10.2.3.1 Recapitalisation schemes

Before the adoption of the First Prolongation Communication, the determining factor was whether the bank was fundamentally sound or distressed.

It should be recalled that some bank support schemes were only open to fundamentally sound banks.1 For instance, as discussed in section 8.10.1, the Swedish recapitalisation scheme was exclusively aimed at banks that were fundamentally sound. However, even though these schemes were aimed at fundamentally sound banks, if the Commission considered that the bank in question was not fundamentally sound, a restructuring plan for that bank had to be submitted to the Commission. Furthermore, many recapitalisation schemes provided for the following: if a bank that was initially considered fundamentally sound would fall into difficulties after recapitalisation had taken place, a restructuring plan for that bank had to be notified.2

A special feature could be found in the original recapitalisation schemes of Germany, Greece and the UK.3 With respect to these schemes, the Commission did not require a restructuring plan if the beneficiary bank had redeemed the State’s stake within six months or if the bank committed to do so in the next six months.4 These schemes were, however, set up before the adoption of the Recapitalisation Communication. Once this Communication was adopted, the Member States notified amendments of the schemes to the Commission. The amendment entailed that participating banks that were fundamentally sound did no longer need to provide a restructuring plan; instead, they had to provide a viability review.5 The Commission accepted this amendment, since it was in line with the Recapitalisation Communication.

As explained in the section 10.2.2, after the adoption of the First Prolongation Communication, a restructuring plan is required for distressed banks as well as for fundamentally sound banks. All prolongations of recapitalisation schemes (notified after the introduction of the First Prolongation Communication) took into account this new guidance. For instance, in the fourth prolongation of the Hungarian scheme, Hungary committed to submit a restructuring plan for any bank which would benefit from a recapitalisation after 31 December 2010, independently of whether the beneficiary was considered to be fundamentally sound or distressed.6 This commitment was welcomed by the Commission.

The 2013 Banking Communication had an impact on the possibilities to set up recapitalisation schemes. As explained in section 8.1.2, the 2013 Banking Communication largely abandoned the two-stage compatibility-assessment. Under this two-stage compatibility-assessment, recapitalisation measures were temporarily authorised (in case the scheme was appropriate, necessary and proportionate), while the individual assessment took place when a restructuring plan was submitted. Following the 2013 Banking Communication, recapitalisation measures could only be authorised after the Commission had approved the restructuring plan. Since the authorisation is thus dependent on the approval of a restructuring plan for each individual bank, recapitalisation schemes are no longer possible.7 There is, however, an exception for small banks.8 Since aid to small banks tends to affect competition less than aid granted to larger banks, the Commission is willing to authorise schemes for recapitalisation and restructuring of small9 banks. An example of a scheme based on point 54 of the 2013 Banking Communication is the ‘Restructuring and stabilisation scheme for the Credit Union Sector in Ireland’.10