7.6.2 “to remedy a serious disturbance in the economy”

As was explained in chapter 3, the Commission adopted the Crisis Framework in October 2008. Pursuant to this Crisis Framework, the Commission chose to use Article 107(3)(b) TFEU as the legal basis for the compatibility-assessment. Article 107(3)(b) TFEU empowers the Commission to find that aid is compatible with the internal market if it is intended “to remedy a serious disturbance in the economy of a Member State”. In essence, the choice for Article 107(3)(b) TFEU was prompted by the financial crisis, which created “exceptional circumstances where financial stability at large is at risk”.

Thus, in the Crisis Communications, the Commission justified its choice for 107 (3)(b) TFEU as legal basis for the compatibility-assessment. In addition, the Commission assessed in each bank State aid decision on which legal basis the aid measures had to be examined. In that regard, the relevant assessment criterion is thus whether the State aid is intended to remedy a serious disturbance in the economy. In every case (taken after the adoption of the 2008 Banking Communication), the Commission came to the conclusion that the aid measure in question was aimed at remedying a serious disturbance in the economy. How did the Commission come to this conclusion? In that regard, the following recital is illustrative of the Commission’s reasoning:

Although this recital was taken from the decision on the German bank support scheme, the same considerations can be found in decisions on the bank support schemes of other Member States. The cited recital is thus illustrative of the Commission’s reasoning. The main elements of this reasoning are the following. Firstly, there are exceptional circumstances created by the financial crisis. In that regard, the Commission noted that the global financial crisis has led to a “lack of liquidity and lack of confidence”. Secondly, the Commission refers to the “systemic effect on the (German) economy”. This element relates to the systemic importance of banks. These two (interrelated) elements can be summarised as follows: in a crisis situation, the failure of a systemic important bank can create a serious disturbance in the economy. State aid measures aimed at avoiding the fall of a systemic important bank are thus aimed at remedying a serious disturbance in the economy.

In decisions on aid measures to individual banks, the Commission usually refers to its considerations from its decision on the bank support scheme of the Member State concerned. This can be illustrated by the following recital from the decision on the German LBBW in which the Commission referred to “its recent approval to the prolongation of the German Rescue package.

In this recital, the Commission mentions the “threat of a serious disturbance in the German economy”. This corresponds to the first element of the Commission’s reasoning (i.e. the financial crisis which created exceptional circumstances where financial stability at large is at risk).

The second element (i.e. the systemic importance – sometimes referred to as ‘systemic relevance’3 – of the bank) is usually elaborated in decisions on aid measures to individual banks. For instance, in the decision on the German LBBW, the Commission considered as follows:

To conclude, the criterion ‘aimed at remedying a serious disturbance in the economy’ is thus substantiated by two (interrelated) elements: i) the financial crisis, and ii) the systemic importance of the bank. Given the relevance of these elements, the following subsection will delve into the question of when a bank has systemic importance.