13.9.3.3 Exemptions to the acquisition ban

The restructuring plan may allow for certain exemptions to the acquisition ban. In that regard, it should be noted that point 47(f) of the 2013 Banking Communication provides for three exemptions to the acquisition ban. Although point 47 of the 2013 Banking Communication introduces measures preventing the outflow of funds prior to a restructuring decision, these three exemptions also appear in many restructuring decisions.

The acquisition ban imposed on the National Bank of Greece (NBG) may serve as an illustration. The modalities of the acquisition ban can be found in the annex of the Restructuring Decision. The acquisition ban with its exemptions is formulated as follows:

The first exemption recognises the fact that there may be situations in which an acquisition may be highly desirable. This exemption makes the ban more flexible, because it allows the Commission to grant an exemption in case of exceptional circumstances. It could, however, be asked whether the Commission is the right authority to judge on these matters. Would a financial supervisory authority not be better placed to judge on the issue of financial stability?

This exemption was actually applied in several Greek banking cases. As set out in section 11.11, each of the four large Greek banks1 acquired some smaller banks. The Commission assessed whether these acquisitions were compatible with the Restructuring Communication. This assessment concerned the effect of the acquisitions i) on the viability of the bank, ii) on the aid amount needed by the bank, and iii) on competition.

With respect to the effect of the acquisitions on the amount of aid needed by the bank, the reasoning of the Commission was as follows. The Commission first recalled that point 23 of the Restructuring Communication required that State aid should not be used for the acquisition of other companies but merely to cover restructuring costs which are necessary to restore the viability of the bank. The Commission then remarked that, although the acquisition had positive implications for the bank’s viability, the acquisition was not essential for the bank’s viability. However, the Commission went on to consider that the purchase price was very low. The purchase price was therefore not financed through State aid. That fact also implies that the payment of the purchase price did not create any capital need for the acquiring bank.2

With respect to the assessment of the distortive effects of the acquisition on competition, points 39-41 of the Restructuring Communication are of importance. The structure of these points is as follows: points 39 and 40 contain a prohibition, whereas point 41 contains an exemption to this prohibition.3 In particular, point 41 provides that in exceptional circumstances, acquisitions may be authorised by the Commission where they are part of a consolidation process necessary to restore financial stability or to ensure effective competition.

An illustration of those exceptional circumstances can be found in the decisions on Alpha Bank, Eurobank, Piraeus Bank and NBG.4 In these decisions, the following exceptional circumstances were mentioned:

It should be noted that the exceptional circumstances are not cumulative criteria. For instance, the fact that the bank raised a large amount of private capital was not present in every case.

The second exemption concerns relatively insignificant acquisitions. Those acquisitions are exempted without requiring the Commission’s prior approval. This makes sense, because if the Commission would have to investigate those acquisitions, then this leads to extra administrative costs (which would probably not outweigh the benefits of the investigation).

It is useful to point out that there is a relation between this second exception and the scope of the acquisition ban: if the acquisition ban is very limited in scope (such as in the case of Fortis and KBC), there is less need to make an exemption for small acquisitions.

The third exemption7 concerns acquisitions that belong, in terms of the management of existing obligations of customers in financial difficulty, to a bank’s normal ongoing business.8 This concerns shareholdings managed or acquired in the course of the bank’s normal business operations in connection with non-performing loans or similar banking operations.9 In one of its decisions, the Commission explained the rationale of this exemption: “When banks are faced with bad loans in their loan portfolio, the restructuring of those loans sometimes requires solutions such as converting debt into equity. Those situations are considered to be normal banking practice and are not covered by the acquisition ban”.10

In addition to the three main exemptions, there are some other exemptions to the acquisition ban. In several cases, disposals and restructuring within the group do not fall under the acquisition ban.11 Also the take-up of capital increases by the beneficiary bank in its current holdings pro rata to its current participation is sometimes excluded from the acquisition ban.12

The table in Annex X gives an overview of all the cases that are characterised by the commitment to comply to an acquisition ban. In addition, the table shows the scope of the acquisition ban and the exemptions to the acquisition ban. The table shows an interesting picture: the three exemptions are not included in every case. Of the 57 decisions that imposed an acquisition ban, 23 of them did not include the first exemption. The second and third exemption were missing in 22 respectively 21 cases.

The general picture that emerges is that an acquisition ban is standard prac-tice, whilst the exact modalities of the acquisition ban are deviating. It should be noted that the modalities of the acquisition ban are usually to be found in the annex of the decision. The exemptions to the acquisition ban are thus not mentioned in the recitals of the decision. Consequently, any explanation as to the reason why certain exemptions are (or are not) included, is completely lacking in the Commission decisions.

It is worth stressing that the picture would be completely different if only the decisions taken after the 2013 Banking Communication are included in the analysis (thus excluding the decisions that were taken before the 2013 Banking Communication). Indeed, point 47(f) of the 2013 Banking Communication provides for the three main exemptions. As a result, nowadays, every acquisition ban includes the three main exemptions.