Member Article

As national governments have taken increasingly drastic steps to shore up their banking systems so the Commission has been working overtime dealing with the State aid fallout. Many of the measures taken by Member States could distort competition - a serious worry in the current volatile climate.

Against this backdrop, the Commission has been keen to stress that it wants to work with Member States to ensure financial stability. At the same time, it has been quick to warn against protectionist measures that could ultimately lead to further financial turmoil, with Commissioner Kroes stating that: "we need to co-ordinate national actions and maximise their effectiveness, and at the same time secure that their negative spillovers on other financial institutions and Member States are limited." To that end, the Commission has taken a number of measures, which include:

• Close contact with the Irish government to ensure that the state guarantee of bank deposits - which it was feared could disadvantage non-Irish banks - does not discriminate against foreign banks operating in Ireland or lead to significant distortions of competition. Similar discussions on State guarantee schemes have taken place with the Greek, German and Austrian governments.
• Putting in place temporary arrangements to allow quicker decisions on emergency rescue measures for financial institutions. Rescue aid for Bradford & Bingley, the German commercial property lender Hypo Real Estate Holding AG and the Danish Roskilde Bank has already been approved, with the Commission in close contact with the Belgian, French and Luxembourg governments over the proposed arrangements for rescue aid to Fortis and Dexia.
• Approving a Danish support scheme for banks.
• Approving, under an accelerated procedure, the UK package aimed at stabilising financial markets.
• Publishing guidance on how the Commission will apply the State aid rules to support schemes for banks in crisis.

Commissioner Kroes has underlined that the Commission is "determined to act as a stabilising force" in the current crisis. While acknowledging that the situation is fast moving and volatile, the Commission is confident that it can act in a responsible and pragmatic way to ensure that the financial system is kept afloat without damaging competition and - ultimately - consumers.

 

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