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Friday July 24, 2009

Aided banks may face asset sale under new EU rules


BRUSSELS: Crisis-hit banks may have to divest assets and hold back on acquisitions to gain European Union regulatory approval for their state bailouts, the European Commission said yesterday.

The European Union executive has to date cleared 70 banking rescues across the region, with a number of lenders due shortly to present restructuring plans for review.

The new restructuring rules, broadly in line with a draft document obtained by Reuters last week, will be in force until the end of December 2010.

The guidelines included structural measures that may see some banks selling assets over a number of years, and behavioural remedies such as constraints on acquisitions or on aggressive pricing and marketing strategies funded by state aid, it said.

“The financial crisis may not be over yet, but we need to start working seriously with member states to restructure European banks,” Competition Commissioner Neelie Kroes said in a statement.

“We need to make banks viable again without state support and to reinvigorate competition in the single market,” she said.

Last month, Kroes warned partially nationalised British lenders Royal Bank of Scotland and Lloyds that they may have to sell a large chunk of their assets to comply with EU antitrust rules.

The comments came after the Commission had agreed to restructuring plans by Germany’s Commerzbank and WestLB that included roughly halving their balance sheets.

Aided banks will need to conduct a stress test outlining their strong and weak points that may lead to them withdrawing from lossmaking activities, absorbed by rivals or wound up, the EU executive said. They also need to disclose impaired assets. – Reuters


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