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IP/10/623

Brussels, 27 May 2010

State aid: latest Scoreboard shows reduced use of crisis support to banks

The reliance of financial institutions on emergency support through state guarantees is declining. This encouraging early indicator of a gradual return to market conditions in the banking sector is the key finding of the spring state aid scoreboard issued by the European Commission today. Altogether, the Commission has approved crisis measures put forward by Member States for an overall maximum volume of €4131.1 billion. Guarantee umbrellas account for over three quarters of this volume, amounting to €3149.8 billion. The effective use of the possibilities for state guaranteed funding and of recapitalisation measures taken together amounted to €1235.2 billion, significantly less than a third of the total.

"The declining use of state guarantees is an encouraging indicator that the financial sector has begun to return to normal market conditions. While the situation remains fragile it is crucial for the overall economy that banks do not stay dependent from the State for longer than is strictly needed and finance themselves increasingly in the market. Some have started, others will have to be induced towards the exit, and for some this will include going through a necessary restructuring ", said Joaquín Almunia, Commission Vice-President in charge of competition policy.

Progressive reduction of reliance on the State

In the first phase of the financial crisis, Member States set up guarantee shields to stabilise the financial system and recapitalisation measures for banks aimed to ensure lending to the real economy.

Overall, the Commission has approved guarantee umbrellas in 19 Member States amounting to €3149.8 billion, of which €2747 billion were approved under schemes and €402.8 billion under ad hoc measures for individual banks. Member States have effectively issued guarantees covering funding of up to €993.6 billion or 32% of the overall approved volume. In many instances, schemes contributed to restoring financial stability even without take-up, as they were often part of a general strategy to reassure financial markets. For example, Finland, Poland and Slovakia introduced guarantee schemes which have never been used.

In Member States where guarantee measures have been used, the scoreboard shows that the bulk of state-guaranteed bonds was issued in the first quarter of 2009, where they reached a monthly average of 30% of banks' total funding. The total amount of guaranteed bonds newly issued has decreased progressively and stood on average at 4% of banks' total funding in December 2009.

As a further step towards a return to normal market conditions, Member States like France, Italy and the UK have already decided not to prolong their guarantee schemes. The Netherlands have tightened the pricing conditions of their scheme well in advance of the forthcoming general strategy to bring funding conditions closer to market conditions.

The overall volume of approved recapitalisation measures, aimed to ensure lending to the real economy, amounted to €503.1 billion, of which €338.2 billion have been approved under schemes and €164.9 billion under ad hoc measures for individual banks. So far, Member States actually implemented recapitalisation measures amounting to €241.6 billion or 48% of the approved volume. With €149.2 billion, ad hoc measures were almost fully implemented while the lower implementation rate for schemes, with around €92.3 billion invested so far, may reflect a general strategy of Member States similar to the approach for guarantees.

Tackling the roots of the crisis and return to viability in the long run

During the second half of 2009, the Commission and Member States started to tackle the root causes of the crisis – the impaired asset on banks' balance sheets. This implies the need for restructuring for many institutions. The scoreboard summarises the current state of play in this regard. To date, the Commission has investigated close to 40 restructuring cases, of which 13 cases have been closed by a final decision.

The state aid scoreboard

The Scoreboard is the European Commission’s benchmarking instrument for State aid. It is published twice a year, in spring and in autumn. The autumn edition includes state aid expenditure figures for the previous calendar year, whereas the spring edition provides a more detailed analysis of a topical state aid theme. Expenditure data on state aid, including crisis aid to the real economy, will be included in the autumn 2010 scoreboard.

The scoreboard, together with a set of detailed statistical tables and indicators for all Member States, is available on the Commission's Europa website at:

http://ec.europa.eu/comm/competition/state_aid/studies_reports/studies_reports.html

under "Scoreboard, reports and studies".


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