EU raps bailed-out banks over early repayments

(BRUSSELS) - Certain banks saved by state aid were yellow carded on Thursday for announcing to markets the early repayment of debt without first alerting European competition authorities.

"Banks which are currently undergoing restructuring aid investment... need to verify with the commission before announcing the early repayment of debt instruments," said Jonathan Todd, EU competition spokesman, in what he termed a "clear warning."

According to a commission statement, such repayments "reduce the total regulatory capital of a financial institution and put into question whether granted state resources were limited to the minimum necessary" under European law.

As a result, early repayments could have "implications for the compatibility of the aid received," it added.

Europe's top competition watchdog has already forced Germany's Commerzbank to shed 45 percent of its balance sheet after it received aid from the German state, which now owns 25 percent of the group.

Britain's Lloyds is also negotiating over heavy restructuring demands, amid question marks over other banks bailed out during last year's financial crisis.

While Brussels did not name the banks involved, the move appeared to refer to Dexia and ING, who have between them recently announced over one billion euros (1.5 billion dollars) of such repayments.

A Dexia statement said it would now "analyse the consequences" of the commission's stance "in the context of ongoing proceedings looking into state aid" received last year.

"We will consult the commission before announcing fresh transactions of this type," added ING spokesman Raymond Vermeulen.

The commission's probe into Dexia's affairs has already been running for more than seven months.

The ING investigation was prolonged in mid-September, amid doubts over the company's own valuation of so-called toxic assets on its books.