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    State Aid: Commission Approves Cypriot Scheme To Support Credit Institutions

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    MihaelaZavoianu
    The European Commission approved a Cypriot scheme to issue special government bonds to reinforce stability in financial markets and mitigate the effects of the financial crisis. Under the scheme, Cyprus would lend the bonds to solvent Cypriot credit institutions to use as collateral to access liquidity, which the institutions would then use to provide housing and small business loans. The Commission found the measure complies with state aid rules by being temporary, requiring adequate fees, and including safeguards to minimize competition distortions.

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    State Aid: Commission Approves Cypriot Scheme To Support Credit Institutions

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    MihaelaZavoianu
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    The European Commission approved a Cypriot scheme to issue special government bonds to reinforce stability in financial markets and mitigate the effects of the financial crisis. Under the scheme, Cyprus would lend the bonds to solvent Cypriot credit institutions to use as collateral to access liquidity, which the institutions would then use to provide housing and small business loans. The Commission found the measure complies with state aid rules by being temporary, requiring adequate fees, and including safeguards to minimize competition distortions.

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    State aid: Commission approves Cypriot scheme to support credit institutions

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    IP/09/1569

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    The European Commission approved a Cypriot scheme to issue special government bonds to reinforce stability in financial markets and mitigate the effects of the financial crisis. Under the scheme, Cyprus would lend the bonds to solvent Cypriot credit institutions to use as collateral to access liquidity, which the institutions would then use to provide housing and small business loans. The Commission found the measure complies with state aid rules by being temporary, requiring adequate fees, and including safeguards to minimize competition distortions.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    5 views1 page

    State Aid: Commission Approves Cypriot Scheme To Support Credit Institutions

    Uploaded by

    MihaelaZavoianu
    The European Commission approved a Cypriot scheme to issue special government bonds to reinforce stability in financial markets and mitigate the effects of the financial crisis. Under the scheme, Cyprus would lend the bonds to solvent Cypriot credit institutions to use as collateral to access liquidity, which the institutions would then use to provide housing and small business loans. The Commission found the measure complies with state aid rules by being temporary, requiring adequate fees, and including safeguards to minimize competition distortions.

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    IP/09/1569

    Brussels, 22nd October 2009

    State aid: Commission approves Cypriot scheme to


    support credit institutions

    The European Commission has approved under EC Treaty state aid rules a
    Cypriot scheme using special government bonds to reinforce stability in
    financial markets and mitigate the effects of the crisis. The Commission
    found the measure to be in line with its Guidance Communication on state
    aid to overcome the current financial crisis (see IP/08/1495). In particular, the
    measure is limited in time and scope, requires adequate remuneration and
    foresees sufficient safeguards to minimise distortions of competition. The
    scheme therefore constitutes an adequate means to remedy a serious
    disturbance in the Cypriot economy and is compatible with Article 87.3.b. of
    the EC Treaty.

    Competition Commissioner Neelie Kroes said: "The Cypriot scheme will contribute to
    limiting the impact of the financial crisis without creating disproportionate distortions
    of competition."
    Under the scheme, Cyprus would issue special government bonds that it would lend
    to credit institutions to use as collateral to obtain liquidity from the European Central
    Bank (ECB) and on interbank markets. The credit institutions would use the liquidity
    raised for housing loans and loans to small- and medium- sized enterprises on
    competitive terms.
    The special bonds would pay no coupons and would have a maturity of maximum
    three years. They would be lent to eligible credit institutions against collateral and the
    payment of a fee.
    The scheme would be open to solvent credit institutions incorporated in Cyprus,
    including subsidiaries of foreign credit institutions. The window to enter the scheme
    would be a period of six months starting from the day the implementing national law
    would enter into force but not later than 30 November 2009. The overall budget of
    the scheme is €3 billion.
    A number of behavioural safeguards ensure that distortions of competition are
    minimised. Inter alia, beneficiaries are not allowed to expand their business in a
    disproportionate manner or to undertake aggressive business strategies.
    The non-confidential version of the decision will be made available under the case
    number N 511/2009 in the State Aid Register on the DG Competition website once
    any confidentiality issues have been resolved. New publications of state aid
    decisions on the internet and in the Official Journal are listed in the State Aid Weekly
    e-News .

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