12.9.2 Implications for the Member States

There may be instances in which Member States wish to avoid burden-sharing by certain investors. Italy is the prime example in that regard. The Italian bank Monte dei Paschi di Siena (MPS) experienced serious difficulties. A resolution of MPS would likely entail bail-in of junior and senior creditors.1 Since many creditors of Italian banks were families and small investors rather than professional investors, Italy wanted to avoid a bail-in of these investors. The wish to avoid a bail-in is driven by political reasons. In that regard, many newspapers refer to the pensioner who committed suicide after he had lost most of his savings, because the subordinated debt of Banca Etruria was ‘bailed in’.2

Can Member States avoid burden-sharing by certain investors? State aid to an ailing bank will usually trigger the resolution of that bank. Consequently, the State aid control framework and the recovery and resolution framework both apply to these cases. Since the BRRD requires a bail-in (of at least 8%), the burden-sharing requirement of the 2013 Banking Communication is automatically fulfilled.

However, as explained in Chapter 4 of this PhD-study, the BRRD does not apply to all bank State aid cases. Indeed, there are three exceptions in which State aid does not trigger the resolution of the beneficiary bank. Nonetheless, the State aid control framework still applies to these cases. Under the State aid control framework (and in particular under the 2013 Banking Communication) burden- sharing by shareholders and subordinated creditors is – in principle – always required. The words “in principle” indicate that there is room for exceptions to the burden-sharing requirement. Indeed, point 45 the 2013 Banking Communication provides that in exceptional circumstances, no burden-sharing measure is required by the Commission.

In addition, as the CJEU held in case C-526/14 (Kotnik), “the adoption of a communication such as the Banking Communication does not […] relieve the Commission of its obligation to examine the specific exceptional circumstances relied on by a Member State, in a particular case, for the purpose of requesting the direct application of Article 107(3)(b) TFEU, and to provide reasons for its refusal to grant such a request”.3 As the AG already rightfully pointed out in his Opinion in case C-526/14 (Kotnik), burden-sharing does not appear in the wording of Article 107(3)(b) TFEU.4 Thus, when State aid is directly assessed under Art. 107(3) TFEU (and thus outside the 2013 Banking Communication), burden-sharing might be avoided. While this may be theoretically true, it should be recalled that since the adoption of the Crisis Framework, all bank State aid cases were assessed on the basis of the Crisis Communications. In my view, the Commission is not likely to assess bank State aid outside the 2013 Banking Communication.5 Thus, in my opinion, the 2013 Banking Communication should be considered as the decisive assessment framework.

To conclude, Member States cannot easily avoid the burden-sharing requirement.