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northern rock state aid December 5, 2007

Posted by Bradley in : Uncategorized , trackback

The Commission has approved the UK’s aid to Northern Rock (and there is an accompanying FAQ). The Press release states:

…the emergency liquidity assistance provided by the Bank of England on 14th September 2007, which was secured by sufficient collateral and was interest-bearing, does not constitute state aid. However the guarantee on deposits granted by the Treasury on 17th September, as well as the measures granted on 9th October, which provided further liquidity and guarantees to Northern Rock and were secured by a Treasury indemnity, do constitute state aid.
These aid measures can be authorised as rescue aid in line with the Community Guidelines on state aid for rescuing and restructuring firms in difficulty. Under these rules, rescue aid must be given in the form of loans or guarantees lasting no more than six months, although there are certain exceptions to these rules in the banking sector, in order to allow for prudential requirements, which have been applied in this case.
Also in line with the rules, the UK authorities have given a commitment to deliver to the Commission by 17th March 2008 a plan for Northern Rock going beyond the short term rescue. If a restructuring plan were to involve state aid, it would have to be assessed on its own merits under the rules on restructuring aid.

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