EU says bank rescues must not discriminate

BRUSSELS (Reuters) - European Union governments rescuing banks should avoid privileging national lenders, the European Commission said on Monday in guidelines on permitted measures to aid financial companies in crisis.

"EU state aid rules require that measures taken do not give rise to disproportionate distortions of competition, for example by discriminating against financial institutions based in other Member States," the EU's executive arm said in a statement.

Competition would also be distorted if a rescue plan allowed "beneficiary banks to unfairly attract new additional business solely as a result of the government support," it said.

The Commission, which monitors whether national decisions are compatible with EU laws on state aid and competition, said it aims to clear compliant schemes in 24 hours where possible.

State support should be clearly defined and limited to what is necessary to address the acute crisis while excluding unjustified benefits for shareholders of financial institutions at the taxpayer's expense, it said.

Governments across Europe unveiled banking rescue plans on Monday after agreeing at a summit on Sunday on a joint response to the escalation of the financial crisis that followed the bankruptcy of investment bank Lehman Brothers last month.

"By adopting this guidance the Commission has delivered very quickly on its undertaking ... to help member states to act in a coordinated and effective manner to address urgent problems facing the financial sector," EU Competition Commissioner Neelie Kroes said.

(Writing by Marcin Grajewski, editing by Paul Taylor)