Crisis-hit banks seeking state aid next year will have to overhaul their operations as European Union regulators further tightened rules on Wednesday as part of a strategy to wean the financial sector off state support. The rule will apply to all lenders getting a capital injection or transferring impaired assets to "bad banks", the EU executive said.
Previously, only distressed banks that received support equal to more than 2 percent of their risk-weighed assets needed a restructuring plan. "After almost two years of a specific crisis state aid regime, we need to prepare a gradual return to normal market functioning," Competition Commissioner Joaquin Almunia said in a statement.
"The remaining risk of renewed stress is a valid reason to proceed with care and caution in the exit process." The rule-tightening came as the European Commission extended by a year, until end-2011, measures allowing EU governments to bail out lenders. The EU executive has also decided to keep measures facilitating access to finance for small- and medium-sized enterprises, but under stricter conditions.
It also extended by a year simpler rules for short-term export credit insurance and said governments could invest up to 2.5 million euros - a 1 million euro increase - in start-ups as private equity investors moved to less-risky investments. In July, the Commission signalled its intention to phase out state support when it increased the fees that banks would have to pay for bailouts, and imposed closer scrutiny of heavy guarantee users. Commission data showed EU governments granted 1.1 trillion euros ($1.44 trillion) to banks last year, out of 4.5 trillion approved by the regulator since October 2008.