Brussels, 29/11/2011 (Agence Europe) - In a report to be published on 30 November, the European Commission will set out the criteria for and detail a plan to extend until 2013 the special aid rules for struggling banks announced by Commissioner Almunia to the European Parliament's economic and monetary affairs committee on 22 November (see EUROPE 10501).
Stricter rules would normally have been introduced on 1 January 2012, but because of persistent storms on the financial markets, the commissioner decided to adjust the rules in force in line with the current situation and the new report will update details of charges and other changes to make it easier to introduce the measures introduced last month to help banks build greater capital and provide collateral for bank debt. New rules have been introduced to cover the following:
- Recapitalisation. The system that came into force in 2008 only covers fixed income instruments like bonds, but the new rules will lay down fees and recapitalisation details for state purchases of ordinary, variable income, shares. Member states will have to base price assessments on share emissions, except where a bank is not quoted on the stock exchange. Bank recapitalisation must be accompanied by incentives for the banks to boost their capital as quickly as possible, by buying up state bonds, for example.
- Financing guarantees provided by the state. This type of collateral must reflect the genuine risk to a state of guaranteeing bonds issued by banks and should properly reflect the different value of collateral provided by other countries. The Commission has changed the interest rate calculations for loans based on the value of credit default swaps (CDS) for gilts and bonds, taking account of the rising spread in CDS values, which are used to set a value on bank guarantees. (FG/transl.fl)