3.5.6.1 Restructuring aid

As set out in section 3.4.3.2, once a restructuring plan has been established and is being implemented, all further aid will be considered as restructuring aid. This includes aid already temporarily authorised by the Commission as rescue aid. Taking into account the more structural nature of restructuring aid, this will normally have the form of recapitalisation and/or asset relief measures. Liquidity support or funding guarantees can however also be granted in the form of restructuring aid. For restructuring aid to be approved by the Commission, certain specific assessment criteria have been set in the 2013 Banking Communication; these are discussed below.

Criterion 1: Restoring long-term viability

The Member State involved should submit a restructuring plan to the Commission in order to demonstrate how the bank will restore its long-term viability.1 The aim of restructuring aid should always be restoring the long-term viability of the bank. In the event that the bank cannot be restored to viability, it should be wound up in an orderly fashion. In that case, the bank has no access to restructuring aid, but it may have access to liquidation aid.2 Long-term viability is achieved when a bank is able to cover all its costs including depreciation and financial charges and provide an appropriate return on equity, taking into account the risk profile of the bank.3 Long-term viability therefore requires that any State aid received is either redeemed over time, as anticipated at the time the aid is granted, or is remunerated according to normal market conditions, thereby ensuring that any form of additional State aid is terminated.4

Restructuring should be implemented as soon as possible and should not last more than five years to be effective and allow for a credible return to viability of the restructured bank.5 Provision of additional aid during the restructuring period is an option if justified by reasons of financial stability.6 This will however be subject to individual ex ante notification and any such further aid will be taken into account in the Commission’s final decision.7

Criterion 2: Own contribution and burden-sharing

In order to limit distortions of competition and address moral hazard, aid should be limited to the minimum necessary, and an appropriate own contribution to restructuring costs should be provided by the aid beneficiary. The bank and its capital holders should contribute to the restructuring as much as possible with their own resources. This is necessary to ensure that rescued banks bear adequate responsibility for the consequences of their past behaviour and to create appropriate incentives for their future behaviour.8 In order to meet the burden-sharing principle, (a) capital raising measures should be taken, (b) shareholders and subordinated debt holders should contribute to a maximum to the cost of intervention, and (c) the beneficiary bank should pay an adequate remuneration.9 These measures are included in the capital raising plan which has to be submitted before or as part of the submission of a restructuring plan. The capital raising plan should achieve that the restructuring aid only solves the capital shortfall that remains after the implementation of this plan.10

Criterion 3: Measures to limit the distortion of competition

Whilst State aid can support financial stability in times of systemic crisis, with wider positive spillovers, it can nevertheless create distortions of competition in various ways. The Commission therefore, in its assessment of restructuring aid, includes the need to implement measures to limit the distortion of competition. Possible measures to limit the distortion of competition should be included in the restructuring plan.