3.4.1.5 The First Prolongation Communication

The four Communications described in the previous subsections constitute the Crisis Framework. One of the most essential characteristics of the Crisis Framework is that – due to the exceptional nature of the crisis – Article 107(3) (b) TFEU was chosen as a legal basis. This provision allows State aid ‘to remedy a serious disturbance in the economy of a Member State’. The Banking Communication stresses that recourse to Article 107(3)(b) TFEU is only possible as long as the crisis situation justifies its application.1 This highlights the temporary nature of the crisis framework. The Restructuring Communication even had a specified expiry date. It was due to expire on 31 December 2010.2

On 7 December 2010, the Commission adopted the (First) Prolongation Communication. This Prolongation Communication recognised that there were still tensions in the financial markets and that the economic outlook was uncertain. In addition, the Prolongation Communication recognised the high level of interconnectedness and interdependence within the financial sector.3 This justified the maintaining of the possibility for Member States to have recourse to crisis-related support measures on the basis of Article 107(3)(b) TFEU. Thus, the Prolongation Communication provided that the Banking Communication, the Recapitalisation Communication and the Impaired Assets Communication would remain in place.4 Furthermore, the Prolongation Communication provides that the temporal scope of the Restructuring Communication should be extended to 31 December 2011.5

Apart from extending the temporal scope of the Crisis Framework, the Prolongation Communication also introduced some changes to the Crisis Framework. Thus far, the Crisis Communications made a distinction between fundamentally sound and distressed banks.6 The Prolongation Communication removed this distinction.7 The financial situation had improved slightly, so the Commission held that banks should face fewer difficulties in raising capital on the market.8 The distinction was mainly important for the question whether the bank had to submit a restructuring plan. The removal of the distinction means that as of 1 January 2011, every bank (both fundamentally sound and distressed banks) which benefit from a new recapitalisation or an impaired asset measure should submit a restructuring plan.9 The requirement to submit a restructuring plan still only applies to structural measures (i.e. recapitalisation and asset relief) and not to aid in the form of guarantees.10