3.3.1.3 Qualification of support measures in the banking sector as State resources imputable to a Member State

For example, in the case of ELA provided by the central bank of Belgium to Fortis, the Commission decided that, since the activities of this central bank were controlled by the Belgian State, its resources were State resources. In addition, the Commission considered in this case that this was particularly true since as a result of a counter-guarantee by the Belgian State any losses as a result of the liquidity assistance would be borne directly by the Belgian State.6 In the case of Northern Rock, the Commission assessed that the ELA provided by the Bank of England did not concern State aid, because this was done at a moment when the bank was solvent, the facility was secured against high quality collateral to which ‘margins’ were applied against the risk of falls in the price of the collateral and against a penal interest rate. In addition, the ELA was granted at the own initiative of the Bank of England independent of and before other measures. 7

Examples of cases in which the Commission concluded that the use of a deposit guarantee scheme consisted of a transfer of State resources and was imputable to the State, are the rescue of Banca Tercas, which involved the use of alternative measures,12 the Danish winding up scheme,13 the Polish orderly liquidation scheme,14 the rescue of Caja Castilla la Mancha15 and Caja de Ahorros del Mediterraneo16 and the liquidation of Italian bank Banca Romagna.17 In these cases the Commission concluded that, although the deposit guarantee schemes were funded by banks, their use was imputable to the State. The Commission notably argued that contributions were compulsory and that governments had crucial influence on the decisions of those deposit guarantee schemes.18 Another example in which the use of the deposit guarantee scheme was qualified as State aid, is the extension of the Belgian Deposit Guarantee Scheme protecting shares held by individual shareholders in certain ‘recognised coop eratives’ (the ARCO cooperatives). According to the Commission, this could not be seen as a transposition of the DGS Directive but stemmed from an initiative from Belgium itself. The Commission also concluded in its decision that the aid was incompatible with the internal market and had to be recovered from the ARCO cooper atives, being the beneficiaries of the aid. 19 The decisions in respect of Banca Tercas and the ARCO cooperatives have been contested before the GC as discussed below.

The use of the IDFF in the case of Barca Tercas

Banca Popolare di Bari (the holding company of Banca Tercas), the Italian Interbank Deposit Protection Fund (IDFF) and Italy have brought actions before the GC in relation to the decision of the Commission in respect of Banca Tercas. They complain that the Commission has infringed and misapplied Article 107(1) TFEU by failing to provide any and/or adequate reasons as regards whether the necessary requirements relating to ‘State resources’ and ‘imputability to the State’ have been met, in so far as the Commission gives priority to the analysis of the State resources criterion over the analysis of the imputability criterion and fails to verify independently whether the requirement relating to State resources, one of the criteria for establishing the existence of State aid for the purpose of Article 107(1) TFEU, has been met.

The GC assesses that the Commission has failed to make the required distinction between the imputability to the State and the question whether the aid measure is funded through State resources.20 First, it should be assessed whether Italy was involved in the adoption of the measure. The GC states that the aid awarded by the IDFF to Banca Tercas mainly aimed to serve the private interests of the banks that are a member of the IDFF. These interests can collide with the public interest, but this does not form an indication of involvement of the Member State. In addition, the GC concludes that the aid was not granted on the basis of a public mandate imposed by Italian law. The Italian Banking Act only requires that deposit guarantee schemes, such as the IDFF, have to make payments in the event of winding up a bank in normal insolvency proceedings, but does not oblige the IDFF to carry out other support measures. Furthermore, the GC assesses whether the IDFF was autonomous in its decision. It states that the IDFF is a private law body of which the management exists of representatives of the banks that are members of the IDFF. There was therefore no organic factor linking the IDFF and Italy. The fact that Banca d’Italia approved the aid granted by the IDFF is no indication that this aid is imputable to Italy. Also, the fact that representatives of Banca d’Italia were present at meetings of the management of the IDFF does not form such indication. Moreover, the Commission has not sufficiently demonstrated that Banca d’Italia has had decisive influence on the negotiations between the IDFF and Banca Popolare di Bari. Lastly, the fact that the trustee of Banca Tercas, which was appointed by Banca d’Italia, can request for aid at the IDFF does not mean that the IDFF has no autonomy in its decision to grant this aid. As a result, the GC assesses that the Commission has not sufficiently demonstrated that Italy had significant control over the adoption of the measure by the IDFF.21 Secondly, it should be assessed whether the resources that are used by the IDFF qualify as State resources. The GC takes into account that there is no public task for deposit guarantee schemes to intervene at banks that are in financial difficulty. The only public task that exists in Italy for deposit guarantee schemes is the payout function in case the bank is wound up in normal insolvency proceedings. Also, the role of Banca d’Italia, as described above, does not make that the resources should qualify as State resources. Lastly, the GC assesses that the contributions paid by the banks to IDFF were not compulsory on the basis of a provision of the law, but on the basis of the articles of association of the IDFF, which safeguards the discretion of the members. As a result, the resources should not be qualified as State resources. The GC annuls the decision of the Commission.22

The extension of the Belgian Deposit Guarantee Scheme protecting shares in ARCO cooperatives

The decision of the Commission to qualify the extension of the Belgian Deposit Guarantee Scheme protecting shares held by individual shareholders in the ARCO cooperatives as incompatible State aid was challenged in three instances. First, private parties brought an action before the Belgium Council of State on the basis of violation of the constitutional equality principle, because a difference in treatment was created between shareholders that were covered by the guarantee and other shareholders. The Council of State subsequently posed preliminary questions to the Constitutional Court, which, in its turn, posed preliminary questions to the ECJ. The ECJ subsequently assessed that Member States are not obliged to adopt the extension as adopted by Belgium on the basis of the DGS Directive, but are also not prevented to do so, as long as this is not detrimental to the effective operation of the deposit guarantee scheme and is not in violation of the TFEU, including the State aid provisions.23 The Constitutional Court subsequently determined that the decision by the Belgian State to adopt the extension is unconstitutional, because it qualifies as unlawful aid. The Council of State annulled this decision.24 Secondly, the ARCO coopera tives brought proceedings before the GC contesting the decision of the Commission. The ARCO cooperatives contested that the aid measure qualified as State aid and that Belgium was prohibited to pay-out the amounts under the extended deposit guarantee scheme. The GC upheld the decision from the Commission and partly dismissed the action as being inadmissible (insofar it contested the prohibition to pay-out the amounts).25 This ties into the third action that was brought by the Belgian State before the GC in which the Belgian State also contested this prohibition on the basis of violation of the proportionality principle. The GC assessed that the prohibition was not suitable to repair the distortion of the competition as a result of the aid award. It therefore annulled the decision of the Commission insofar it related to this prohibition.26

For example, the measures taken by the Portuguese resolution fund in the resolution of Banco Espírito Santo, S.A. (BES), consisting of a guarantee of the capital position of Novo Banco (the bridge bank) and the underwriting of a capital instrument, which puts at risk the resources of the resolution fund to be used to buy those capital instruments, were considered by the Commission to constitute State aid.29

In Italy, the privately managed Atlante Fund and Atlante Fund II have been put in use to recapitalise banks and to purchase portfolios of NPLs. Atlante Fund and Atlante II Fund are closed-end alternative investment funds regulated by Italian law reserved for professional investors. The funds are managed by Quaestio Capital Management SGR S.p.A. Atlante Fund’s investors are 67 Italian and foreign institutions, including banks, insurance companies, banking foundations and the Cassa Depositi e Prestiti.31 Atlante Fund may invest in banks with a lower capital ratio than the minimum established in the context of the SREP and that therefore, on request by the Italian supervisory authority, implement initiatives to reinforce capital by means of a share capital increase, and/or, the purchase of NPLs originating from a variety of Italian banks. The Atlante Fund has already been put in use to bail out two small banks (Banca Popolare di Vicenza and Veneto Banca) and to purchase portfolios of NPLs. The fund’s financial objective is to realize a return of approximately 6% per annum for its investors.32 Atlante II Fund invests in so-called mezzanine and junior financial instruments, issued by vehicles constituted for purchasing NPL portfolios originating from a variety of Italian banks. It is also made possible for the Atlante II Fund to take advantage of the re-rating of the originator banks. Both the Italian State and the Commission do not consider the bailouts by the Atlante Fund to qualify as State aid.33 The Atlante II Fund was involved in the recapitalisation of the Italian bank Monte dei Paschi di Siena (MPS).34 It bought 95% of the mezzanine notes relating to the securitization of MPS Group's bad debts portfolio.

The use of a private investor protection scheme in the rescue of Roskilde Bank was also not considered to constitute the transfer of State resources imputable to the State. Det Private Beredskab, an association created by the Danish Bankers Association,35 agreed to provide a guarantee to Danish National Bank for a loan that was provided to Roskilde Bank by the Danish National Bank. Given that Det Private Beredskab was exclusively based on the voluntary membership of private institutions, that the members of its highest authority came from the private sector, that the members from the private banks had the right of veto in the decision-making body and that the commitment assumed by Det Private Beredskab's members was nothing like so large as their potential commitment under the Deposit Guarantee Fund, the Commission considered that no State resources were involved in the financing of the guarantee provided by Det Private Beredskab to the Danish National Bank on 11 July 2008.36