13.12.3.2 Repayment of State aid

When the bank has been granted support in the form of preference shares, CoCo’s or other (hybrid) debt instruments, the exit is achieved by repayment of these instruments. In that regard, three remarks are in order.

In the first place, it should be recalled that the Commission welcomes exit incentives. As discussed in section 8.7, a step-up clause in the remuneration may induce the bank to pay back capital to the State as quickly as possible. Exit incentives thus contribute to an early repayment.

In the second place, the Commission welcomes a clear repayment schedule.1 This can be illustrated by the case of Banco Comercial Português (BCP). This bank had committed to a “rigorous” repayment schedule of the CoCo’s, which was noted favourably by the Commission.2

In the third place, the Commission welcomes an early repayment of the State aid. This can be illustrated by the case of FHB (a Hungarian bank). FHB was recapitalised by the Hungarian State on 23 March 2009. On 19 February 2010, the capital injected by the State was already repaid. This early repayment of State aid was viewed favourably by the Commission.3 FHB also benefited from a State loan. At the time of the Restructuring Decision, FHB had already paid back four instalments of the loan, a fact which was noted favourably by the Commission.4 The early repayment – together with the fact that FHB had a small market share in the retail and corporate deposits market – led the Commission to conclude that the distortions of competition were limited.5

To conclude, exit incentives, a clear repayment schedule or an early repayment are noted positively by the Commission, because these factors ensure an exit from State aid.