6.5.2 Liquidation aid

In a fact sheet dated 25 June 2017, the Commission stated: “While the winding up of smaller banks may not affect the European financial system, their market exit may still have effects in the regions where such banks are most active. Therefore, outside the European banking resolution framework, it is for Member States to decide whether they consider a bank exit to have a serious impact on the regional economy, e.g. on the financing of small and medium enterprises in the regional economy, and whether they wish to use national funds to mitigate these effects. EU state aid rules, in particular the 2013 Banking Communication, foresee this possibility, subject, amongst other things, to burden-sharing rules and clear commitments that the entities effectively exit the market to ensure that competition distortions are minimised.”1 The Commission therefore specifically acknowledges that liquidation aid may still be necessary after the introduction of the resolution framework. In its assessment of this liquidation aid, the Commission applies the conditions set out in Section 6 of the 2013 Banking Communication, including burden-sharing by shareholders and subordinated creditors, but not by senior creditors.2 See section 5.3.6 for examples of liquidation aid granted after the introduction of the resolution framework.

Liquidation aid is granted outside the scope of the resolution framework as a result of which there are no intrinsically linked provisions of the resolution framework that impact the assessment of liquidation aid under the State aid regime for the banking sector. One exemption in that respect is that winding up in normal insolvency proceedings is only possible if resolution is not in the public interest.3

The assessment by the Commission of liquidation schemes is discussed in section 6.4.5.