European state aid support for banking sector extended until 2012

5 October 2010

European banks will be able to benefit from soft loans and other concessions from their host states, it has been announced.

EU competition commissioner Joaquin Almunia told the Financial Times that the lighter regime will now last until the beginning of 2012 due to the lingering effects of the financial crisis.

State aid rules were eased in late 2008 when the crisis first made its mark and financial institutions made use of direct aid, state guarantees and soft loans.

The changes were due to finish at the end of 2010, but they will now be extended into 2011 with the rules being gradually changed over the course of next year.

"On present analysis, we are not yet in a position to return to a normal regime," said Mr Almunia.

"We know there are still some institutions ... that need this public support through public capital injections."

Last week, the European Commission laid out plans to fine states that do not bring their deficits under control.

By Claire Archer

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