Public funding of failing banks in the European Union (LBF vol. 19) 2020/3.2.1:3.2.1 The 2004 R&R Guidelines as a first resort

Public funding of failing banks in the European Union (LBF vol. 19) 2020/3.2.1

3.2.1 The 2004 R&R Guidelines as a first resort

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.

The 2004 R&R Guidelines set out the Commission’s policy for State aid control in the situation of rescuing and restructuring firms in difficulty. They applied to firms in all sectors, except for coal and steel, that were in difficulty. The assessment by the Commission of rescue and restructuring aid under the 2004 R&R Guidelines took place on the basis of Article 87(3)(c) EC Treaty (the predecessor of Article 107(3)(c) TFEU). On the basis of Article 87(3)(c) EC Treaty, the Commission could consider State aid compatible with the internal market, if it was aid to facilitate the development of certain economic activities or of certain economic areas, where this aid did not adversely affect trading conditions to an extent contrary to the common interest.

The 2004 R&R Guidelines contained a number of conditions that the Commission took into consideration in its assessment whether an aid measure could be considered compatible with the internal market as rescue or restructuring aid.

The conditions for rescue aid provided that:

a)

the rescue aid should be granted in the form of loans or loan guarantees;1

b)

within six months from the date of granting the rescue aid a re structuring or liquidation plan or proof of full reimbursement of the loans and cessation of the guarantees should be submitted;

c)

the aid measure should be restricted to the amount needed to keep the firm in business for the period of six months;

d)

the aid measure was justified on grounds of serious social difficulties and did not have unduly adverse effects which spill over into other Member States; and

e)

the beneficiary bank had not benefited from rescue or restructuring aid in the past (one time, last time principle).2

In relation to restructuring aid, the 2004 R&R Guidelines required that:

a)

the restructuring would restore the long-term viability of the failing entity;

b)

the aid had been limited to the minimum and was accompanied by a significant own contribution: at least 25% in the case of small enterprises, at least 40%, for medium-sized enterprises and at least 50% for large firms;3

c)

sufficient measures were being taken to mitigate as far as possible any adverse effects of the aid on competitors; and

d)

the beneficiary bank had not benefited from rescue or restructuring aid in the past (one time, last time principle).4

The 2004 R&R Guidelines were applied in relation to the granting of rescue and/or restructuring aid to the Danish Roskilde Bank,5 the German banks IKB6 and SachsenLB7 and the UK bank Northern Rock.8

Deze functie is alleen te gebruiken als je bent ingelogd.