| Abstract: |
In response to the recent Financial Crisis - after it had been widely accepted
that “a serious disturbance in the economy of Member States” had occurred, and
that several measures were required to remedy this disturbance, various
Commission communications were adopted and these include: The Communication on
the application of State aid rules to measures taken in relation to financial
institutions in the context of the current global financial crisis
(hereinafter "the Banking Communication"), its Communication on the
recapitalisation of financial institutions in the current financial crisis:
limitation of aid to the minimum necessary and safeguards against undue
distortions of competition (hereinafter "the Recapitalisation Communication"),
and its Communication on the return to viability and the assessment of
restructuring measures in the financial sector in the current crisis under the
State aid rules (hereinafter "the Restructuring Communication").” The Banking
Communication will constitute the focus of this study. Are rescue aids (as
distinguished from other forms of State aids) justified even where the
possibility exists that rescue attempts are unlikely to succeed? Should rescue
aids still be granted at a point when other measures such as winding down
measures and the provision of other forms of liquidity assistance could be
introduced?At what point should the Government decide upon the nationalisation
of ailing institutions? Furthermore, should State aids be provided to all
classes of financial institutions which are considered to qualify for such aid
– as stated within the Banking Communication? These questions interalia
constitute questions which are not only raised in this paper, but which this
paper aims to address through a consideration of different State aid rescue
and restructuring measures, as well as reference to two rescue aid cases,
namely those of Bradford & Bingley (State aid NN 41/2008 – United Kingdom
Rescue Aid to Bradford & Bingley) and Hypo Real Estate (State aid NN 44/2008 –
Germany Rescue Aid for Hypo Real Estate). In addition, the impact of the
recent crisis on the choice of legislation and legal basis for compatibility
assessments, will be highlighted. Whereas State aid to individual undertakings
in difficulties is usually assessed under Article 87 (3)(c) of the EC Treaty
and the Community Guidelines on State aid for rescuing and restructuring firms
in difficulty, the systemic relevance of a financial institution and the
impact of such an institution's failure on the economy, has been reflected by
the preference for Article 87(3)(b) EC Treaty and Article 107(3)(b) TFEU. |