Chillin' out till it needs to be funded
Europe Issues New Bank Guidelines
zyakaira notes: These common rules specify stress tests for the 30 that have received state aid. Also they emphasize the fact that this aid must stay on the books to be of any value and not immediately used to save falling/defaulted bonds. All in all, it looks good on paper and barring any unforeseen bickering by the nation states individually as BoE and maybe a few others may prefer, these would set a nice denominator. From my side I would recommend that the best and worst case be not used to skew results and be used in a fair range, which should be eminently possible in 6 months
To even out different requirements imposed on banks that have received government aid, the European Commission has set forth common rules
The European Commission laid out new guidelines for banks receiving government support on Thursday (23 July) in order to avoid distortions of competition within the sector.
Since the fall of Lehman Brothers last September, roughly 30 banks within the EU have received state aid to keep them afloat on condition that a restructuring plan be submitted within six months.
But banks will have five years to implement their plans, an indication that the commission still considers the current climate extremely difficult.
Philip Lowe, the commission’s director-general for competition, said the guidelines were “the ultimate stage in restoring health to the banking sector…which is done by returning individual institutions to viability without state aid.”
He cautioned that state aid could not be provided so that banks could continue with a “failed business model.”
Instead, the restructuring plans must take account of “the present state of and future prospects of financial markets, reflecting best-case and worst-case assumptions,” say the guidelines, which will remain in place until 31 December 2010.