5.2.1.1 Supranational EPFS

With the introduction of the EPFS concept, the resolution framework not only regulates access to State aid, but also to supranational EPFS.

The second limb of the definition of EPFS, relating to supranational EPFS, was included in the BRRD following an amendment by EP Member Lamberts.1 The amendment included the wording “or any other public financial support at supra-national level”. The motivation for this amendment reads: “support provided via the ECB, EFSF, ESM or indeed third countries (for example the ‘bailout’ of EU banks by the US after Lehman) is also public money. A bank whose viability depends on any such support should be allowed to fail unless the cost to the taxpayer would be greater, in which case the resolution tools should be used.”

The European Parliament subsequently further amended the definition of EPFS to its current wording, i.e. the words “which, if provided at national level, would constitute State aid” were added.2 In the absence of a further explanation to this addition, it seems that these words try to express that not all supranational support constitutes EPFS. This means that the assessment whether supranational aid and national aid qualify as EPFS is based on the same criteria. That is for national aid, does the aid qualify as State aid, or for supranational aid, would it qualify as State aid, if provided at national level?

After the GFC, two forms of supranational EPFS were introduced to preserve or restore the viability, liquidity or solvency of a bank or group entity of such bank in the Eurozone: the ESM and the SRF. The definition of EPFS is, however, not restricted to these types of supranational funding; other forms of supranational public funding may fall within the definition of EPFS. Other – future – forms of supranational public funding may, for example, be support by the European Investment Bank (EIB).3 Furthermore, EP Member Lamberts mentioned aid provided by third countries as a potential form of EPFS. This form of aid does not fall within the geographical scope of the EU State aid rules, as it is not granted through State resources of a Member State. It is also no form of supranational support. Thus, it is not entirely clear in the author’s view how this would fit within the definition of EPFS.

Some forms of supranational EPFS also qualify as State aid. For example, the ESM is funded through capital contributions from the participating Member States of the SSM, and the money it raises in the financial markets. The highest decision-making body of the ESM is the ESM Board of Governors. It comprises government representatives responsible for finance from each participating Member State. The ESM Board of Governors decides on the provision of stability support and the choice of instruments and financial terms and conditions.4 These decisions need to be taken by unanimity. The ESM can support banks through the indirect recapitalisation instrument and the direct recapitalisation instrument (the ESM DRI). In case of indirect recapitalisation by the ESM, assistance is still channelled via the Member State. As a result, the latter cannot escape the application of the State aid rules.5 In the case of direct recapitalisation, the assistance is, however, directly granted by the ESM; the Member States do not form part of the assistance chain. The question therefore is whether any aid granted by the ESM under the application of the ESM DRI is imputable to one or more Member States. As the ESM benefits from the capital provided by the participating Member States and their finance ministers make up the ESM Board of Governors, it could be argued that is the case. The result would be that the application of the ESM DRI also falls within the scope of the State aid rules.6

This is different for the SRF which is funded by ex ante and ex post contributions from banks and banking groups established in the Eurozone. If contributions are not sufficient, amounts may be raised from alternative funding means, such as from Member States. The SRF is managed by the SRB. Whether or not SRF contributions qualify as State aid, is perceived differently amongst authors. Kokkoris states that the SRF may be considered State aid,7 while Gray and De Cecco state that given the private origin of its resources and given that these resources are not managed by Member States but by an EU agency (the SRB), the use of the SRF would not normally fall within the scope of the notion of State aid.8 In the absence of any case-law from the EU Courts, the author tends to concur with Gray and De Cecco, also taking into account that the SRB has to act independently from the Member States.9

However, as a result of the final wording of the definition of EPFS, it actually does not matter whether supranational EPFS qualifies as State aid or not. Either way, it qualifies as EPFS, provided that it concerns a selective intervention and constitutes an economic advantage that the recipient would not have received in the normal course of its business and that has the potential to distort competition and affect trade between EU Member States.10 In addition, the practical relevance of the qualification of supranational EPFS as State aid is also limited for the application of the State aid rules, because the supranational funding instruments are made subject to the State aid rules.11