Public funding of failing banks in the European Union (LBF vol. 19) 2020/6.6.2.4:6.6.2.4 Resolution and State aid control may serve different purposes

Public funding of failing banks in the European Union (LBF vol. 19) 2020/6.6.2.4

6.6.2.4 Resolution and State aid control may serve different purposes

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

While both the State aid regime for the banking sector and the resolution framework serve the purpose of ensuring financial stability while State aid is kept to the minimum, there are some differences between the regimes that may make the Commission and the SRB take different interests into account when making their assessment.

First, the Commission, being the State aid authority, has foremost to ensure that any aid measure is compatible with the internal market. In its assessment, it balances public policy objectives, such as financial stability, against distortions of competition between banks and across Member States.1 Distortions should always be kept to the minimum. The assessment is made in relation to the particular State aid award or scheme under discussion; it does not assess the policy of a Member State in general.2 Ensuring fair competition is not one of the resolution objectives. The SRB does, however, have to undertake every action, proposal or policy with full regard and duty of care for the unity and integrity of the internal market.3 In addition, efficiency and integrity of the internal market is an explicit assessment criterion in the resolvability assessment.4

Article 107(3) TFEU gives the Commission the possibility to balance the necessity and proportionality of a public policy objectives versus distortions of competition. The introduction of the resolution framework may give the Commission room to tighten its assessment, and to focus more on prevention of distortion of competition, since financial stability is better safeguarded.5

Secondly, the Commission should, on the basis of Article 107(3)(b) TFEU, assess whether the aid is appropriate to remedy a serious disturbance in the economy of a Member State. It is therefore focused on the results of the aid at a national level. Even more, according to a fact sheet dated 25 June 2017, the Commission, in its assessment of liquidation aid, accounts for whether the Member States decides that the bank exit has a “serious impact on the regional economy”.6 This interpretation was presented in the case of Banca Popolare di Vicenza and Veneto Banca.7 This seems to be contrary to the interpretation of the EU Courts that the compatibility assessment under Article 107(3)(b) TFEU only justifies aid that remedies a disturbance that affects the whole economy, and not just a region or sector.8

While the Commission therefore seems to tend to take the regional impact of an aid measure into consideration, the SRB should ensure that appropriate account is taken of both national and EU financial stability.9 The financial stability assessments made by the Commission and the SRB may then take place at different levels.10

A last difference between the assessment by the SRB and by the Commission, is that the Commission’s assessment is based on the request of a Member State to approve a State aid measure. In cases where a Member State motivates that the aid measure is appropriate to remedy a serious disturbance, the Commission seems to go with that motivation.11

Since it started using Article 107(3)(b) TFEU as the legal basis for its assessment in the fall of 2008, the Commission has not once taken the position that this is not the case. It seems that the Commission restricts its assessment in that respect to whether there are grounds to dispute the assessment and thus not to conduct its own full assessment.12 This seems reasonable taking into account the short timelines and the insights required in relation to the position of the bank and the economy of a Member State to conduct the assessment.

The SRB’s assessment is more independent in that respect. The assessment whether resolution is necessary in the public interest is made by the SRB itself.13

This independence should also be seen against the background that Member States have accepted giving up part of their budget sovereignty by giving the Commission the power to assess State aid awards. Decisions or actions of the SRB, on the other hand, cannot impinge on the budgetary sovereignty and fiscal responsibilities of the Member States.14

Deze functie is alleen te gebruiken als je bent ingelogd.