EU approves Spanish guarantee scheme for credit institutions

Special Report:Global Financial Crisis

BRUSSELS, Dec. 23 (Chinese media) -- The European Commission on Tuesday approved a Spanish scheme to support its domestic financial sector by providing guarantees to eligible financial institutions.

Under the scheme, the Spanish government will provide guarantees for the issuance of notes, bonds and obligations admitted to the official secondary market in Spain.

The scheme's overall budget is 100 billion euros (140 billion U.S. dollars), which can be increased to 200 billion euros (280 billion U.S. dollars) if market conditions deteriorate. Only solvent banks have access to the guarantee scheme.

"In the current financial crisis it is important to address the liquidity problems of banks as they can adversely affect lending to the real economy," said EU Competition Commissioner Neelie Kroes.

"The Spanish scheme takes into account national particularities of the banking market in Spain while ensuring the coherence necessary to maintain a level playing field for all European banks," she said.

According to the scheme, the maturity of the financial instruments covered ranges from three months to three years, but the guarantees can be extended to up to five years in exceptional circumstances.

The European Commission's approval only covers a period of six months. Spain has to terminate the scheme or reinform the commission of its extension after the six-month guarantee period ends, Kroes added.