11.2.2.2 Possible explanations

The table in Annex VII shows that the replacement of the senior management is not mentioned in every decision. Indeed, there are 67 decisions (of in total 90 cases) that do not mention whether the senior management of the beneficiary bank has been replaced. It is striking that in so many decisions, the Commission did not explicitly take into account the relevance of management changes. How can this be explained?

In essence, there are four possible explanations for the omission to mention a relevant characteristic in certain decisions. In the first place, some relevant characteristics are not applicable in every context. However, regarding the current relevant characteristic, this explanation can be discarded, since the change of management is applicable in every context.

In the second place, the State aid control policy of the Commission can evolve. This possible explanation can also be discarded. The relevance of this characteristic was not toned down in later Communications. On the contrary, the 2013 Banking Communication really emphasised the relevance of management changes.1

In the third place, the omission to mention the relevant characteristic could be due to an inconsistency. This is the case when the Commission does not mention the presence of a relevant characteristic in the decision, even though the relevant characteristic is present in the case. In the fourth place, the omission can be explained by the simple fact that the relevant characteristic was not present in the case at hand. This could – but does not necessarily have to – amount to an inconsistency. With respect to the third and fourth possible explanation, it is important to understand the difference between, on the one hand, the situation that the Commission does not mention if a relevant characteristic is present in a certain case, and on the other hand, the situation that the relevant characteristic is not present in the case. This is illustrated by the following matrix.

“Situation P/M” and “situation A/M” fall under the scope of section 11.2.3 of the current chapter. Indeed, that section discusses the decisions that mention the relevant characteristic. The current section focusses on the decisions in which the relevant characteristic is not mentioned (i.e. (“situation P/O” and “situation A/O”).

This situation amounts to an inconsistency. In several cases, the fact that the senior management was replaced, was noted positively by the Commission. In these cases, the change of management was treated as relevant characteristic that positively contributes to the viability-assessment. If there would be cases in which the management was replaced, but in which this change of management was not noted positively by the Commission, then this would mean that the change of management was not treated as a relevant characteristic in those cases. Clearly, this would be a violation of the principle of equal treatment.

This situation is more nuanced. Two remarks are in order. First, it should be pointed out that the absence of a relevant characteristic in a case can be justified. For instance, as will be explained below, a replacement of the bank’s senior management is not always required.

Second, the principle of equal treatment requires that the Commission assesses in each and every case whether a relevant characteristic is present (unless the characteristic is not applicable in that context or no longer relevant because of an evolving policy). The Commission should thus always assess whether the relevant characteristic (if applicable and still relevant) is present in the case at hand. Furthermore, this assessment should be expressed in the decision. In other words: the Commission should mention whether the relevant characteristic is present. Not mentioning the absence of a relevant characteristic can only be justified when two conditions are fulfilled: firstly, there is a justification for the absence of the relevant characteristic; and secondly, this justification of the absence of the relevant characteristic does not need to be explained in the decision and it should be obvious that the omission to mention the relevant characteristic means that the relevant characteristic is not present. Are these two conditions met with respect to the current relevant characteristic?

In that regard, it is worthwhile to recall point 37 of the 2013 Banking Communication:

Thus, the necessity of a management change depends on several relevant aspects. First of all, the fact that recourse to State aid could have reasonably been averted through appropriate and timely management action is a relevant aspect. Another element that can be inferred from point 37 is “normally” (in the phrase “should normally replace the CEO”). The use of the term “normally” implies that there is room for exceptions. This, in turn, raises the question in which circumstances such an exception is justified. A last element that can be inferred from point 37 is “if appropriate” (in the phrase “as well as other board members if appropriate”). Also here, the question can be raised under which circumstances a replacement of other board members is “appropriate”.

The decisional practice (based on the 2013 Banking Communication) does not provide answers to these questions. This is surprising, because one would expect that the elements of point 37 of the 2013 Banking Communication would be applied in the decisions. For instance, one would expect that in cases in which the senior management was not replaced, the Commission would refer to the circumstances that justify why the CEO (and other board members) should not be replaced. It can be observed that this is not the case. Most of the decisions that are based on the 2013 Banking Communication are silent on point 37 of that Communication. Similarly, decisions taken before the introduction of the 2013 Banking Communication do not provide a justification why the senior management was not replaced (provided that that is the case).

To conclude, it can only be observed that there are some decisions that do not mention whether there has been a replacement of the bank’s senior management. It cannot be observed whether these decisions correspond to “situation P/O” or “situation A/O”. However, as discussed above, either situation would amount to an inconsistency.