World Business

EU report shows banks rely less on state aid

(Xinhua)
Updated: 2010-05-28 15:37

BRUSSELS: European Union (EU) banks are relying less on state aid, a sign that the financial sector is returning to normal after it was hit by the financial crisis, the European Commission said in a report on Thursday.

The EU's executive arm said it has so far approved state aid measures put forward by member states amid the crisis for an overall maximum volume of 4,131.1 billion euros ($5,062.7 billion), with less than one third of the total actually taken up.

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Among those measures, state guarantees accounted for over three quarters, amounting to 3,149.8 billion euros ($3,860.1 billion). EU member states only activated 32 percent of the overall approved volume. Finland, Poland and Slovakia introduced guarantee schemes which have never been used.

Recapitalization measures, aimed to ensure lending to the real economy, amounted to 503.1 billion euros ($616.5 billion), with 48 percent of the approved volume actually implemented.

The peak period of using state aid measures for banks was the first quarter of 2009, when up to 30 percent of banks' total funding had to be guaranteed by national governments, but the share had fallen to 4 percent in December 2009.

As a further step towards a return to normal market conditions, member states like France, Italy and Britain have already decided not to prolong their guarantee schemes.

"The declining use of state guarantees is an encouraging indicator that the financial sector has begun to return to normal market conditions," said Joaquin Almunia, commission vice president in charge of competition policy.

He said it is crucial that banks do not stay dependent on state aid for longer than is strictly needed, though the situation remains fragile.