In a set of guidelines to be sent to national capitals, Brussels invites member states to take into consideration "the option of nationalisation" of banks should restructuring prove impossible. This is a major political shift for Commission President José Manuel Barroso's team, which has so far been a fierce supporter of the free-market economy.
The draft document suggests that member states value national banks' toxic and impaired assets, the Italian press reported yesterday (24 February). The Commission openly acknowledges that exposure to junk assets is the primary cause of the current credit crunch, partially lifting the blame from the shoulders of banks, which have so far stood accused of having held extra liquidity, made available by monetary policy measures.
Clarifying the amount of bad assets controlled by a bank is considered crucial if credit is to be unblocked and the economy allowed to recover. However, the Commission's guidelines admit that there is currently no agreement over an evaluation system for toxic assets (such as US subprime mortgages) and impaired assets (which have been damaged by the crisis and are thus no longer completely reliable). The issue has not yet been solved "in a satisfactory way," reads the draft.
Toxic and impaired assets will top the agenda of an informal summit of EU heads of state and government called by the Czech Presidency for next Sunday (1 March) in Brussels (EurActiv 12/02/09).
Brussels's green light to nationalise follows state interventions already carried out in Belgium (Fortis), Ireland (Anglo Irish Bank) and Portugal (BPN), and put forward elsewhere, to rescue collapsing financial institutions. The Obama administration in the US is planning de facto nationalisations of giants Citigroup and the American International Group (AIG).
The Commission made clear that nationalisation should be considered a last resort, setting out a range of requirements for banks eligible for state aid. It had already announced that in return for public aid, banks may be asked to downsize or divest profitable business units or subsidiaries, while strict control of dividends and managers' remunerations should also be required (EurActiv 11/02/09).
