The European Commission will delay the arrival of tighter rules governing state aid for banks beyond the end of 2011 due to mounting turmoil in European financial markets, Joaquin Almunia, the commissioner in charge of competition policy, said Thursday.

The commission, the European Union's executive arm, sets rules that limit how much aid companies can receive from national governments, but it relaxed those rules for banks in the aftermath of the 2008 crisis to allow the industry to receive the enormous amount of government aid that kept the financial system afloat. Almunia had said he wanted to tighten the rules again, from the beginning of 2012.

But on Thursday, the commissioner said that he will propose a delay in the arrival of tighter rules.

"It would not be safe" to introduce the new rules in the current market climate, he said in a speech at the Eurofi conference here.

-By Matthew Dalton, Dow Jones Newswires; +32 (0)2 741 1487; Matthew.dalton@dowjones.com

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