year.

Spanish and Irish lenders including Allied Irish Banks and Anglo Irish Bank are covered by EU-approved state guarantees until June 30.

Next year, some special treatment will “continue to help banks deal with the remaining balance sheet problems,” Almunia told European lawmakers yesterday. “Market conditions permitting, we should return to the normal state aid regime on January 1, 2012.”

Banks in the 27-nation EU used nearly a trillion euros of state guarantees between 2007 and the end of 2009, according to commission data published in April.

The EU’s antitrust agency, which checks whether subsidies distort competition in the region, granted approval for the measures as part of its response to the financial crisis.

EU officials have already suggested increasing fees that banks pay for state guarantees on their borrowings from mid- 2011.

The guarantees help lenders obtain funding, providing a backstop for creditors and bondholders. Governments set the fees, which can’t fall below a minimum level determined by the EU’s executive arm.


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