Public funding of failing banks in the European Union (LBF vol. 19) 2020/2.6.1.2:2.6.1.2 Member State support

Public funding of failing banks in the European Union (LBF vol. 19) 2020/2.6.1.2

2.6.1.2 Member State support

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

Another – since the GFC more controversial – funding instrument is Member State support. This can e.g. be granted in the form of loans, guarantees or capital injections. Not all funding by or through Member States qualifies as State aid that requires the authorisation of the Commission pursuant to Articles 107-108 TFEU. In order for a measure to qualify as State aid, it should be an intervention by a Member State or through Member State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods and that affects trade between Member States.1 If a Member State provides funding to banks in financial difficulties in line with market conditions, this does not qualify as State aid and no prior authorisation from the Commission is required. This is discussed in more detail in section 3.3.2.

For example, the Portuguese recapitalisation of the fully state-owned bank Caixa Geral de Depósitos in March 2017 was carried out on market terms and therefore did not involve State aid in favour of the bank.2 Another example of a market-conform intervention in favour of the banking sector is the Hungarian asset management company MARK to which solvent financial institutions in Hungary can, on a voluntary basis, sell non-performing loans at market price.3

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