7.3.2 Intervention by a DGS

In several bank State aid cases, the Deposit Guarantee Scheme (DGS) is used to rescue and restructure ailing banks. With respect to the intervention by a DGS, two remarks are in order.

In the first place, where a DGS carries out measures other than paying out depositors in the liquidation of a bank, it should comply with State aid rules. This was observed by the Commission in several cases. For instance, the Resolution scheme of the Hellenic Deposit and Investment Guarantee Fund (HDIGF) assisted in the rescue of Proton Bank. The Commission noted that– unlike the deposit guarantee part of the HDIGF, which was created following the implementation of an EU Directive – the Resolution scheme of HDIGF was not created to implement EU legislation. In other words: Greece was not bound by an obligation originating from EU law when it decided to create the Resolution scheme of HDIGF. The Commission therefore concluded that the Resolution scheme was imputable to the Greek State.1

The same conclusion was reached in the case of the Italian DGS. The Fondo di Garanzia dei Deposanti del Credito Cooperativo (i.e. the Italian DGS) facilitated the transfer of the ailing BRC to ICCREA by making up the negative difference between the transferred assets and liabilities The Commission held that “unlike the pay-out of covered deposits by DGSs in cases of liquidation of banks, which are mandatory under Directive 94/19/EC, the FGDCC’s inter-ventions in transfers of assets and liabilities in the context of national insolvency proceedings as in the case at hand are discretionary and fulfil a public policy mandate laid down in Italian law at the discretion of the State”.2

In the second place, deposit guarantee schemes are often financed by contributions from banks. This raises the question whether the support measures involve State resources. The determining factor is whether the financial means by which the aid measure is funded, are under public control.3 This is the case when the contributions are made compulsory by state legislation and are managed and apportioned in accordance with that legislation.4 In that regard, the Commission has held that “the mere fact that resources are financed in part by private contributions is not sufficient to rule out the public character of those resources since the relevant factor is not the direct origin of the resources but the degree of intervention of the public authority within the definition of the measure and its method of financing”.5

The two remarks made in the present subsection are reprised in point 63 of the 2013 Banking Communication. In essence, this provision of the 2013 Banking Communication codifies that the intervention by a DGS may constitute State aid.