EU vows no simple "rubber-stamping" of bank aid

LUXEMBOURG (Reuters) - EU Competition Commissioner Neelie Kroes, facing national pressure to approve bank rescue schemes, insisted on Friday that EU state aid rules could not be dismantled.

"Our efforts are no rubber-stamping exercise because we must be careful to prevent the disintegration of the single market in financial services," she said according to the text of a speech to be delivered to a banking conference in Luxembourg.

"The cost of capital is one of the main factors on which banks compete, so we must ensure that such state recapitalizations do not become a permanent feature of European financial markets," she said.

France and Germany have urged Kroes to hurry up and approve rescue schemes for their bank sector in the wake of the financial crisis.

Kroes reiterated the three guiding principles on bank recapitalization she had proposed to EU finance ministers this week and which she said the Commission will soon adopt.

Kroes said the Commission accepted a pricing formula for aid proposed by the ECB for fundamentally sound banks at a minimum price, but added: "This has to be adjusted upwards depending on the risk profile of each beneficiary bank."

Officials say one of the snagging points between the Commission and national governments is the price banks are made to pay for government help, noting the Commission has been pressing for more than the 6-9 percent rates recommended as reasonable by ECB experts.

Secondly, she said that schemes must include incentives for the state capital to be redeemed, once market conditions have returned to normality. Finally she said that safeguards were needed to limit distortions of competition.

"If the objective of recapitalization is lending to the real economy, I would therefore expect commitments to lend from the banks benefiting from State aid," she said.

Kroes also noted the Commission had proposed other measures, including allowing guarantees at a premium below the market price in order to unblock the lending by the banks.

(Reporting by Bate Felix and Mark John; editing by Dale Hudson)