9.8.2 Claw-back

As a general rule, an asset relief measure can only be declared compatible if the transfer value is equal to or below the real economic value. A transfer value above the real economic value means that the aid amount is too large, since only the difference between the transfer value and the market value can constitute compatible aid. The additional aid (corresponding to the amount by which the transfer value exceeds the REV) can only be allowed if it is accompanied by the introduction of conditions allowing the recovery of the additional aid at a later stage, i.e. a so-called claw-back. If no full recovery (claw-back) is possible, far-reaching restructuring must be provided for. This follows from point 41 of the IAC and is reiterated in Annex IV of the IAC: “The greater any deviation of the transfer value from the ‘real economic value’, and thus the amount of aid, the greater the need for remedial measures to ensure accurate pricing over time (for example, through better fortune clauses) and for more in-depth restructuring”.1

The burden-sharing principle can be clarified by means of the following example. Assume a portfolio with a nominal value of EUR 100, a real economic value of EUR 80 and a market value of EUR 50. The transfer value should not exceed the real economic value of EUR 80. Assume, however, that the transfer value is set at EUR 85. In this case, the own contribution by the bank is only EUR 15 (i.e. the difference between the nominal value and the transfer value), while the own contribution should have been EUR 20 (i.e. the difference between the nominal value and the real economic value). The aid amount corresponds to the difference between the transfer value and the market value, and amounts to EUR 35. Of this aid amount, only the difference between the real economic value and the market value can constitute compatible aid. So, in principle, only the aid amount of EUR 30 can be authorised. The ‘additional aid’ of EUR 5 has to be clawed back.

In most cases, the transfer value was equal to the REV or below the REV. How-ever, there are also some cases in which the transfer value exceeded the REV. In these cases, the Commission required a claw-back or far-reaching restructuring.

One of those cases is the case of BayernLB. The Commission recalled that a claw-back required that the bank would reimburse the entire amount above the REV covered by the guarantee; this would imply a claw-back amount of EUR 1,96 billion.2 However, BayernLB only proposed to make six annual payments of EUR 120 million.3 BayernLB claimed that it would not be able to pay more. However, the Commission considered that a claw-back of a nominal amount of EUR 1,96 billion in six years was feasible. According to point 41 of the IAC, a partial claw-back should be allowed only if the full claw-back would result in the technical insolvency of BayernLB. However, the Commission did not believe that a technical insolvency would happen if the claw-back payments were stretched over time, even beyond the restructuring period. The Commission considered that this would not conflict with point 41 of the IAC, which refers not to payment within a specific period but to payment ‘at a later stage’. Therefore the Commission considered that the burden-sharing requirement in the IAC would be respected if a full claw-back were to be achieved over a period of six years.4

In some instances, a claw-back is not possible. This was the case with UNNIM Banc and Banco de Valencia. Spain had provided an Asset Protection Scheme (APS) for these banks. The Commission considered the institution of a claw- back clause incompatible with the sale of UNNIM Banc to a third party through a formalised tender procedure since the bidders would have compensated in advance the potential cost of the claw-back in demanding additional support measures in theirs offers.5 Therefore, the capital injection element of the APS could be deemed compatible only if it was accompanied by an in-depth and far- reaching restructuring of the entity.6 This is a manifestation of the principle that non-compliance with one of the IAC-criteria has to be compensated for by far- reaching restructuring. This principle will be explored further in section 9.10.