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Immediate responses to financial turmoil

Council Conclusions - Ecofin Council of 7 October 2008

In the current troubled situation in the financial sector, and building
on our Heads of State and Governments' declaration of 6 October, we
agree that the priority is to restore confidence and proper functioning
of the financial sector.

We have agreed to support systemic financial institutions. We all commit
to take all

necessary measures to enhance the soundness and stability of our banking
system and to protect the deposits of individual savers. EU authorities
and Member States will remain in daily contact through the EFC in order
to share information and ensure a comprehensive and coordinated response
to the current situation and our continued effort to work on our common
principles, ahead of the European Council.

We welcome the actions taken by the ECB and the national central banks
since the

beginning of the turmoil. The liquidity of the financial system shall be
ensured by all

authorities in order to preserve confidence and stability.

We reaffirm our call on financial institutions in Europe to achieve full
transparency and we will closely monitor the progress achieved in this
regard.

We agree to coordinate closely in our actions and to take into
consideration potential crossborder effects of national decisions. We
agree that public intervention has to be decided at national level in a
coordinated framework.

To protect the depositors' interests and the stability of the system, we
stress the

appropriateness of an approach including, among other means,
recapitalisation of

vulnerable systemically relevant financial institutions. We are prepared
to act accordingly in this context.

We agree on EU common principles so as to guide our action:

Interventions should be timely and the support should in principle be
temporary;

we will be watchful regarding the interests of taxpayers;

existing shareholders should bear the due consequences of the
intervention;

the government should be in a position to bring about a change of
management;

the management should not retain undue benefits – governments may have
inter alia the power to intervene in remuneration;

legitimate interest of competitors must be protected, in particular
through the state aid rules;

negative spillover effects should be avoided.

We will ensure rapid cooperation within the EU, with reference to the
Memorandum of Understanding, in particular as regards cross-border
financial institutions.

We underline the necessity of avoiding any distortion of treatment
between US and

European banks due to differences in accounting rules. We take note of
the flexibility in the application of mark to market valuation under
IFRS as outlined in recent guidance from the IASB. Ecofin strongly
recommends that supervisors and auditors in the EU apply this new
guidance immediately. We also consider that the issue of asset
reclassification must be resolved quickly. To this end, we urge the IASB
and the FASB to work together on this issue and welcome the readiness of
the Commission to bring forward appropriate measures as soon as
possible. We expect this issue to be solved by the end of the month,
with the objective to implement as of the third quarter, in accordance
with the relevant procedures.

We welcome the Commission's continued commitment to act quickly and
apply flexibility in state aid decisions, within the framework of the
single market and state aid regime. The Council welcomes the
Commission's commitment to shortly issue guidance setting out the broad
framework within which the state aid compatibility of recapitalisation
and guarantee schemes, and cases of application of such schemes, could
be rapidly assessed.

The application of the Stability and Growth Pact should also reflect the
current exceptional circumstances, in accordance with the provisions of
the Pact.

Several Member States have recently increased the level of coverage of
national deposit guarantee schemes. We agreed that all Member States
would, for an initial period of at least one year, provide deposit
guarantee protection for individuals for an amount of at least 50 000
euros, acknowledging that many Member States determine to raise their
minimum to 100 000 euros. We welcome the intention of the Commission to
bring forward urgently an appropriate proposal to promote convergence of
deposit guarantee schemes.

This short term strategy is fully consistent with the framework
established by the Ecofin since October 2007, which aims at fostering
transparency and responsibility within the financial sector, in
coordination with our partners, notably within the FSF.