Brussels, 30/10/2008 (Agence Europe) - On Thursday 30 October, the European Commission approved Swedish and Portuguese state rescue packages to the financial sector. This takes to six the number of member states whose (similar) packages have been approved. A number of others - from Belgium, France, the Netherlands and Italy - are currently being examined by the Commission.
The Swedish and Portuguese schemes are “both guarantee regimes”, the spokesman for the Competition Commissioner told press on Thursday 30 October, stating that, “they do not include provisions for recapitalisation”, unlike several other national schemes. In both Sweden and Portugal, beneficiaries of the guarantees will have to pay a premium to the state for this service, open to every bank operating within the respective countries. The Swedish and Portuguese schemes also contain measures to prevent the banks concerned from deriving competitive advantage from the guarantees, the spokesman said. The schemes proposed by the two countries complied, then, with Community law, he stated.
On 27 October 2008, Sweden notified the Commission of a raft of measures to rebuild confidence on the financial markets. This package consists of a guarantee scheme covering new issuances of short and medium term non-subordinated debt, to support solvent banks and mortgage institutions that have difficulties in accessing inter-bank financing. Excluded, then are so-called subordinated debts, that is, those debts which, in the event of bankruptcy, are not repaid until after all the other debts of the debtor concerned have been repaid. The risk for a guarantor of these debts is, consequently, greater. The total amount of debt to be covered is capped at SEK 1,500 billion (approximately €150 billion) and concerns instruments with a maturity of maximum three years, or exceptionally five years for covered bonds only. Debt covered by the guarantee will be accepted by the Swedish Central Bank as equivalent to government bonds.
The Commission was notified of the Portuguese scheme on 15 October. This scheme applies to debts similar to those in the Swedish scheme. Its total budget is €20 billion and relates, too, to instruments with a maximum maturity of three years, or exceptionally five years only when duly justified by the Portuguese Central Bank. It will remain in place until the end of 2009.
The Commission was also informed of a similar Austrian plan, but has yet to receive official notification, a spokesman said in Brussels. The Greek authorities have also informed the Commission of a scheme, but further information in required to allow the investigation to proceed. As for the French scheme, the chapter on state guarantees for banks is expected to be approved on Thursday 30 or Friday 31 October and the chapter on recapitalisation before next week.
The EC Treaty provides for state aid to be granted “to remedy a serious disturbance in the economy” (Article 87 paragraph 3b). In mid October, the Commission published guidelines clarifying criteria to be met by state aid schemes so as not to infringe Community law (see EUROPE 9760). According to the spokesman, the approval given hitherto to national plans by the Commission “demonstrates that it is perfectly possible to ensure support in these situations without discrimination”. The guidelines were in part inspired by the scheme proposed by Denmark, which was approved on 10 October. They confirm the principles which state that the aid must neither lead to discrimination among the banks of the states concerned nor confer competitive advantage on the beneficiaries, which, in addition, are required to pay a premium at “normal” market conditions. Since the guidelines were published, the Commission has approved the Irish and British schemes on 13 October and the German scheme on 28 October.
The Spokesman for DG Competition said that, once approved, schemes could serve as references for national decisions on aid to the banking sector, without having to notify the Commission further. However, after six months, the banks concerned must either reimburse the money (or, if necessary, leave the guarantee scheme) or submit a restructuring or winding up plan to the Commission. Restructuring plans are currently being considered for British bank Northern Rock, the Belgian branch of the Fortis group, and the Franco-Dutch group Dexia. (C.D./transl.rt)