Einde inhoudsopgave
State aid to banks (IVOR nr. 109) 2018/9.8.3
9.8.3 Remuneration of an asset guarantee
mr. drs. R.E. van Lambalgen, datum 01-12-2017
- Datum
01-12-2017
- Auteur
mr. drs. R.E. van Lambalgen
- JCDI
JCDI:ADS589411:1
- Vakgebied(en)
Financieel recht / Europees financieel recht
Mededingingsrecht / EU-mededingingsrecht
Voetnoten
Voetnoten
In one of its decisions (Parex banka, C26/2009, 15 September 2010, para. 124), the Commission noted that “The objective of requiring remuneration (including, where applicable, a claw-back) is two-fold: to ensure burden-sharing and to ensure a level playing field (i.e. minimize competition distortions).
Annex IV, para. II. of the IAC.
Footnote 1 relating to point 21 of the IAC continues by pointing out that the State generally incurs a larger risk in the case of asset relief measures, related to a specific portfolio of impaired assets, with no direct contribution of other bank’s income generating activities and funds, and beyond its possible stake into the bank. In view of the larger down-side and more limited up-side remuneration for asset relief should normally be higher than for capital injections.
NordLB, SA.34381, 25 July 2012, footnote 70.
It should be recalled that the remuneration for the risk shield for BayernLB included a claw-back payment (as described in the previous subsection). As result, the remuneration was higher than 6,25%.
BayernLB, SA.28487, 5 February 2013, para. 152.
Landesbank Baden-Württemberg (LBBW), C17/2009, 15 December 2009, para. 65.
UNNIM Banc, SA.33733, 25 July 2012, para. 137.
In exchange for an asset guarantee, the beneficiary bank has to pay a guarantee fee. This fee is the remuneration for the State aid. As was outlined in section 8.6, State aid measures should be adequately remunerated.1 In that regard, the IAC sets out that impaired asset measures remuneration should be ‘inspired’ by the remuneration that would have been required for recapitalisation measures with equivalent effects on regulatory capital.2 The explanation can be found in footnote 1 relating to point 21 of the IAC: “Asset relief measures are somewhat comparable to capital injections insofar as they provide a loss absorption mechanism and have a regulatory capital effect”.3 There are thus two key elements: the capital relief effect and the remuneration rate.
The capital relief effect is nicely explained in the decision on KBC. The State Protection Measure reduced the RWA of KBC by EUR 6,3 billion. This amounted to a capital relief effect of EUR 504 million (i.e. 8% of 6,3 billion). Using a rate of 7%, such a capital relief effect would cost EUR 35 million (i.e. 7% of 504 million).
As regards the remuneration rate, the Commission explained in its decision on NordLB that it would accept a remuneration level of 7% on the capital relief effect:
“In an asset guarantee scenario, it would have to be taken into consideration that in contrast to recapitalisation measures, no liquidity is provided. Using that guidance, the Commission has determined that the base remuneration for a CT1-targeted measure ought to be 10%. Because of the relatively good quality of the underlying portfolio, no additional capital remuneration would have to be foreseen. In order to distinguish between asset transfers and asset guarantees (where in the latter no liquidity is foreseen), a long-term interest rate could be deducted. The Commission’s decisional practice has put that interest rate deduction at 3%”.4
BayernLB paid 6,25% on the capital relief effect.5 The Commission considered this to be in line with the levels approved in earlier decisions (such as LBBW).6 In the decision on LBBW, the rate of 6,25% was explained as follows:
“In view of the equity capital relief effect the compensation should how-ever be reduced by 0,75% to 6,25% p.a. At least 50% of regulatory equity capital must consist of tier 1 capital. According to the current legal provisions the tier 2 capital must not exceed 100% of the tier 1 capital. This means that the equity capital can consist 50% of tier 1 capital and 50% of tier 2 capital in order to meet the regulatory requirements. As according to the Recommendation of the European Central Bank of 20 November 2008 on recapitalisation measures a difference of 1,5% exists between the price of tier 1 capital and tier 2 capital, a reduction of 150 basis points is appropriate. If according to the Recapitalisation Communication 7% can be regarded as appropriate compensation for tier 1 capital without the supply of liquidity, the tier 2 capital should then be compensated for at a rate of 5,5%. The average of both rates is 6,25%”.7
Most cases involving an asset guarantee complied with the remuneration-criterion of the IAC. By contrast, in a few cases, the guarantee fee was not adequate. For instance, in the decision on UNNIM Banc, the Commission concluded that the APS measure had not been remunerated adequately. However, the Commission noted that it is possible to accept a lower level of remuneration if it is compensated for by a thorough and far-reaching restructuring.8 The principle that non-compliance with one of the IAC-criteria has to be compensated for by far-reaching restructuring was touched upon in the previous subsection and will be explored further in section 9.10.