State aid to banks (IVOR nr. 109) 2018/7.6.4:7.6.4 Decisions taken before the adoption of the 2008 Banking Communication

State aid to banks (IVOR nr. 109) 2018/7.6.4

7.6.4 Decisions taken before the adoption of the 2008 Banking Communication

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Several bank State aid decisions were taken before the introduction of the Crisis Framework: Roskilde Bank (31 July 2008), Northern Rock (5 December 2007), West LB (30 April 2008), Sachsen LB (4 June 2008), Bradford&Bingley (1 October 2008) and IKB (21 October 2008). Since these decisions were taken before the Commission accepted Article 87(3)(b) EC as legal basis, the compatibility of the aid measures was assessed on the basis of Article 87(3)(c) EC.1 Interestingly, in these decisions, the Commission analysed whether Article 87(3)(b) EC could be used as legal basis. It concluded, however, that this was not possible. For instance, in the Opening decision on WestLB of 30 April 2008, the Commission held that it had found no grounds for compatibility of the measures on the basis of Article 87(3)(b) EC.

Interestingly, the Restructuring decision in the case of WestLB was taken on 12 May 2009, i.e. after the introduction of the Crisis Framework. Consequently, the legal basis was Article 87(3)(b) instead of (c). The Commission justified this change as follows:

“In the opening decision the Commission declared that Article 87(3)(c) EC is the legal basis for the compatibility assessment of the aid measure in question. The Commission also analysed whether the aid measure should also be assessed on the basis of Article 87(3)(b) EC. Art. 87(3)(b) EC provides that aid to remedy serious disturbance in the economy of a Member State may be considered to be compatible with the common market. The Commission pointed out that at the time when the aid measure to WestLB was granted the crisis on the subprime market had not yet lead to a serious disturbance in the German economy in the meaning of Article 87(3)(b). Furthermore the Commission had not received evidence from the German authorities demonstrating that not granting aid to WestLB would have led to such serious disturbance.

In the meantime the Commission has acknowledged in its three Communications and in its approval of the German Rescue package that there is a threat of serious disturbance in the German economy and that measures supporting banks are apt to remedy serious disturbance in the German economy. Therefore the legal basis for the assessment of the aid measure should be Article 87(3)(b) EC.”

Does this change of approach violate the principle of equal treatment? It can be argued that cases before the adoption of the Banking Communication and cases after the adoption of the Banking Communication are treated differently by the Commission. However, as discussed in section 6.7.2, I take the view that the principle of equal treatment does not preclude the possibility of a policy change, provided that this policy change is justified and explained. In that regard, it should be recalled that in the 2008 Banking Communication, the Commission justified its choice for Article 87(3)(b) EC as legal basis. Moreover, the abovementioned recital from the decision on WestLB illustrates that the Commission took some effort in explaining the policy change. For these reasons, I am of the opinion that the change of legal basis does not amount to an inconsistency.

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