State aid to banks (IVOR nr. 109) 2018/8.3.3:8.3.3 Concluding remarks

State aid to banks (IVOR nr. 109) 2018/8.3.3

8.3.3 Concluding remarks

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In some decisions, the Commission referred to earlier decisions in order to underline that its decisional practice is consistent. Consider, for instance, the following recital.

“The Commission has already observed in several cases that recapitalisation is in principle an appropriate mean to strengthen the banks and thus to restore market confidence”.1

The approach of the Commission with respect to the current relevant characteristic can thus be considered consistent. However, it should be recalled that the fact that a capital injection is an appropriate means to strengthen the bank, is to a very large extent self-explanatory. It would have been very hard for the Commission to be inconsistent (by claiming that a capital injection would not be suitable to strengthen the bank). This illustrates that the Commission easily arrives at the conclusion that the aid measure is appropriate.

Part II: Necessity

The second of the three compatibility-criteria is the criterion that the aid should be necessary. When is aid “necessary”? Necessity is defined as follows:

“The aid measure must, in its amount and form, be necessary to achieve the objective. That implies that it must be of the minimum amount necessary to reach the objective, and take the form most appropriate to remedy the disturbance. In other words, if a lesser amount of aid or a measure in a less distortive form were sufficient to remedy a serious disturbance in the entire economy, the measure in question would not be necessary”.2

The necessity of ad hoc guarantees and ad hoc recapitalisation measures will be discussed in sections 8.4 and 8.5. In case of a bank support scheme – which can be a guarantee scheme, recapitalisation scheme or any other scheme – there is an additional relevant characteristic: the fact that the bank support scheme has a maximum budget. This will be discussed in section 8.10.

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