Brussels, 25 June 2010
State aid: Commission extends Austrian and Latvian bank support schemes
The European Commission has extended until the end of 2010 an aid scheme for credit institutions in Austria and a Latvian bank guarantee scheme. The extended schemes feature higher premiums to be paid by banks to the State for guaranteeing the loans they raise on the market. This is to encourage banks to finance themselves without state support and to limit distortions of competition. The current schemes for the financial sector expire at the end of the month. To be extended, the fees charged by government need to be increased and the banks that continue to rely heavily on such guarantees for their financing should undergo a viability review. EU finance ministers agreed with this approach. The Commission has already extended under these conditions bank support schemes in Sweden and Germany. The extensions are for six months, until the end of 2010.
Austrian aid scheme for credit institutions
The Commission authorised the extension until 31 December 2010 of an Austrian aid scheme for credit institutions. The scheme covers in particular guarantees on interbank lending, asset guarantees and capital injections, but only the guarantee scheme has been changed. The broad Austrian scheme was initially approved on 9 December 2008 (see IP/08/1933) and would expire at end of this month.
The Commission considers the scheme to be in line with its guidance on state aid to banks during the crisis (see IP/08/1495 and IP/08/1901) and the recent adjustment of the rules for state guarantees, endorsed by the ECOFIN Council of 18 May 2010 on the phasing out of support measures for the financial sector.
In particular, the extended measures are well targeted, proportionate and limited in time and scope. The extended support package includes higher premiums for the state guarantee according to a bank's creditworthiness, in order to provide an incentive for banks to refinance themselves on the markets without state support and to limit distortions of competition. The Commission has therefore concluded that the extended measures are compatible with Article 107(3)(b) of the Treaty on the Functioning of the European Union (TFEU).
Latvian bank guarantee scheme
The Commission also authorised the extension until 31 December 2010 of a scheme to support banks in Latvia. The scheme, which would expire on 30 June 2010, was initially approved on 22 December 2008 (see IP/08/2054).
The scheme also features higher fees according to the recent adjustment of the rules for state guarantees. As in the case of the Austrian scheme, the extended measures are considered well targeted, proportionate and limited in time and scope. The scheme is, therefore, in line with the Commission's guidance on state aid to banks during the crisis and Article 107(3)(b) TFEU.
The vast majority of support schemes for financial institutions, put in place at the end of 2008 to ensure financial stability at the height of the financial crisis, expire at the end of June. They have been periodically extended, generally for six months, when requested by the Member States concerned and justified.
The Commission has already approved, also for six months, the prolongation of schemes in Sweden (guarantee scheme) (see MEX/10/0615), Germany (guarantees, recapitalisation and other measures) and Hungary (recapitalisation scheme) (see IP/10/789). For a full list of the guarantee and recapitalisation schemes expiring in June see the Spring State Aid Scoreboard, including IP/10/623, published on May.