EC prepares guidelines for dealing with toxic assets
According to Reuters European Commission will present guidelines for dealing with toxic assets in the European Union in two weeks’ time after EU finance ministers agreed on 09/02/10 that they need a common approach to avoid distorting banking competition.
Debates were based on a draft Commission guidance paper, prepared in consultation with the European Central Bank. ECB’s “Guiding principles for bank asset support measures” name seven principles for dealing with toxic debt. Participation in asset relief schemes should be voluntary, the defintion of such assets should be relatively broad, the valuation should be common in EU, risks should be shared to limit the cost to the government, the schemes should be run according to business principles and favour schemes with well defined exit strategies; the asset relief should be conditional on commitments to continue to provide credit to meet demand on commercial terms.
The Commission insists that toxic asset relief must abide by EU state aid rules and be notified to the Commission: “State aid rules must be observed because there is a risk of a subsidy race between countries and a drift towards financial protectionism.” In the case of cross border banks, toxic asset valuation should takeplace at the EU level, or at least be closely coordinated among the member states. Depending on their particular situation, banks benefiting from asset relief would have to undergo restructuring.
more at
FACTBOX-EU exec draft guidance on toxic asset treatment
Posted on February 11th, 2009 under news • Tags: bad bank, toxic assets, European Union. • 
Print This Post
• RSS 2.0 feed • You can skip to the end and leave a response. Pinging is currently not allowed