4.4.2 State aid to a bank under resolution

Can Member States grant aid to a bank under resolution? Art. 37(10) BRRD provides for the possibility for Member States to grant State aid to banks under resolution. It must be granted through ‘government stabilisation tools’ and it is only possible when there is a bail-in of at least 8%. This means that the share holders and creditors of the bank have to contribute to loss absorption and recapitalisation (through write down, conversion or otherwise). This contribution should be equal to an amount of at least 8% of total liabilities including own funds.

In addition, Art. 37(10)(b) BRRD stresses that this extraordinary public support is conditional on prior and final approval under the Union State aid framework.1

The rules on government stabilisation tools are laid down in article 56-58 BRRD. In art. 56(1) BRRD, it is again underlined that extraordinary public support – through government financial stabilisation tools – must be granted in accordance with art. 37(10) BRRD and the Union State aid framework. Art. 56 (3) BRRD stresses that government financial stabilisation tools may only be used as a last resort.2