6.6.3.1 Lack of coherence between State aid regime and resolution framework

Both the State aid regime for the banking sector and the resolution framework set rules in respect of the award of State aid, while these are not always aligned. An example, is the application of the PONV conversion power in case of the award of precautionary guarantees.1 In cases where there is a lack of coherence, the question arises how the State aid regime and the resolution framework relate. Does one take precedence over the other, or are they equal? This question can be answered along different lines. One could, for example, take temporal aspects into account, resulting from the fact that the State aid regime precedes the resolution framework. One could also look at the hierarchy of norms instituted by the Lisbon Treaty, according to which the TFEU and TEU sit in the first tier; the second tier is formed by the general principles of law and regulations, directives, decisions, delegated acts, and implementing acts constitute the third tier.2 It is, however, in the author’s view, too straightforward to establish a hierarchical relationship between the State aid regime and the resolution framework on this basis.

The resolution framework provides that Member States and national resolution authorities should comply with the Union State aid framework, where applicable.3 It also provides that the SRB should act in compliance with Union law and the decisions taken by the Commission concerning the compatibility of the use of aid with the internal market.4 This indicates that the resolution framework acknowledges the priority of the State aid regime for the banking sector. In addition, outside of resolution, the State aid rules apply.5 The 2013 Banking Communication, on the other hand, intends to help a smooth passage to the resolution framework.6 Moreover, section 6.3.2 discussed that the Commission, in its State aid assessment, includes whether aid measures granted to the banking sector violate ‘intrinsically linked provisions of the BRRD and SRMR’, since the Commission’s assessment of State aid awards may never produce a result which is contrary to the specific provisions of the EU Treaties.

As a result, both the State aid regime for the banking sector and the resolution framework seem to start from the premise that the rules set out therein should be mutually acknowledged. Although there is no case-law – yet – on the hierarchical relationship between the State aid regime for the banking sector and the resolution framework, it is settled case-law that the provisions relating to the free movement of goods and those relating to State aid have a common purpose, namely to ensure the free movement of goods between Member States under normal conditions of competition,7 as Articles 107 and 108 TFEU may in no case be used to frustrate the rules of the TFEU on the free movement of goods.8 On the basis of this case-law, Advocate-General Wathelet took the view in the case of „ZPT“ AD v Narodno sabranie na Republika Bulgaria and Others that the TFEU does not establish a hierarchy between its rules prohibiting quantitative restrictions and on State aid. He consequently stated that national measures or measures adopted by the institutions of the EU must be consistent with both the rules of the TFEU on the prohibition of quantitative restrictions and the rules on State aid.9

The same line could arguably be followed in relation to the hierarchical relationship between the State aid regime for the banking sector and the resolution framework. After all, the resolution framework is based on Article 114 TFEU and therefore has, as its object, the establishment and functioning of the internal market, ensuring the free movement of banking services. The outcome that there is no hierarchy between the State aid regime for the banking sector and the resolution framework, and that measures adopted by Member States and EU institutions should be consistent with both rules of the State aid regime and the resolution framework, seems to be in line with the approach taken by the Commission in its State aid decisions. This means that if there is any inconsistency between these rules, either the State aid regime or the resolution framework should be amended in order to align them. In the example of precautionary guarantees and the exercise of the PONV conversion power, it is the author’s view that the resolution framework should be amended in order to ensure that the use of precautionary guarantees is no trigger for the exercise of the PONV conversion power.

Finally, although no inconsistency, it should be practically considered that the resolution framework places considerable constraints on the application of the State aid rules in respect of timing. An example is the valuation of impaired assets in case the asset separation tool is applied. Ex ante valuation of impaired asset measures may not be possible in that case. This has forced the Commission to approve liquidation aid on a temporary basis, although the 2013 Banking Communication does not provide for this situation.10 In this case, the State aid regime for the banking sector may have to be amended to cater for this possibility. This brings us to the next topic.