State aid to banks (IVOR nr. 109) 2018/9.10.1:9.10.1 The need for far-reaching restructuring

State aid to banks (IVOR nr. 109) 2018/9.10.1

9.10.1 The need for far-reaching restructuring

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In principle, asset relief measures should satisfy the criteria of (section 5 of) the IAC. However, some cases did not satisfy all these requirements. These cases can still be compatible with the IAC, but they should then be subject to far- reaching restructuring. This follows from points 49 and 50 of the IAC, which read as follows:

49. Under State aid rules and notably those for rescue and restructuring aid, asset relief amounts to a structural operation and requires a careful assessment of three conditions: (i) adequate contribution of the beneficiary to the costs of the impaired assets programme; (ii) appropriate action to guarantee the return to viability; and (iii) necessary measures to remedy competition distortions.1

50. The first condition should normally be achieved by fulfilling the requirements set out in the Section 5, notably disclosure, valuation, pricing and burden-sharing. This should ensure a contribution by the beneficiary of at least the entirety of the losses incurred in the transfer of assets to the State. Where this is materially not possible, aid may still be authorised, by way of exception, subject to stricter requirements as to the other two conditions.

This principle is reiterated in points 54 (“Departure from the general principles set out in Section 5 will normally point to the need for such in-depth restructuring”) and 58 of the IAC (“The need for compensatory measures will be presumed if the beneficiary bank does not fulfil the conditions set out in Section 5 and notably those of disclosure, valuation, pricing and burden-sharing”). In addition, point 41 of the IAC already stated that a transfer value that exceeds the REV can only be accepted if it is accompanied by far-reaching restructuring (in case a claw-back is not possible). Point 36 of the IAC also contained a provision that far-reaching restructuring was required when the range of assets covered by the asset relief measure was very large.

Points 36, 41 and 50 are all based on the principle that far-reaching restructuring is required when the IAC-criteria have not been met. Point 36 and 41 are specific provisions (related to specific IAC-criteria), while point 50 is a general provision (related to the IAC-criteria in general).

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