Brussels, 12th February 2009
The European Commission has approved under EC Treaty state aid rules a Hungarian package intended to stabilise the markets as a response to the global financial crisis. The package will provide eligible credit institutions with new capital and guarantees on short and medium term newly issued debt, under strict conditions. The Commission found the measures to be in line with its guidance Communications on state aid to overcome the financial crisis (see IP/08/1495 and IP/08/1901). In particular, the package ensures non discriminatory access, is limited in time and scope, provides for a market-oriented remuneration and foresees adequate safeguards to minimise potential distortions of competition. The Commission therefore concludes that the scheme is an adequate means to remedy a serious disturbance in the Hungarian economy and is as such compatible with Article 87.3.b of the EC Treaty.
Competition Commissioner Neelie Kroes said: "The Hungarian scheme provides effective means for strengthening confidence in the markets and, above all, for financing the real economy in a period of crisis, while at the same time establishing safeguards to limit distortions of competition".
The package includes two measures designed to stabilise the financial markets:
The Commission concluded that the support package comprises elements of state aid but contains several provisions aimed at ensuring its adequacy and proportionality, in line with the EU state aid rules. Hence, the scheme is an appropriate, proportionate and necessary means to maintain confidence in the Hungarian credit institutions' creditworthiness and to stimulate interbank lending.
In particular, the scheme is open to all credit institutions of systemic importance on the Hungarian banking market. It is limited in time and scope, with entry windows and budget caps. It requires beneficiaries to pay a market-oriented remuneration. The measures target only fundamentally sound financial institutions; the provision of guarantees and capital is based on an assessment by the Hungarian Central Bank and the Hungarian Financial Supervisory Authority.
Moreover, several behavioural safeguards are in place, to avoid an abusive use of the state support. These include a special veto share aimed at enabling the State to object to decisions which would lead to a misuse of the funds or which would be detrimental to the stability of the financial system. Moreover, Hungary introduced a ban on advertising the State's intervention and can also impose limitations to management remuneration while the support measures are in place. Finally, Hungary has committed to notify restructuring or liquidation plans for companies that have either failed under the guarantee scheme or for banks that can no longer be considered as fundamentally sound.
The non-confidential version of the decision will be made available under the case number N664/2008 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.