Back-up fund for EU banks
European Union countries that discover problem banks when they stress-test their lenders could turn to an existing EU state back-up scheme.
EU economy commissioner Olli Rehn said that should any government exhaust national funds in helping a troubled lender, it could turn to “EU financial backstops.”
“In order to use these European financial stability mechanisms in the case of any country we would need to have a programme… focused in particular on the restructing of the banking sector and addressing the potential needs of a possible recapitalisation,” Rehn told lawmakers in the European parliament. “That is the strategy.”
It is the first time the European Commission or executive has spelt out that countries struggling to recapitalise stricken banks could tap a €500bn (£414bn) scheme set up as a safety net should borrowing problems in Greece spread to Spain and beyond.
By explaining what it would do if “pockets of vulnerability” were uncovered by stress testing, Rehn hopes to win back the confidence of jittery investors.
The banks to be stress tested will be named by the Committee of European Banking Supervisors today.