6.8.1 Introduction

One of the central ideas of this PhD-study is that the context matters. There is no standard way of rescuing and restructuring a beneficiary bank. This means that there are different ‘end states’. Indeed, some beneficiary banks continue to exist as a standalone entity, while other banks are being wound-down (liquidated), taken-over by another bank or split-up into a ‘good bank’ and ‘bad bank’. The ‘end state’ or final situation that the beneficiary bank finds itself in, constitutes a relevant context. Accordingly, the following contexts can be distinguished:

During the financial crisis, ING benefited from several State aid measures, such as a capital injection and an impaired asset measure. The restructuring plan for ING envisaged a spectacular downsizing of the bank: in total, ING’s balance sheet would reduce by 45%. Although ING had to reduce the size of its balance sheet by 45%, ING nonetheless continued to exist as a standalone entity.

Factor Banka, a Slovenian bank, experienced difficulties in 2013. The Slovenian State decided to wind-down Factor Banka. Factor Banka would thus not be immediately liquidated; rather, it would be wound-down over a period of three years. This orderly winding-down would allow Factor Banka to realise a significantly higher yield from the realisation of its assets (loans, securities, fixed assets, etc.) than it would be the case under immediate liquidation or bankruptcy. In order to stabilise the liability side of Factor Banka’s balance sheet while proceeding to its orderly winding down, the Slovenian State granted Factor Banka a State guarantee on newly issued debt. The purpose of State aid to a bank in the W-context is thus to allow an orderly winding down and to maintain confidence while avoiding negative spillover effects such as possible bank runs.

The T-context usually follows a nationalisation of the beneficiary bank, after which the State sells all the shares in the beneficiary bank to the acquiring bank. To give an example: the rescue and restructuring of Banco de Valencia (BVA) consisted of a takeover by CaixaBank. Following an open, transparent and competitive tender procedure, CaixaBank purchased all the shares of the FROB in BVA at a price of EUR 1. The takeover of BVA was made under the condition that the FROB would carry out a capital injection into BVA and that the FROB would grant an asset protection scheme (APS). The State aid was thus used to facilitate the take-over of BVA’s activities. In other words: while BVA ceased to exist as independent legal entity, the State aid allowed BVA’s activities to continue to exist within CaixaBank.

AB Ukio bankas was split-up into a ‘good’ part and a ‘bad’ part. In the decision on AB Ukio bankas, the ‘good’ part is referred to as the Transfer Package, while the ‘bad’ part is referred to as Rump Ukio. The ‘good’ part (approximately 80% of Ukio bank’s assets or approximately 80% of its liabilities) was sold and transferred to Siauliau bank. The ‘bad’ part (consisting of the unsold assets and liabilities remaining under the legal entity of AB Ukio Bankas) was being wound-down.