July 10, 2017 / 1:36 PM / 2 months ago

Italy's bank rescues raise issue of EU state aid rule changes - Dijsselbloem

FILE PHOTO: Dutch Finance Minister and Eurogroup President Jeroen Dijsselbloem talks to the media as he arrives at European Union finance ministers meeting in Brussels, Belgium February 21, 2017. REUTERS/Francois Lenoir/Files

BRUSSELS (Reuters) - The head of euro zone finance ministers said on Monday that Italy’s winding-down in June of two banks from the Veneto region had raised the question of whether European Union rules on state aid should be changed.

EU state aid rules for banks were revised in the wake of the 2010-2012 euro zone debt crisis and allow public support for lenders after shareholders and junior bondholders have contributed to the rescue.

The state aid rules are less strict than more recent banking rules, known as the bail-in, which dictate that senior bondholders and uninsured depositors must take losses before taxpayers’ money can be used to help banks.

“The question is if the state aid rules, that apply in any case, should not be adjusted now,” Jeroen Dijsselbloem told reporters in reply to a question on whether Italy’s public rescue of Veneto Banca and Banca Popolare di Vicenza was in line with the spirit of EU banking rules.

Arriving at a regular meeting of euro zone finance ministers in Brussels, Dijsselbloem said EU banking rules were respected by Italy, but that a discussion would be held at the Eurogroup meeting on possible changes to EU competition rules.

After the meeting, he said no joint conclusions were adopted by ministers but that discussions will continue on this issue.

“We need to make sure that even if other legal frameworks apply, the state aid rules should be to the same kind of level,” Dijsselbloem said.

EU rules are proposed by the executive European Commission and approved by EU states and the European Parliament. Italy used the state aid framework to wind down the Veneto banks because the small size of the lenders permitted it.

Arriving at the same meeting, the European Commission vice president in charge of the issue, Valdis Dombrovskis, said the EU executive “at a certain stage” will discuss whether state aid rules for banks need to be changed.

But he stressed that there would be no proposal for the moment as possible side effects of amending the rules need to be carefully assessed.

As he arrived at the meeting, German Finance Minister Wolfgang Schaeuble said Italy had “done very well” in handling problems with troubled banks and that its actions were a good basis for further improvements.

Reporting by Francesco Guarascio @fraguarascio; Editing by Robin Emmott and Catherine Evans

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