1.1.0 Introductie

These newspaper headlines all relate to the decision of the European Commission regarding the State aid that was granted by the Dutch state to the Dutch bank ING. During the financial crisis, ING (like many other banks and financial institutions) experienced financial difficulties, and it had to be ‘rescued’ by the Dutch state. The Dutch state undertook several measures to help ING survive the crisis. These measures constituted State aid.

In principle, EU law prohibits State aid, because State aid may give rise to com- petition concerns. Distortions of competition can occur in three ways. Firstly, State aid may give the beneficiary banks an unfair competitive advantage over other banks which did not get State aid. Secondly, State aid may lead to subsidy races between member states. If one member state is granting excessive aid to its banks, then other member states may follow and also give excessive aid to their banks. Thirdly, if a Member State recapitalises banks which do otherwise not have access to capital (and would subsequently have to leave the market), then State aid can frustrate the normal market functioning. Besides these competition concerns, there is also the concern of moral hazard. If banks know or expect that they will be rescued, then they are more inclined to take (excessive) risks. They enjoy the upside, but do not bear the downside risk of their actions. Thus, moral hazard may lead to excessive risk-taking.

So it comes as no surprise that State aid is prohibited in EU law. This prohibition is laid down in Article 107, paragraph 1, of the Treaty on the Functioning of the European Union (TFEU). However, there are a few exceptions to this prohibition (Article 107, paragraphs 2 and 3, TFEU). For instance, State aid may be justified when it is intended to remedy market failure. In the case of State aid to the banks, the aid was deemed necessary to prevent a meltdown of the financial system. Therefore, a balance must be struck between preserving competition on the one hand and preserving financial stability on the other hand. This is the task of the European Commission, who is the only competent authority to judge the aid measures. The Commission has sought to achieve this balance by approving the aid measures (to preserve financial stability), and by imposing restructuring measures on the beneficiary banks at the same time (to compensate for the competition distortions).4 Those restructuring measures can be very severe, and are sometimes perceived (by the banks) as punishment.5

In the case of ING, the Commission approved the aid measures, but it imposed certain conditions on ING: ING had to divest 45% of its assets (i.e. its insurance branch, its subsidiary ING Direct USA, and other entities). Furthermore, ING was prohibited from acting as price leader. And finally, ING had to adhere to an acquisition ban for 3 years.

It is clear that those restructuring measures are very severe. ING has con-ducted legal proceedings against the European Commission arguing that it was not treated fairly. Other banks have also been granted State aid, but they were not imposed such strict conditions. Also in the literature, it is argued that ING was treated harshly, especially when compared to other banks. This raises the question of equal treatment.6

At this point, an important clarification should be made. The ING-case just serves as an illustration of a more general issue: can it be established whether the Commission has applied the principle of equal treatment in its Stateaid control policy. Since the ING-case is a well-known example in the Netherlands, it was a logical choice to illustrate my point using the ING-case. However, I could have easily used another bank. ING was not the only bank that felt treated unjustly. Some other banks also faced restructuring measures that they felt were too severe.

Thus, on a more general level, the following observation can be made: some banks appear to have ‘escaped’ easily, while ING and other banks faced severe restructuring measures. This raises the question of equal treatment. Similar concerns were raised in a task force report of the Centre for European Policy Studies:

In the literature, the following observation was made:

This observation touches upon a crucial problem: there is a lack of clarity as to whether bank State aid decisions comply with the principle of equal treatment. In my opinion, this lack of clarity is problematic, as will be discussed in the following section.