6.4.4.3 Example 3: Contribution by national resolution fund / Member State to funding gap under the sale of business tool

In the resolution of Panellinia Bank, selected bank assets and liabilities, including deposits, were auctioned. The Greek resolution fund would cover the so-called funding gap, which is the difference between the value of the assets and the value of the liabilities transferred from the resolved bank to an acquiring bank. The acquiring bank would have to cover its additional capital needs coming from the increase in its risk weighted assets and the payment of the purchase price. In April 2015, it was decided by the Greek resolution authority that Piraeus Bank would be the acquiring bank. The Commission considered the contribution by the Greek resolution fund to the funding to constitute State aid for the benefit of the economic activities of Panellinia Bank to be transferred to the buyer.1

In the resolution of BANIF, selected assets and liabilities were transferred to a private sector purchaser (Banco Santander Totta). The Portuguese resolution fund, together with Portugal, would cover the funding gap. The Commission considered the contribution by the resolution fund and Portugal to constitute State aid to the economic activities to be transferred (also referred to as the Clean Bank).2

The Commission considered that Piraeus Bank was a viable entity, because it approved its restructuring plan in an earlier decision. In addition, the transferred activities were very small compared to the size of Piraeus bank, as a result of which they could not endanger the restoration of the viability of the latter. Moreover, the integration plan of Piraeus Bank provided that the activities would be largely restructured, and that it ceased to operate as a stand-alone bank. It was therefore considered by the Commission that the transfer of the activities allowed the restoration of Panellinia Bank’s viability.3

In the case of BANIF, the buyer presented an integration plan of the acquired assets, rights and liabilities of the Clean Bank. The Commission had no reason to doubt the viability of the buyer or its ability to integrate the Clean Bank it acquired.4

In the case of Panellinia Bank, the Commission considered that the integration of the transferred activities of the bank into a larger entity and the concomitant realisation of synergies, through the rationalisation of the buyer's branch network, the consolidation of the IT infrastructure, and the reduction of funding costs, would help to limit the costs to the minimum compared to a scenario in which the State sought to restore the bank's viability on a standalone basis.6

In the case of BANIF, the Commission considered the orderly resolution aid to be limited to the minimum necessary because the amount of costs incurred in the resolution was lower than the estimated losses in liquidation.7

In the case of Panellinia Bank, it was considered by the Commission that the equity and preference shares were not transferred to Piraeus Bank, but remained in Panellinia Bank, the entity in liquidation. Hence, the Commission considered that sufficient burden-sharing was achieved since the shareholders were entitled to proceeds from the liquidation only if the proceeds were sufficient to repay first the resolution fund, which had a large priority claim over other creditors.

In the case of BANIF, the Commission considered that the costs incurred in resolution would be lower than the estimated losses in liquidation.8 A bail-in of holders of subordinated debt as well as liabilities from other banks had taken place. In addition, the shareholders and holders of hybrid instruments had fully participated in the losses.9

In the case of Panellinia Bank, it was concluded by the Commission that given the very small size of the transferred activities, the open sales process, and the full integration of Panellinia Bank's activities into Piraeus Bank, there were no undue distortions of competition, despite the large amount of aid and the absence of remuneration.10 The resolution fund was not remunerated for contributing to the funding gap.11

In the case of BANIF, the Commission positively noted the choice of the sale of business tool as the primary resolution tool, thereby limiting competition concerns. It specifically assessed that the commercial presence of the Clean Bank would be significantly reduced compared with the old BANIF, the fact that the Clean Bank would be bought by a much larger commercial bank, the commitment of Portugal that the BANIF brand would disappear, and the commitment of Portugal to comply with an advertising and acquisition ban. 12