Brussels, 10/02/2009 (Agence Europe) - Agreeing on a series of principles, EU finance ministers admit the need to adopt a coordinated approach on how to deal with impaired assets, which banks seek to rid themselves of. It is out of the question, however, to use one and the same process, given that a certain amount of flexibility is needed to accommodate the different situations, Miroslav Kalousek stressed on Tuesday 10 February. Within two weeks, the European Commission will present guidelines specifying the conditions to be complied with in order to implement the various options envisaged, the Czech minister added after the Ecofin Council under his chairmanship.
“Whatever the technique used, we need common principles and guidance on the evaluation of assets and on which assets are eligible”, stressed Joaquin Almunia. For some member states, it will be a matter of establishing a “bad bank” structure (which would buy up the financial assets), whereas, for others - the United Kingdom in particular as well as the Netherlands to some extent - another mechanism is foreseen in the form of a guarantee system, the commissioner for economic and monetary affairs confirmed. Nonetheless, whether it is a matter of purchasing or of insuring assets, each instrument requires a clear framework for assessing the value (and hence the price) of these doubtful asset and thus avoid competition distortion. By acting in this way, the 27 hope to restore stability to the banking sector and the smooth working of the credit market, while limiting the impact of these operations on public finance.
The principles set out in the text adopted by the ministers after their discussion on Tuesday morning underline: - a correct and consistent approach of valuation (of financial assets) is of key importance for maintaining a level playing field; - banks benefiting from such schemes (for dealing with impaired assets) should keep a portion of the risk and some specific conditions related to management may have to be included to limit “moral hazard”; - while there should be some flexibility concerning the choice of assets selected, full transparency should be ensured; - and close monitoring of the implementation of such measures would be essential. (A.B./transl.jl)