Brussels, 31 October 2008
In accordance with the state aid rules of the EC Treaty, the European Commission has given the go-ahead to France's debt-refinancing scheme for credit institutions that aims to stabilise the financial markets. In particular, the scheme provides for non-discriminatory access, is limited in time and scope, and introduces proper safeguards for limiting distortions of competition. The Commission has decided that the scheme is an appropriate, necessary and proportionate means of remedying a serious disturbance in the French economy and is, therefore, compatible with the EU rules on state aid (Article 87(3)(b) of the EC Treaty), as explained in the Communication on how these rules apply to banks during the crisis (see IP/08/1495).
As Competition Commissioner Neelie Kroes commented "The French refinancing scheme is an effective instrument for boosting market confidence. The commitments we have secured from the French authorities will enable distortions of competition to be kept to a minimum."
On 16 October 2008 the French authorities passed a law authorising a refinancing scheme for stabilising the financial markets. Following contacts with the Commission, they officially notified it of the scheme on 28 October 2008.
The French authorities decided against a direct guarantee scheme and are instead making use of a structure set up for this purpose, the société de refinancement des activités des établissements de crédit (SRAEC - refinancing company for the activities of the credit institutions), which will be the only institution enjoying a state guarantee. SRAEC will issue securities guaranteed by the State with a view to making loans to credit institutions against collateral. The credit institutions will have to pay a premium over and above the normal market price and will have to make commitments regarding their conduct. SRAEC's activities are limited to five years. Under the law, the guarantee that the French Government can provide to SRAEC for this purpose may not exceed €265 billion.
The Commission reached the conclusion that the French refinancing scheme was an appropriate means of restoring confidence on the financial markets. It also noted that the scheme was compatible with EU state aid principles in that it provides in particular for:
The French authorities have undertaken to re-notify the scheme in the event that the total amount of loans granted or of securities subscribed to or acquired by SRAEC with a maturity of more than three years exceeds a certain percentage of the total amount outstanding. Likewise, France will notify an individual aid if the total amount to be received by a bank exceeds certain pre-defined limits.
Finally, France has undertaken to re-notify the scheme in six months' time. This will allow the Commission to decide, depending on developments, whether the scheme should be extended.
The non-confidential version of the decision will be made available under the case number N 548/2008 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. The latest publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.