3.10 Conclusion

The EU is unique in having a State aid regime under which Member States give up part of their sovereignty by requiring the approval by the Commission of State aid awards. Not all public funding qualifies as State aid. Public funding only comes within the remit of State aid control, if it is assessed to be an intervention by a Member State or through Member State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods and that affects trade between Member States.

The State aid assessment by the Commission normally starts with the request of a Member State for approval to award State aid. It remains for each Member State to determine the circumstances in which it wishes to grant State aid and the beneficiaries to whom this aid is to be granted. The Member States design the aid measure in liaison with the bank. At the end, it is however the Commission that has to approve the aid as being compatible with the internal market, which makes the process of designing the aid measure more of a trialogue. Third parties, such as the shareholders and creditors of a bank, also play their part when State aid is awarded. Sometimes far-reaching restructuring of the bank is necessary, which may include dilution, cancellation or conversion of capital instruments, write-off of debts, replacement of management, divestment etc. Especially in respect of burden-sharing, cooperation by third parties is very important, although in certain cases this was bypassed by the adoption of specific laws by Member States.

The Commission makes use of soft law instruments to inform Member States how it assesses State aid awards. The urgency, the inter-dependence of financial markets and the extraordinary size of the subsidies committed by Member States to save national banks during the GFC led the Commission to modify its ordinary decision-making practices and adopt a new set of soft laws, consisting of the Crisis Communications.1 As a result of the GFC, the Commission started to assess State aid awards in the banking sector on the basis of Article 107(3)(b) TFEU. State aid awards therefore need to be appropriate to remedy a serious disturbance in the economy of a Member State.

At the time of writing this dissertation, the Commission still assesses State aid awards on the basis of the State aid regime for the banking sector that it developed during the GFC. The temporality thereof, although still advocated by the Commission, therefore seems to be no longer reality. The idiosyncrasies of the banking sector may be a reason to create a permanent State aid regime for the banking sector, also taking into account the resolution regime that has been developed and that will be discussed in the next chapter.