Luxembourg, 07/10/2008 (Agence Europe) - After the weekend's mini summit and the Eurogroup the day before, it was the turn of EU finance ministers to unanimously undertake to ensure the stability of the European financial system. Still in a concern to reassure the markets and depositors, they adopted conclusions on Tuesday 7 October in which they pledge to “take all necessary measures to enhance the soundness and stability of our banking system and to protect the deposits of individual savers”. One thing is certain, said Christine Lagarde after the meeting under her chairmanship, “we do not want a European Lehman Brothers”. She thus confirmed Europeans' resolve not to allow the disappearance of a pan-European bank. “Europe is united against the crisis and determined to act in a coordinated manner”, the French finance minister was pleased to tell the press, saying the text adopted on Tuesday would be the “EU's guideline” for responding to the current upheavals.
Although an American-style bailout is to be ruled out, the text indicates that “public intervention has to be decided at national level in a coordinated framework”, and the Ecofin Council has confirmed means of action available to Europeans in order to ensure liquidity on the money market, envisage the necessary recapitalisation, and standardise deposit guarantee systems (see related article). All these actions should meet a concern for coordination and certain common principles, in order to take into account the possible crossborder effects of national decisions.
Thus, in the event of banks being buoyed up by public funds: - interventions should be timely and the support should in principle be temporary; - banks will be watchful regarding the interests of taxpayers; - existing shareholders should bear the due consequences of the intervention; - the government should be in a position to bring about a change of management; - the management should not retain undue benefits and governments may have inter alia the power to intervene in remuneration; - legitimate interests of competitors must be protected, in particular through the state aid rules; - and negative spillover effects should be avoided.
The Commission for its part will continue to apply the Stability and Growth Pact (SGP) while fully exploiting flexibility as authorised by the provisions relating to exceptional circumstances, the conclusions point out. The same is true for Community state aid rules. With this in mind, Competition Commissioner Neelie Kroes announced the presentation of a policy paper on the compatibility of recapitalisation operations and the granting of guarantees in relation to provisions on state aid. The paper is supposed to guide possible intervention depending on the elements or the practices noted in the case of recent operations. A number of positive elements from the Danish plan will be taken on board, she said, adding that, for Ireland, some shortcomings concerning the lack of guarantee limits or the question of controls had been elucidated in her conversation with the minister the day before (see other article).
In order to avoid discriminatory treatment of European firms compared to their American counterparts, ministers also announced the rapid setting in place of new accountancy rules, which will allow banks to reclassify certain assets. The Commission will make a proposal along these lines “as soon as possible”, Charlie McCreevy said, the aim being to allow financial institutions to apply these rules for publication of their third quarter 2008 balance sheets. Ministers also call on European supervisors to immediately apply the guidelines on application of the “fair value” principle. (A.B./transl.jl)