BRUSSELS (AFP) - – First, it was Commerzbank, ING and now
Northern Rock -- European Union competition regulators are imposing
tough conditions on banks that benefited from state bailouts,
deepening concerns for the likes of Lloyds, RBS and Dexia.
EU competition regulators on Wednesday approved the state aid
contained in plans to break up and sell British nationalised bank
Northern Rock in the wake of the global financial crisis.
Competition commissioner Neelie Kroes said the proposed changes
"will allow the bank to become viable in the long-term and limit
distortions of competition."
Welcomed on this occasion by the British Treasury, the deal to
bring Northern Rock back from the brink of collapse will see it
split into a "good bank" that will continue its economic
activities, and a "bad bank" management company to run down the
remaining assets.
The British government's aid includes recapitalisation measures
of up to three billion pounds (4.43 billion euros), liquidity
measures of up to 27 billion pounds and guarantees for liabilities
of several billion pounds.
Once Britain's fifth-biggest home loan provider, Northern Rock
faced potential collapse in September 2007 and requested emergency
funding from the Bank of England -- sparking the first run on a
British bank for more than a century.
The commission's ruling comes after Dutch banking and insurance
group ING said it would restructure, under pressure from the EU
regulator, to pay back emergency state funds.
ING said Monday it would sell off its insurance operations and
raise up to 7.5 billion euros (11.25 billion dollars).
As Kroes heads towards the end of her tenure in the plum
competition job, she has made a concerted drive to rein in banks
previously considered "too big to fail."
Germany's Commerzbank has already been forced to shed 45 percent
of its balance sheet after it received aid from the German state,
which now owns 25 percent of the group.
And Belgium's Dexia, like ING, was also yellow carded by the
commission this month for announcing to markets the early repayment
of debt without first alerting European competition
authorities.
Dexia -- itself under investigation for nearly eight months --
and ING have between them announced over one billion euros of such
repayments.
Bankruptcy is no longer taboo, in the commission's eyes -- with
one banking source saying it is "frightening" what is happening
with ING.
Stock markets seemed to agree. Shares in the banks concerned
fell following Brussels' announcements.
Kroes has long had the two biggest British bank rescues -- Royal
Bank of Scotland and Lloyds Banking Group -- in her sights.
Lloyds is expected to face a forced reduction in its share of
the retail banking market from 30 percent to 25 percent, with the
disposal of more than a seventh of its 3,000 branches, Britain's
Independent newspaper reported on Wednesday.
RBS, which is 70 percent owned by the taxpayer after it was
saved from collapse by a government bailout last year, is also
working on plans to sell off several hundred branches.
RBS had to be rescued after it was ravaged by the credit crunch
and weakened by its 2007 takeover of Dutch group ABN Amro at the
top of the market.
Last year, it recorded Britain's biggest ever corporate loss of
more than 24 billion pounds (26 billion euros, 38 billion
dollars).