State aid to banks (IVOR nr. 109) 2018/4.4.3:4.4.3 Relevance of the State aid control framework

State aid to banks (IVOR nr. 109) 2018/4.4.3

4.4.3 Relevance of the State aid control framework

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Is the State aid control framework still relevant when a bank is rescued under the recovery and resolution-framework? This question should be answered in the affirmative. In the BRRD as well as in the SRM-Regulation, references to the State aid rules can be found. The relevance of the State aid framework is already highlighted in the recitals of the BRRD and SRM-Regulation.

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Recital 47 BRRD underlines that when the use of the resolution tools involves the granting of State aid, interventions have to be assessed in accordance with the Union State aid framework. Recital 47 BRRD further stipulates that State aid may be involved where resolution funds or deposit guarantee funds intervene to assist in the resolution of an ailing bank.

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Recital 55 BRRD stresses that the resolution tools should be applied before any extraordinary public financial support to the bank. Recital 55 BRRD further provides that the use of extraordinary public support, resolution funds or deposit guarantee schemes to assist in the resolution of failing institutions should comply with the rules on State aid.

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Recital 30 SRM-Regulation provides that “where resolution action would involve the granting of State aid pursuant to Article 107(1) TFEU or as Fund aid, a resolution decision can be adopted after the Commission has adopted a positive or conditional decision concerning the compatibility of the use of such aid with the internal market”.

Already in its Proposal for a SRM-Regulation, the Commission stressed that “within the SRM, the State aid control of the Commission would be preserved in all circumstances”.1

The procedure concerning State aid and Fund aid is laid down in article 19 SRM-Regulation. Pursuant to Art. 19(3) SRM-Regulation, the SRB shall, to the extent that the resolution action involves the use of the Fund, notify the Commission of the proposed use of the Fund. This notification shall trigger a preliminary investigation by the Commission during the course of which the Commission may request further information from the SRB. Art. 19(3) SRM- Regulation further provides that the Commission shall assess whether the use of the Fund would distort, or threaten to distort, competition by favouring the beneficiary or any other undertaking so as, insofar as it would affect trade between Member States, to be incompatible with the internal market. The Commission shall apply to the use of the Fund the criteria established for the application of State aid rules as enshrined in Article 107 TFEU.

The Commission shall adopt a decision on the compatibility of the use ofthe Fund with the internal market, which shall be addressed to the SRB and to the national resolution authorities of the Member State or Member States concerned. That decision may be contingent on conditions, commitments or undertakings in respect of the beneficiary.

Art. 44 SRM-Regulation provides that the SRB shall act in compliance with Union law, in particular with the Council and the Commission decisions pursuant to the SRM-Regulation.

Drijber remarked that the State aid rules apply by analogy to Fund aid. If Fund aid would directly qualify as State aid, then there would be no need for laying down the procedure in Art. 19 of the SRM-Regulation.2 Though the terms “by analogy” cannot be found in the SRM-Regulation, the Commission made use of these terms in its Proposal for a SRM-Regulation:

“Where no State aid is present in the use of the Fund, the criteria estab lished for the application of Article 107 of the TFEU should be applied, by way of analogy, as a precondition for the adoption of a decision to place a bank under resolution, in order to preserve the integrity of the internal market between participating and nonparticipating Member States.”3 [Italics mine, REvL]

Consistency between the recovery and resolution framework and the State aid control framework is also ensured as regards the business reorganisation plan. Where the bail-in tool is used to recapitalise the bank, a business reorganisation plan should be drawn up and implemented.4Art. 52(1) BRRD provides that this business reorganisation plan should be compatible with the restructuring plan that is required under the State aid framework.5 Noteworthy is also that in the Delegated Regulation of 10 May 2016, the Commission explicitly indicated that the Crisis Communications “may provide useful reference for the elaboration of the business reorganisation plan even where no State aid has been granted, since they share with the business reorganisation plan the objective of restoring the institution or entity’s longterm viability”.6

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