Public funding of failing banks in the European Union (LBF vol. 19) 2020/6.3.1:6.3.1 The introduction of the term ‘resolution aid’

Public funding of failing banks in the European Union (LBF vol. 19) 2020/6.3.1

6.3.1 The introduction of the term ‘resolution aid’

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With the introduction of the resolution framework, the term ‘resolution aid’ was also introduced by the Commission in its State aid decisions. This term is not included in the 2013 Banking Communication.

The concept of resolution aid was actually already mentioned by the Commission prior to the introduction of the resolution framework, namely in relation to the assessment of aid involved in the application of national resolution regimes. For example, T Bank and Proton Bank received ‘resolution aid’ when put in resolution on the basis of the Greek resolution regime.1

The Commission does not explain in its State aid decisions when an aid measure qualifies as resolution aid. Its decisions however show that:

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the concept of resolution aid covers all aid provided in relation to the application of a resolution tool (i.e. the sale of business tool, bridge bank tool, asset separation tool, or bail-in tool);

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the beneficiary of resolution aid can be the bank in resolution, but, for example, also the bridge bank created;

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resolution aid can be granted by Member States directly, but also by deposit guarantee schemes or the national resolution funds; and resolution aid can be granted in different forms, e.g. in the form of capital injections, impaired asset measures, guarantees, or liquidity.

It is not clear how the concept of resolution aid fits within the concepts of rescue, restructuring and liquidation aid. It seems, based on the decisions from the Commission, that resolution aid can have the form of all three types of aid, as will be seen in section 6.4.4.

It may benefit the transparency of the State aid regime for the banking sector, if resolution aid is distinguished as a separate type of State aid with its own assessment framework. See also section 8.6.3.

Supranational EPFS can also be a form of resolution aid, if it qualifies as State aid. As discussed in section 5.2.1.1, the qualification of supranational EPFS as State aid is however of less relevance, since the specific frameworks set out in the SRMR and the ESM DRI Guideline subject the use of the SRF and the ESM DRI to the State aid rules. It seems logical that the Commission assesses the use of the SRF and the ESM DRI along the same lines as set out for resolution aid in the next section, taking into account that the SRF and ESM DRI can only be used in resolution.

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