Press Release: State aid: Commission adopts guidance on bank recapitalisation in current financial crisis to boost credit flows to real economy

The European Commission published detailed guidance on how Member States can recapitalise banks in the current financial crisis to ensure adequate levels of lending to the rest of the economy and stabilise financial markets whilst avoiding excessive distortions of competition, in line with EU state aid rules. The guidance takes account of the fact that the credit crunch is now beginning to affect the real economy and that financially sound banks may need state capital to ensure an adequate level loans to companies. The Communication complemented and refined the broader guidance document adopted on 13 October 2008, to ensure Member States had rapid guidance on the adequate pricing of state capital injections into banks designed to stabilise the banks themselves. The present guidance further addressed the necessity of appropriate safeguards to ensure that the public capital is used to sustain lending to the real economy and not to finance aggressive commercial conduct to the detriment of competitors who manage without state aid. Such safeguards also need to provide incentives for maintaining state intervention in the financial sector only as long as the crisis in the financial markets so requires. This approach ensures fair competition between Member States, fair competition between banks and a return to normal market functioning as soon as possible.

European Commission: SPEECH/08/683: The role of state aid in tackling the financial & economic crisis http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/08/683&format=HTML&aged=0&language=EN&guiLanguage=en

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