Public funding of failing banks in the European Union (LBF vol. 19) 2020/3.3.4:3.3.4 Undertakings

Public funding of failing banks in the European Union (LBF vol. 19) 2020/3.3.4

3.3.4 Undertakings

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 State aid rules only apply where the beneficiary of the measure is an undertaking. Undertakings are entities engaged in economic activity, regardless of their legal status and the way in which they are financed.1 An economic activity is an activity consisting in offering goods and services on a market. Where the activity in question forms part of the essential functions of the State or is connected with those functions by its nature, its aim and the rules to which it is subject, the State aid rules do not apply.2

The question whether or not the beneficiary of an aid measure is an undertaking was addressed by the Commission in relation to the liquidation of the Bank of Peloponnese. The Bank of Peloponnese was put in liquidation as a result of which it would no longer carry out economic activities on the banking market. Its customer and bank deposits were transferred to a third party. The Greek Resolution Fund covered the funding gap (that is, the difference between the value of the assets and the value of the liabilities transferred from the Bank of Peloponnese to the buyer). The support by the resolution fund, that is to say the financing of the funding gap, would constitute aid to the transferred assets and liabilities within the meaning of Article 107(1) TFEU, but only if they together constituted an undertaking. In order to conclude whether there is aid to an undertaking, it should be assessed whether the transfer of the assets and liabilities entails the transfer of an economic activity. The Commission considered that the fact that loans were not transferred to the buyer but remained with the Bank of Peloponnese into liquidation, the fact that no branch was transferred and the lack of automatic transfer of labour contracts contributed to the conclusion that there was no transfer of an economic activity. The transferred liabilities (that is to say deposits) could not be considered to be the beneficiary of State support, as they do not constitute an ‘undertaking’. Therefore, the resolution support constituted neither aid to the liquidated entity nor aid to the transferred assets and liabilities.3 The Commission also considered that no State aid was provided to the buyer, since (i) the sale process was open, unconditional and non-discriminatory; (ii) the sale took place on market terms; and (iii) the bank or the government maximised the sale price for the assets and liabilities involved.4

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