July 9, 2012 / 10:42 AM / 7 years ago

Euro zone can help banks directly once supervisor set up

BRUSSELS (Reuters) - Direct recapitalization of euro zone banks will not require sovereign guarantees as soon as the bloc has established a new banking supervisory body, the European Commission said on Monday.

A senior euro zone official said on Friday that sovereign guarantees could only be dropped “in the very distant future.

“I would like to clarify that there will be no need for sovereign guarantees for banks being directly recapitalized by the ESM,” said Commission spokesman Simon O’Connor, referring to the bloc’s permanent rescue fund.

“The ESM will be able to decide by a regular decision once the single supervisory mechanism is in place to adopt an instrument that would allow for the direct recapitalization of banks.”

A bank supervisor could be operational sometime next year.

Reporting by Robin Emmott; editing by John O'Donnell

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