EU regulators extended rules allowing EU governments to bail out troubled banks until market conditions improve, citing the sovereign debt crisis and banks' resulting funding difficulties for Thursday's move.
The European Commission would continue applying looser rules to make it easier for governments to help struggling banks as the 27-country EU grapples with a credit squeeze, a capital shortfall and the sovereign debt crisis.
My intention had been to put an end to the crisis regime... this month, EU Competition Commissioner Joaquin Almunia told a news conference, pointing out the rules had already been extended by 12 months until the end of 2011.
But since last summer, I was obliged to change my mind, given the stronger tensions in sovereign debt markets and the transmission of those tensions to interbank markets and to the funding conditions for banks.
The guidelines were introduced during the credit crisis in 2008 for lenders that received a capital injection or transferred loans into so-called bad banks.
Under some revisions to the rules, valid from January 1, 2012, the fees paid by banks for guarantees on their liabilities will reflect their intrinsic risk rather than the country's risk or market conditions, the Commission said.
There will also be a minimum fee for such guarantees, which will include guarantees for longer term debt between one to five years and for seven-year covered bonds.
Banks were required to restructure their businesses in return for regulatory approval for their bailouts. Lenders that have been recapitalised or benefited with other support will still need to restructure.
Banks that are heavy users of state guarantees will need to show they are viable.
Almunia said he would have preferred a mutualised or pooled system of EU state guarantees for banks seeking to borrow.
But the bloc's finance ministers decided on Wednesday to leave it to individual EU member states to back their banks alone, a move that will do little to lift confidence in struggling financial institutions based in countries that are too weak to help them.
(Reporting by Foo Yun Chee and John O'Donnell; editing by Rex Merrifield)