Commission welcomes US bailout plans

The European Commission welcomed US plans for a $700 billion bailout to ringfence fallout from the credit crisis but anticipated…

The European Commission welcomed US plans for a $700 billion bailout to ringfence fallout from the credit crisis but anticipated no EU emergency measures.

"The Commission welcomes the US action to stabilise the financial system," a spokesman for the European Union executive told a regular news briefing.

"We cannot comment in detail at this point in time as the details are still being worked out by the U.S. administration and Congress. The Commission continues to follow the situation closely," the spokesman added.

US Treasury Secretary Henry Paulson has invited other countries to join the bail-out but the Commission said it was up to individual governments in the EU to respond.

The Commission has sole right to initiate EU-wide financial regulation and is coming under growing pressure to act.

German finance minister Peer Steinbrueck and his British counterpart Alistair Darling have called for more regulation to stop a repeat of the credit crunch which has also claimed bank victims in Britain and Germany.

EU Internal Market Commissioner Charlie McCreevy will come forward with two planned initiatives, one on beefing up bank capital rules, the other on mandatory oversight of credit rating agencies. There were no plans for emergency measures, Mr McCreevy's spokesman Oliver Drewes said.

"His position is that one should have rules where necessary and not just rules to be seen to be active," Mr Drewes told the news briefing.

"The Commission is preparing a change in the capital requirements directive and those changes are due to be adopted by the college of commissioners very soon. It has been scheduled for October 1st."

The ratings agency initiative would follow soon and both will need approval from EU states and the European Parliament to become law.

But parts of the CRD reform will be contentious, such as changing how cross-border banks are supervised by giving a bank's home supervisor some authority over branches elsewhere in the EU.

Mr McCreevy has signalled he wants to force banks to retain 10 per cent of the securitised products they devise as an incentive for them to take more care in putting them together.

Banks and many member states already oppose the 10 per cent minimum and it's not clear if it will be in the final proposal.

Mr McCreevy's spokesman urged speedy adoption of the bank capital and rating agency measures as parliament goes into recess next spring ahead of elections.

"What we would hope to see is that member states and parliament would be on board and actually doing something. We don't have much time to debate about who should do what. We need conclusions," Mr Drewes said.

Reuters