At the heart of the case is the risk that the aid will distort banking competition.

“We must be careful not to introduce distortions in the competition”

“We must be careful not to introduce distortions in the competition,” he said during the “Grand Jury RTL-LCI- Le Figaro ” about the aid of 10.5 billion euros in capital brought by France to six banks: BNP Paribas, Societe Generale, Crédit Agricole, Caisses d’Epargne, Banques Populaires and Crédit Mutuel.

Negotiations are tense between Paris and Brussels, the European Commission being reluctant to endorse the plan to support French banks of 40 billion euros announced on 13 October. At the heart of the case is the risk that the aid will distort banking competition.

Sunday, November 30, the President of the European Commission, the Portuguese José Manuel Barroso, expressed his reservations. While affirming that Brussels examined rigorously and quickly the French plan and that there was no blocking, he warned against a “law of the jungle” between countries of the European Union.

“We must be careful not to introduce distortions in the competition,” he said during the “Grand Jury RTL-LCI- Le Figaro ” about the aid of 10.5 billion euros in capital brought by France to six banks: BNP Paribas, Societe Generale, Crédit Agricole, Caisses d’Epargne, Banques Populaires and Crédit Mutuel.

The use of these funds is of concern to the Commission because, in return, the French government is asking banks to increase their credit to businesses and individuals. State aid would then allow them to gain customers on unassisted banks.

Mr. Barroso believes that a distinction must be made between emergency measures, such as the rescue of the Franco-Belgian bank Dexia, and the restructuring measures to which these loans belong to French banks. “There must be a clear and homogenous criterion for the whole of Europe” in support of the banking sector, he added, warning against a “fragmentation” of the single market.

Friday, the Minister of Economy, Christine Lagarde, and the Commissioner for Competition, Neelie Kroes, had raised this issue without being able to move forward. “There is a willingness on both sides to reach an agreement,” said a spokesman for the Commission. Negotiations will continue this week on the sidelines of meetings of European finance ministers in Brussels on Monday 1st and Tuesday 2nd December.

Since the beginning of the financial crisis, Brussels has insisted that the intervention of governments to help banks must be made in return for adequate remuneration, accompanied by measures to compensate for distortions of competition and be limited to strictly necessary to remedy the disruption to the economy created by the crisis.

“WE CHANGED FROM WORLD”

Asked about a possible blocking of the French plan by Brussels on the sidelines of a UN conference on financing for development in Doha on Saturday, November 29, Nicolas Sarkozy said he had “spoken on the phone” with Mr. Barroso the day before. “I do not think there is such a willingness on the part of a particular commissioner, it would be that everyone understands that we have changed hands and that we have to move quickly,” he added. President of the Republic.

In the past, French officials accused the Commission of being too dogmatic in the application of the competition rules. This time, with the financial crisis, it is more flexible. But “as the economic situation improves, the Commission will tighten the bolts to prevent governments from taking advantage of the crisis to over-subsidize or favor their companies, ” said Jean Pisani-Ferry, director of the think tank Bruegel Brussels.

Juvenile unemployment, public debt … Brussels ‘catches’ Spain in seven of the 14 imbalance indexes

  • Spain still does not respect the unemployment standards, public and private debt, net international investment position and losses in the share of exports.
  • In addition, it fails to meet two new criteria related to employment: long-term unemployment rate and unemployment of young people between 15 and 24 years of age
  • The European Commission urges to take “decisive actions” before proposing next year a fine equivalent to 0.1% of GDP (about 1,000 million euros).
  • Read the report of the European Commission (PDF).
Desempleo

A group of people queue in front of an employment office in Madrid. GTRES

The European Commission (EC) has warned on Thursday that Spain suspends half of the 14 indicators on macroeconomic imbalances that accumulates its economy, such as high unemployment or large public and private debt, so he recalled that he has to take ” decisive actions “.

l Poverty indicators remain among the highest in the EU Spain still does not respect the standards recommended by Brussels in terms of unemployment , public debt, private debt , net international investment position and losses in the market share of exports .

In addition, it also fails to meet two of the three new indicators introduced by the European Commission in its analysis known as the “Alert Mechanism” on the economic situation of European countries. These three indicators focus on employment and Spain fails to comply with the two related to the long-term unemployment rate of the active population and the relative unemployment rate of young people between 15 and 24 years of age .

 

“In addition,” says the European Commission, “the improvement of the situation in the labor market has not translated into a reduction in poverty indicators, which are still among the highest in the EU .”

Tasa de desempleo y su evolución de 2013 a 2015. (COMISIÓN EUROPEA)

This year, Spain continues to comply with the Brussels cut in six other indicators: the effective exchange rate, the current account balance, nominal unit labor costs, housing prices, the flow of credit to the private sector and total liabilities of the financial sector. It also approves the activity rate of the total population, another of the new markers introduced this year.

“Decisive action is required”

The Commission recalled that it warned last February that Spain is accumulating macroeconomic imbalances that ” require decisive action and specific vigilance , particularly regarding the high levels of private, public and external indebtedness in a context of high unemployment”.

Further examine related risks and monitor progress in smoothing out excessive imbalances In addition, it is stated to be “useful, also taking into account the detection of imbalances that require decisive actions and specific supervision, to further examine the related risks and to monitor the progress in smoothing excessive imbalances “, a recommendation that is not new for Spain.

This will be carried out in a coordinated manner with the surveillance missions of the Spanish economic drift that are carried out after the end of the rescue granted to the country to clean up its banking.

With these data, the Community Executive will decide in the spring if the detected imbalances can be considered “excessive” or not . If Spain continues to persistently suspend the indicators and does not take the necessary measures to correct the imbalances, the EC could propose, as a last resort, the Council of the EU to impose a fine equal to 0.1% of annual GDP ( about 1,000 million euros)

 The Banking Act (KWG) regulates the business activities of banks and financial services companies. The focus is on the regulations governing the amount of lending in relation to equity, reserve requirements, Bafin’s influence on business activities and organizational requirements.

Basis of the KWG

Picture: Law paragraphsThe aim of the KWG is to steer the banking industry in such a way that, on the one hand, the banks are protected against bankruptcy and, on the other hand, that investors’ deposits are not jeopardized. This should generally protect the banking industry. The KWG came into force in 1936. Among other things, the KWG regulates the operating license for a company with the business object banking.

Loans and deposits

For the purposes of the KWG, the analysis of a credit institution does not separate deposits and loans. The notification of large loans and deposits ensures that they are in a healthy relationship. If the lending volume exceeds the permitted amount, Bafin decides whether or not lending is permitted. The companies have a duty to provide information, in which the key figures for the individual loan and deposit volumes must be stated on a monthly basis. For loans, a distinction is made between standardized loans, million credits and large loans. With regard to large loans, the report must be made every three months.

Definition of large loan

Under a large loan, the KWG understands all loans to a borrower in the sum, provided they exceed ten percent or more of the liable equity capital of the bank. As a result, a large loan in the context of credit default risk poses a particular risk for the bank. For monitoring, large loans as well as millions of loans are to be reported to the central bank for evidence of the Deutsche Bundesbank, the department that oversees bank lending. These loans are not just loans to non-banks, but also include cross-institution loan lending.

Basel II

This pass, implemented in Germany as Solvabilitätsverordnung, regulates the capital requirements for a bank with regard to borrowing. In addition to the risk weighting of the loans granted, Basel II is still based on two other cornerstones. One is the regulatory review process, which provides for ongoing scrutiny by the state bodies. Secondly, market control plays a role. This is made possible by the disclosure of the business activity. This allows market participants to assess how conservative or speculative a company works and reward or sanction it accordingly.

Related topics Credit Equity Equity Debt Bankruptcy Credit intermediary Residual debt waiver Remaining debt insurance Prepayment penalty Usurious interest Interest

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