Public funding of failing banks in the European Union (LBF vol. 19) 2020/6.2.1.1:6.2.1.1 References to State aid (regime) in the resolution framework

Public funding of failing banks in the European Union (LBF vol. 19) 2020/6.2.1.1

6.2.1.1 References to State aid (regime) in the resolution framework

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

The resolution framework contains several references to ‘State aid’ and the ‘Union State aid framework’, the latter being defined as “the framework established by Articles 107, 108 and 109 TFEU and regulations and all Union acts, including guidelines, communications and notices, made or adopted pursuant to Article 108(4) or Article 109 TFEU”.1 These references can be distinguished in four categories:

a)

References that are – from a legal perspective – unnecessary and did not have to be included in the resolution framework;

b)

References that streamline the restructuring obligations of a bank under the resolution framework and the State aid regime for the banking sector;

c)

References that ensure that the resolution framework does not violate the State aid regime for the banking sector; and

d)

References that regulate the relation between the SRB and the Commission.

Ad a: Unnecessary references

Certain references in the resolution framework are – from a legal perspective – unnecessary, because they are already covered by Articles 107 and 108 TFEU. These are, for example, references to aid measures, such as precautionary guarantees, precautionary recapitalisation and GFST, being conditional on final approval under the Union State aid framework2, and Member States needing to comply with the Union State aid framework when applying the resolution tools and exercising the resolution powers.3 Even if these references were not included in the resolution framework, the same would apply on the basis of Articles 107 and 108 TFEU. In other words, the resolution framework cannot in any way restrict the exclusive competence of the Commission to assess State aid awards on their compliance with the internal market under Articles 107 and 108 TFEU.4 Hence, the legal basis for the Commission to assess, for example, the compatibility of precautionary guarantees with the internal market is not the resolution framework, but Articles 107 and 108 TFEU.

While the resolution framework cannot restrict the competence of the Commission to assess State aid awards on their compliance with the internal market, an interesting question is whether the resolution framework can expand this. In the author’s view, this is only possible insofar this expansion is not, on its own merit, included in the competence under Articles 107 and 108 TFEU. One could, for example, think of the assessment of SRF contributions as these do not qualify as State aid, but are made subject to the State aid rules by means of Article 19 SRMR.5

Although – from a legal perspective – it may be preferable to delete the references to the Union State aid framework as set out above, there may be a practical advantage of including these references. The financial regulatory framework and the State aid regime for the banking sector are two different domains, governed by different institutions and experts. The references may serve the purpose of ensuring that both domains are aware of each other’s existence and impact.

Ad b: Streamline restructuring obligations

The resolution framework explicates that, where the Union State aid framework is applicable, a business reorganisation plan should be compatible with the restructuring plan that a bank is required to submit to the Commission under the State aid regime for the banking sector.6 This compatibility requirement would not apply if not set out in the resolution framework. Moreover, the resolution framework sets out that where the business reorganisation plan is required to be notified within the Union State aid framework, the resolution authority may extend the period in which this has to be submitted to the resolution authority.7 These references streamline the restructuring obligations of a bank put in resolution with the assistance of State aid. The impact of the resolution framework on the restructuring process of a bank is discussed in more detail in Chapter 7.

Ad c: No violation of the State aid regime for the banking sector

The resolution framework clarifies that the exemption for national resolution authorities to comply with any procedural requirements to notify any person prior to the exercise of resolution powers does not apply to any notification requirements under the Union State aid framework.8 Without this, the resolution framework might have given the impression that the notification obligation would not apply, which would be in violation with Articles 107 and 108 TFEU.

National resolution authorities are public administrative authorities entrusted with public administrative powers, e.g. national central banks, competent ministries or other public administrative authorities, or authorities entrusted with public administrative powers.9 As such they are bound by Article 107 and 108 TFEU.10

Ad d: Regulation of the relationship between the SRB and the Commission

Lastly, the resolution framework includes provisions that describe the relationship between the Commission and the SRB.

First, it introduces a notification obligation for the SRB. If the SRB considers that resolution action could constitute State aid, it has to invite the Member State(s) concerned to immediately notify the envisaged measure to the Commission. In addition, the SRB has to notify the Commission of any such case.11

Secondly, the resolution framework introduces a stand-still obligation for the SRB. Where resolution action involves the granting of State aid, the adoption of the resolution scheme shall not take place until such time as the Commission has adopted a positive or conditional decision concerning the compatibility of the use of this aid with the internal market.12

Articles 107 and 108 TFEU are directed towards the Member States, but not the SRB.13 Hence, the SRB would not be bound to the State aid provisions set out therein, including the stand-still obligation, if this was not catered for by the SRMR.14 As stated above, this is different for national resolution authorities.

Thirdly, a compliance obligation is introduced. The resolution scheme adopted by the SRB has to establish, in accordance with any decision on State aid, the details of the resolution tools to be applied.15 Furthermore, where State aid is present, the SRB has to act in conformity with a decision on that aid taken by the Commission.16

Deze functie is alleen te gebruiken als je bent ingelogd.