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European Commission approves extension of liquidity scheme in Hungary

The European Commission on Tuesday said it approved the extension of a Hungarian anti-crisis liquidity scheme for banks by six months until December 31, 2010.

The Commission said it “considered the extension of the Hungarian liquidity scheme to be in line with EU state aid rules, because it was proportionate, well targeted, limited in time and scope and included higher premiums for the provision of liquidity.” The extended scheme features higher premiums to be paid by the banks for the liquidity granted by the state.

The scheme, enacted in March 2009, was originally approved on January 14, 2010. The aim has been to provide non-subordinated, non-structured short-term loans to Hungarian financial institutions to enable them to maintain lending to the real economy in spite of the severe liquidity shortage.

The Commission has also approved the extension of similar bank support schemes in other EU members states.

One week earlier, the Commission approved a six-month extension until the end of the year of a Hungarian recapitalization scheme for credit institutions. The scheme was extended on the conditions that the fee charged by the government be raised and banks that rely heavily on the loan guarantees and recapitalization undergo a viability review. (MTI-Econews)