Public funding of failing banks in the European Union (LBF vol. 19) 2020/6.4.7.1:6.4.7.1 Resolution aid ad hoc

Public funding of failing banks in the European Union (LBF vol. 19) 2020/6.4.7.1

6.4.7.1 Resolution aid ad hoc

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It can be read in the decisions taken by the Commission in respect of ad hoc resolution aid, that it has considered the following provisions to be intrinsically linked provisions, depending on the specifics of the resolution aid measure:

1.

The general principles governing resolution provided by Article 34 BRRD;1

2.

The resolution conditions set out in Article 32 BRRD;2

3.

The possibility to perform a provisional valuation for the purposes of valuation pursuant to Article 36(2) BRRD;3

4.

The requirement to establish and use national resolution funds following Article 100(5) BRRD;4

5.

The requirement that the asset separation tool is only applied together with another resolution tool pursuant to Article 37(5) BRRD.5

In all of its decisions, without going into much detail, the Commission assessed that these intrinsically linked provisions were not violated by the proposed aid measures. It may be that other provisions of the resolution framework also qualify as ‘intrinsically linked’. This will have to become clear from future State aid decisions. In any event, it is stated in Recital 57 BRRD, that the Commission should separately assess whether the GFST do not infringe any intrinsically linked provisions of Union law, including those relating to the minimum loss absorption requirement of 8 % contained in the BRRD, as well as whether there is a very extraordinary situation of a systemic crisis justifying resorting to those tools under the BRRD while ensuring the level playing field in the internal market. At the time of writing this dissertation, the Commission has not yet assessed the use of the GFST.

Public funding provided to a bank in resolution does not always qualify as State aid. In case public funding does not qualify as State aid, the Commission does not have to assess whether it breaches any intrinsically linked provisions of the resolution framework.

An example is the case of Bank of Peloponesse, in which the Commission concluded that the resolution support by the national resolution fund did not constitute State aid.6

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