EU clears German asset relief plan for banks

BRUSSELS, July 31 (Reuters) - EU competition authorities approved on Friday a German plan to let crisis-hit banks shift billions of euros of troubled assets off their balance sheet and said some of those lenders would have to be restructured. "The German asset relief scheme now provides an efficient tool for addressing the uncertainty regarding the quality of banks' assets. This will contribute to maintaining market confidence," European Competition Commissioner Neelie Kroes said in a statement.

"Restructuring is likely to be necessary in a significant number of cases," she added.

German authorities notified the European Commission, the top competition watchdog of the 27-nation European Union, in May of the asset relief plan, which is part of rescue measures for the financial sector approved in October last year. Under the plan, banks can transfer structured securities to special purpose vehicles in exchange for guaranteed bonds. They will have to make an initial writedown of 10 percent of the initial value.

The enrolment period for asset relief is limited to six months.

In return for regulatory approval, Germany will have to notify the Commission of either a viability review or a restructuring plan, the EU executive said.

German bank regulator Bafin has estimated the maximum value of toxic assets in German bank balance sheets at 853 billion euros ($1.204 trillion). (Reporting by Foo Yun Chee; Editing by Dale Hudson)