Press watch: EU ‘considering state aid investigation into southern European banks’

The Financial Times (6 April) reported that the EU is collecting evidence to decide whether to launch an investigation into unfair state aid in Portugal, Italy, Greece and Spain and whether these member states have illegally underwritten banks ‘that have bolstered their capital’ with deferred tax assets, which are accepted as core capital in those countries, but are considered as ‘low-grade’ by the European Central Bank (ECB) and the rest of the Eurozone.

Under Basel III rules on bank capital, reports the FT, deferred tax assets, which result from bank losses that banks can use to set off against tax bills in later years, will ‘progressively no longer count as bona fide capital’. The request for information from the EC comes as the result of the ECB coming down on national exceptions to capital rules. However, EC competition commissioner Margrethe Vestager told the FT that the EC had ‘not made up our minds at all’ about whether a formal investigation into deferred tax assets would take place.