1.5 Structure of the dissertation

Chapter 2 (A bank and its balance sheet) describes the basics of the funding profile of banks in order to gain a better understanding of how the State aid regime and resolution framework work. This chapter outlines what a bank is and which banking models can be distinguished. It fur thermore describes the balance sheet of a bank, its funding profile and the reasons for the special prudential treatment of banks. It continues by explaining the regulatory capital requirements that have to be met by banks and what happens if banks fail to do so. Moreover, it describes the impact of the resolution framework on the balance sheet of a bank. If there are not sufficient capital instruments and eligible liabilities on its balance sheet, the resolution of a bank will be difficult to envisage without the use of public funding. The resolution framework therefore provides for a minimum requirement for own funds and eligible liabilities (MREL). This chapter will show that the possibilities for authorities to intervene, if the MREL is breached by a bank, are still limited. Lastly, the chapter discusses funding instruments and asset measures that can be applied by banks in times of difficulty.

Chapter 3 (The State aid regime for the banking sector) describes the State aid regime for the banking sector. It starts with a description of the development of the State aid regime for the banking sector. It describes how the Commission shifted from using Article 107(3)(c) TFEU to Article 107(3)(b) TFEU for its assessment of State aid awards in the banking sector, as a result of which it started to approve State aid awards in order to ‘remedy a serious disturbance in the economy of a Member State’. It discusses the concept of State aid and the contours of the current State aid regime for the banking sector, including the legal outline and scope of the State aid regime. Moreover, the chapter dives into the assessment of State aid by the Commission in the banking sector and touches on the topic of granting State aid to a group. Lastly, this chapter discusses the consequences of awarding State aid to a bank, describing the restructuring that a bank has to undergo when receiving State aid, the consequences of the receipt of State aid for the position of third parties (such as shareholders and creditors of a bank) and judicial protection against the decisions from the Commission.

Chapter 4 (The resolution framework for the banking sector) describes the resolution framework for the banking sector, and more or less has the same structure as Chapter 3 in order to be able to assess the impact of the resolution framework on the State aid regime for the banking sector in Part 2. It starts with describing the development of the resolution framework. It subsequently discusses the legal outline and scope of the resolution framework. It analyses the relationship between the two main legislative instruments of this framework: the BRRD and SRMR. It subsequently sets out the concept of resolution and describes the process of resolution, while also paying attention to the complex relationship between the SRB and the national resolution authorities. It discusses the provisions of the resolution framework in relation to group resolution and elaborates on the treatment of the bank in resolution and third parties (such as shareholders and creditors of a bank) involved therein. It ends with discussing the judicial protection available for banks and third parties against decisions of the SRB and national resolution authorities. Chapter 4 does not discuss the provisions of the resolution framework that specifically govern public funding, as these are discussed in Part 2.

Chapter 5 (The impact of the resolution framework on the access to public funding for failing banks) describes and analyses the impact that the resolution framework has on the access to public funding as a remedy for failing banks. It first analyses the concepts of extraordinary public financial support (EPFS) and emergency liquidity assistance (ELA). It then discusses the different ways in which the resolution framework restricts the access to EPFS and ELA. Subsequently, it analyses these access restrictions. It discusses that access is restricted both in absolute and relative ways. It also discusses that the access to public funds is restricted under the resolution framework depending on in which phase (recovery, resolution or insolvency) and under which legal instrument (BRRD or SRMR) the public funds are used. Lastly, it describes potential hurdles in restricting access to public funding as a remedy for failing banks.

Chapter 6 (The impact of the resolution framework on the exercise of State aid control by the Commission) describes and analyses the impact that the resolution framework has on the exercise of State aid control by the Commission. This chapter starts with describing the different roles that the Commission has since the introduction of the resolution framework. Since then, the Commission basically has two roles. It still acts as State aid authority, but, in addition, it also acts as co-resolution authority within the SRM. The chapter then introduces the new term of ‘resolution aid’ and describes how the Commission assesses it. It then discusses the assessment by the Commission of ‘intrinsically linked provisions of the resolution framework’ as part of its State aid assessment, as well as the impact of the resolution framework on the State aid assessment outside of resolution and the assessment of the newly introduced forms of supranational funding. Lastly, it analyses the impact of the resolution framework on State aid control and discusses the tensions that exist between the different roles of the Commission and the different rules that are taken into account by the Commission in its assessment of State aid and supranational funding.

Chapter 7 (The impact of the resolution framework on the restructuring process of a failing bank) describes and analyses the impact that the resolution framework has on the restructuring process of a failing bank. It starts with describing the restructuring processes that a failing bank can be subject to after the introduction of the resolution framework. It subsequently assesses the competences of the different authorities in the restructuring process of a failing bank. It looks into the cooperation between the different authorities and the judicial protection against decisions of these authorities. It continues with a discussion of the burden-sharing obligations of the shareholders/creditors of a failing bank under the resolution framework and the State aid regime for the banking sector. Lastly, it analyses the consequences of the co-existence of the State aid regime for the banking sector and the resolution framework for the restructuring process of a failing bank, and identifies any challenges in this process as a result thereof.

Chapter 8 contains the conclusion. It starts with a retrospective on Part 1 of this dissertation. Subsequently, it discusses the assessments that have been made in Part 2 with respect to the impact of the resolution framework on the access to public funding as a remedy for failing banks, the exercise of State aid control by the Commission and the restructuring process of a failing bank. It summarises the hurdles, tensions and challenges that are identified as part of these impact assessments. It also discusses potential steps to address these hurdles, tensions and challenges and presents some thoughts on the further development of the regulation of public funding within the European Banking Union. The chapter ends with a reflection on the contribution of the resolution framework to solving the inadequacies revealed by the GFC.