Brussels, 15/04/2009 (Agence Europe) - On Wednesday 15 April, the European Commission approved the prolongation of the Credit Guarantee and Recapitalisation Schemes, which form part of the United Kingdom's support measures to the banking industry during the current financial crisis. The original measures were approved by the Commission on 13 October 2008 and modifications were approved on 23 December 2008. The UK announced it was extending the schemes until 13 October 2009 because of the continued severe stress in the global and UK financial markets which made the original credit guarantee and recapitalisation schemes necessary in the first place.
On 27 March 2009, the UK intimated that it intended to prolong its support measures to the banking industry. The UK also provided the Commission with a report on the operation of the Credit Guarantee Scheme, demonstrating the success of the scheme in its early stages and the need to extend the window for issuing new debt under the UK Government guarantee to 13 October 2009.
The UK considered that the original limit on guaranteed issue of £250 billion remained appropriate. The amount set aside for recapitalisation remained £50 billion. The eligible beneficiaries remained fundamentally sound banks, with eligible liabilities of above £500 million. Any capital injection into a bank that has already benefitted from the recapitalisation scheme, however, will be subject to individual notification and approval.
The Commission's investigation found that the circumstances on the financial markets justify the extension until 13 October 2009 to underpin lending to the UK real economy. The Commission notes in a press release that banking institutions which benefit from the schemes have to agree in turn to provide loans to companies in the real economy and to individuals. The Commission concluded, therefore, that the UK support measures are compatible with conditions set in the Commission's Guidelines Communication on the application of state aid rules to banks during the financial crisis. It noted, too, that these measures were “well targeted to remedy a serious disturbance in the UK economy, proportionate to the challenge faced and designed to minimise negative spill-over effects on competitors, other sectors and other member states”. They are “non-discriminatory, limited in time (six months) and scope and with a market-orientated remuneration”. (O.L./transl.rt)