European banks may restructure

Bloomberg

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Banks "may be required to divest subsidiaries or branches, portfolios of customers or business" units, according to a draft document by the Brussels-based European Commission obtained by Bloomberg News. The guidelines, which didn’t specifically mention any banks, would also require stress tests before aid approval is granted.

The recommendations will be used to review restructuring plans for lenders that have received aid since the credit crisis prompted governments to approve more than 3.77 trillion euros ($5.29 trillion) to support banks. The commission has already forced other lenders, including Commerzbank last month, to sell assets to win approval for bailouts.

The restructuring plan "should include a comparison with alternative options, including a break-up, or absorption by another bank or an orderly winding-up of distressed banks, in order to allow the commission to assess whether less costly or less distortive solutions are available," the commission said in the 15-page document, that could be approved as soon as the end of the month.