AFP - EU finance ministers said Tuesday they would coordinate their approach to "toxic assets" held by banks in order to promote lending, while agreeing there was no one-size-fits-all solution.
The European Commission was tasked with drafting concrete proposals in two weeks or so, but it is already agreed that individual member states may decide whether to set up a "bad bank" to assume the impaired assets, offer a government guarantee on them to boost the banks or some hybrid scheme.
The commission, in a discussion paper, urged all nations to avoid "negative spillovers" to fellow member states or a "subsidy race" that put further pressure on public coffers.
"Each country has to do what it thinks is appropriate," said British finance minister Alistair Darling.
"What we want to do is to ensure that countries take whatever action is right for them together. The effect of doing that will have a far greater effect than if we just do these things on our own."
Seeking to avoid a rash of unilateral protectionist measures -- Britain has already insured its banks' bad assets -- the ministers called for a coordinated approach to ensure a level playing field and avoid distortions.
European Union Economic and Monetary Policy Affairs Commissioner Joaquin Almunia said all 27 ministers had agreed on "the need to combine their concerns regarding financial stability, priority number one, with the need to preserve a level playing field so as to avoid financial protectionism and the establishment of internal borders in our single market."
He declined to put an amount on the toxic assets involved, saying he was concentrating more on dealing with them than with counting them.
In a joint statement, the finance ministers said the priority was to "fully restore the functioning of credit channels" in order to get their economies moving again.
It was also agreed that banks benefiting from a toxic asset scheme should keep a portion of the risk.
There will also need to be a definition of what constitutes a toxic or impaired asset and an independent and transparent way of valuing them.
Freeing banks of those impaired assets, including the kind of sub-prime loans that started the financial malaise in the United States, would help free money for lending and restore the banking sector to some kind of normality because banks would not have to hold back funds to cover massive potential losses.
Swedish Finance Minister Anders Borg said it was "very important to point out that we are trying to solve a crisis and that is about doing what is right, not being nice to banks."
The EU ministers also stressed that their moves would be more effective in concert with the United States.
President Barack Obama vowed Monday to work with distressed US banks to "clean up" their balance sheets and unclog blocked credit lines, as his treasury team readied a new bailout plan.
Obama previewed Treasury Secretary Timothy Geithner's announcement Tuesday of how the administration intends to spend the remaining 350 billion dollars of a bailout program for the banking industry.