8.7.3 Other exit mechanisms

Several cases included a dividend ban. The Commission considered that the dividend ban was an (additional) incentive for banks to reimburse the injected capital.1 A dividend ban is aimed at the bank’s shareholders. It gives them an incentive to support or demand a reimbursement of the injected capital at the earliest opportunity.

The Portuguese recapitalisation scheme did not include a dividend ban, but it contained the clause that if a beneficiary bank decided to pay out dividends to its shareholders, the remuneration rate of the injected capital would be increased by 50 basis points.2 The Commission concluded that this could be regarded as a further incentive to pay back capital to the State as quickly as possible.3

In fact, all behavioural constraints are to some extent ‘painful’ and make it unattractive for a bank to be dependent on State aid over a long period. Not only restrictions on dividend payments, but also restrictions on the executive remuneration policy are exit incentives. In the decision on the Polish recapitalisation scheme, the restrictions on the executive remuneration policy were mentioned as exit incentives.4 A similar observation can be found in the decision on the Lithuanian Central Credit Union (LCCU). In that case, payment of bonuses were suspended to the LCCU staff and executives until the injected capital was repaid.5