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European Union warns state-aided banks of possible forced sales
  Hedgeweb - THU, JUL 23 2009
News Banks such as Lloyds Banking Group Plc and Dexia SA that received government bailouts may have to sell branches or units to win approval for restructuring plans under new European Union guidelines.

The recommendations also call for stress tests, the disclosure of impaired assets and the possible closure of unprofitable operations, the EU said in a statement today. The guidelines will be used to review lenders that received aid after the credit crisis prompted EU governments to approve more than ?3.77 trillion euros to support banks.

The proposals, which don??t mention specific banks, increase pressure on national governments and lenders to turn in restructuring plans that comply with EU demands, within weeks in some cases. European Competition Commissioner Neelie Kroes last month said Royal Bank of Scotland Group Plc and Lloyds might have to sell branches and units.

??Large state support may require some adjustments including structural measures, such as divestitures,? the European Commission in Brussels said in a statement today.

Governments must submit the plans within six months after the commission approved initial bailouts. The EU said it is reviewing a ??large number of individual cases.?

The EU-Commission in May forced Germany??s Commerzbank AG to sell assets to win approval for a rescue plan and is reviewing a plan by ING Groep NV, the biggest financial services company in the Netherlands.

The commission said banks must be viable in the long-term in order to receive approval for state aid.

??We need to make banks viable again without state support and to re-invigorate competition in the single market,? Kroes said in the statement.

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