13.6.3.3 Limited possibilities for downsizing

The 2015 restructuring plans of Eurobank, Alpha Bank, Pireaus Bank and National Bank of Greece (NBG) did not envisage any downsizing of the loans to households and businesses in Greece. In its decisions on these banks, the Commission noted that these four large banks accounted for more than 95% of the market and that “it would have adverse macro-economic effects to accept commitments from the Member State concerned regarding each of them to reduce their lending to the Greek economy”.1 The Commission therefore exceptionally accepted a lower degree of downsizing. These cases illustrate that the Commission takes into account that too much downsizing of the beneficiary bank may produce negative effects on the economy of the Member State. The effect on the real economy can thus be used as a justification for a lower degree of downsizing.

Another case in which the Commission took into account the effects of the restructuring on the real economy, was KBC. Pursuant to its restructuring plan, KBC would not withdraw from its CEE-R markets and Ireland. The Commission approved this, because “it could be damaging to financial stability in these countries and lending to the real economy if KBC was required to further reduce its presence in the region”.2 The fact that further restructuring could be damaging to financial stability could thus be a reason for the Commission not to require further restructuring.

It should be stressed that taking into account the effect of downsizing on the real economy can also result in the conclusion that there is absolutely no reason to lower the downsizing requirement. For instance, in the decision on Sparkasse KolnBonn, the Commission noted that the reduction of the bank’s presence in certain customer segments affected mainly large entities and that those entities generally have access to the capital market. The Commission therefore considered “the risk of negative impact on the real economy of this measure to be negligible”.3

In my opinion, the Commission should be applauded for taking into account the fact that too much downsizing of the bank might produce negative effects on the economy of the Member State. Indeed, the very purpose of State aid to banks is to preserve financial stability. Requiring too much downsizing might contravene that objective.