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BRUSSELS: European Union regulators are scrutinising four EU countries' treatment of banks' deferred tax assets (DTAs) to see if they constitute potentially illegal state aid, the European Commission said on Tuesday.

The EU executive said it had contacted authorities in Spain, Italy, Portugal and Greece following requests from some lawmakers in the European Parliament and other parties about state guarantees on such assets.

A deferred tax asset is an asset used to reduce the amount of tax subsequently due, such as from a loss-making period, to a future period of profit when tax would normally be due.

Under globally agreed Basel III capital rules, banks will not able to include DTAs that rely on future profitability to demonstrate their ability to absorb losses. These assets will have to be deducted by 40 percent this year, rising to 100 percent from 2018.

Their treatment is significant because local accounting behaviour, such as allowing DTAs to be converted into tax credits, can boost banks' core capital and so help prop up a country's financial sector.

European Competition Commissioner Margrethe Vestager has authorised a letter be sent to each member state requesting information. The Commission said this did not amount to a formal investigation.

"To be clear, the process is at a very early stage. We cannot prejudge whether a formal investigation is needed or the outcome of the Commission's assessment of these measures," the EU regulator said.

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European Union studies four countries over banks' deferred tax assets

European Union flags flutter outside the EU Commission headquarters in Brussels February 2, 2015. REUTERS/Francois Lenoir

BRUSSELS (Reuters) - European Union regulators are scrutinising four EU countries' treatment of banks' deferred tax assets (DTAs) to see if they constitute potentially illegal state aid, the European Commission said on Tuesday.

The EU executive said it had contacted authorities in Spain, Italy, Portugal and Greece following requests from some lawmakers in the European Parliament and other parties about state guarantees on such assets.

A deferred tax asset is an asset used to reduce the amount of tax subsequently due, such as from a loss-making period, to a future period of profit when tax would normally be due.

Under globally agreed Basel III capital rules, banks will not able to include DTAs that rely on future profitability to demonstrate their ability to absorb losses. These assets will have to be deducted by 40 percent this year, rising to 100 percent from 2018.

Their treatment is significant because local accounting behaviour, such as allowing DTAs to be converted into tax credits, can boost banks' core capital and so help prop up a country's financial sector.

European Competition Commissioner Margrethe Vestager has authorised a letter be sent to each member state requesting information. The Commission said this did not amount to a formal investigation.

"To be clear, the process is at a very early stage. We cannot prejudge whether a formal investigation is needed or the outcome of the Commission's assessment of these measures," the EU regulator said.

(Reporting by Foo Yun Chee and Philip Blenkinsop; Editing by Adrian Croft and Mark Potter)

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EU looking into four countries' treatment of banks' deferred tax assets

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Greece opposes EU's sanctions on Russia, Tsipras tells Tass

Greece opposes European Union sanctions imposed against Russia over the conflict in Ukraine, Prime Minister Alexis Tsipras said, denouncing the approach as senseless and calling for a negotiated solution.

Greece has suffered from a Russian food import ban that President Vladimir Putin imposed in response to the sanctions, Tsipras said in an interview with state-run Russian news service Tass published on Tuesday. After his government was sworn in two months ago, Tsipras said that he told EU leaders that they couldnt assume he would support the penalties.

We disagree with sanctions, Tsipras told Tass. I see it as a road to nowhere.

Greece, Europes most-indebted state, is locked in negotiations with euro-area countries and the International Monetary Fund over the terms of its 240 billion-euro ($258 billion) rescue. The standoff, which has left Greece dependent upon European Central Bank loans, risks leading to a default within weeks and the nations potential exit from the euro area.

After a Syriza-led government assumed power in Greece in late January, Tsipras said he called EU President Donald Tusk and Federica Mogherini, the 28-nation blocs foreign-policy chief, to tell them that they had to seek the new cabinets position before making decisions.

The new European security architecture must include Russia, Tsipras said. Greece, as an EU member state, can be a link, a bridge between the West and Russia.

The need for a unanimous EU vote to renew the trade restrictions gives skeptics like Greece leverage over the UK, Poland and the Baltic states, the leading advocates for maintaining the pressure on Russia. At a March meeting in Brussels, EU leaders made a pledge to extend sanctions until the end of the year while leaving open the possibility that the trade and investment curbs might not be renewed when they expire in July.

Postponing the final decision gave Putin time to cultivate growing opposition to sanctions among the leaders of some countries in central and southern Europe.

Putin, whose relations with EU leaders have worsened to a post-Cold War low because of the conflict in Ukraine, in February invited Tsipras to Russia. The Greek premier plans to visit Moscow on April 8 and will return for World War II victory celebrations in early May.

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Greece opposes EU's sanctions on Russia, Tsipras tells Tass

The development of a strong partnership between the United Nations and the European Union (EU) is increasingly critical as global crises intensify in complexity and multiply in scope, Secretary-General Ban Ki-moon declared on Monday.

"In recent years, the United Nations and the EU have made significant strides in working together for peace and security around the world," he continued.

He added, "But we still encounter difficulties in mobilizing early action before a situation visibly deteriorates."

As a solution, Ban explained, rapid and effective political engagement remained "the single most important element for success" in preventive diplomacy efforts as the two bodies continue to tackle a range of international challenges together.

The continent of Africa, in fact, offered the best examples of the comprehensive and complementary nature of the UN - EU partnership, he said.

In Mali, for instance, the UN Multidimensional Integrated Stabilization Mission (MINUSMA) was working "very closely" with the EU and "benefitting from the uniformed contributions of 13 European Member States."

Meanwhile, in the Central African Republic, MINUSCA, as the UN mission there is known, has been working "effectively" with European forces, putting it "on track for a seamless handover by mid-March."

The experience, he added, showed the "tremendous potential for EU operations to deploy as bridging mechanisms to UN missions."

"Given the magnitude of the challenges we face, it is our responsibility to continue exploring scenarios where we can put our combined efforts to use," Ban continued.

In addition to the breadth of peace and security crises that had converged UN and EU attention, the uptick in global terrorism also remained a point of concern which required "a global and holistic response that upholds human rights and does not exacerbate the problem."

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UN-EU strategic partnership key as world faces multiple crises: Ban