# Official Journal L 203/2016

| | ISSN 1977-0677 |
| --- | --- |
| Official Journal
  of the European Union | L 203 |
| | |
| English edition | Legislation | Volume 5928 July 2016 |

ISSN 1977-0677

Official Journal

of the European Union

L 203

English edition

Legislation

Volume 5928 July 2016

---

| Contents | | II   Non-legislative acts | page |
| --- | --- | --- | --- |
| | | DECISIONS |
| | * | Commission Decision (EU) 2016/1208 of 23 December 2015 on State aid granted by Italy to the bank Tercas (Case SA.39451 (2015/C) (ex 2015/NN))
  (notified under document C(2015) 9526)

   (
  1
  ) | 1 |
| | * | Commission Implementing Decision (EU) 2016/1209 of 12 July 2016 replacing the Annex to Commission Implementing Decision 2013/115/EU on the SIRENE Manual and other implementing measures for the second generation Schengen Information System (SIS II)
  (notified under document C(2016) 4283) | 35 |

Contents

II   Non-legislative acts

page

DECISIONS

*

Commission Decision (EU) 2016/1208 of 23 December 2015 on State aid granted by Italy to the bank Tercas (Case SA.39451 (2015/C) (ex 2015/NN))
  (notified under document C(2015) 9526)

   (
  1
  )

(notified under document C(2015) 9526)

1

1

*

Commission Implementing Decision (EU) 2016/1209 of 12 July 2016 replacing the Annex to Commission Implementing Decision 2013/115/EU on the SIRENE Manual and other implementing measures for the second generation Schengen Information System (SIS II)
  (notified under document C(2016) 4283)

(notified under document C(2016) 4283)

35

| | |
| --- | --- |
| | (1)   Text with EEA relevance |

---

(1)   Text with EEA relevance

1

| EN | Acts whose titles are printed in light type are those relating to day-to-day management of agricultural matters, and are generally valid for a limited period.
  The titles of all other Acts are printed in bold type and preceded by an asterisk. |
| --- | --- |

EN

Acts whose titles are printed in light type are those relating to day-to-day management of agricultural matters, and are generally valid for a limited period.

The titles of all other Acts are printed in bold type and preceded by an asterisk.

---

II Non-legislative acts

DECISIONS

| 28.7.2016 | EN | Official Journal of the European Union | L 203/1 |
| --- | --- | --- | --- |

28.7.2016

EN

Official Journal of the European Union

L 203/1

---

COMMISSION DECISION (EU) 2016/1208

of 23 December 2015

on State aid granted by Italy to the bank Tercas (Case SA.39451 (2015/C) (ex 2015/NN))

(notified under document C(2015) 9526)

(Only the Italian text is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments pursuant to the provisions cited above (1),

Whereas:

1.   PROCEDURE

PROCEDURE

| (1) | From press reports and from the websites of the bank Tercas — Cassa di Risparmio della Provincia di Teramo SpA and of the Italian deposit guarantee scheme, the Fondo Interbancario di Tutela dei Depositi (‘FITD’ or ‘the Fund’), the Commission learnt that the FITD had taken steps to support the bank. |
| --- | --- |

(1)

From press reports and from the websites of the bank Tercas — Cassa di Risparmio della Provincia di Teramo SpA and of the Italian deposit guarantee scheme, the Fondo Interbancario di Tutela dei Depositi (‘FITD’ or ‘the Fund’), the Commission learnt that the FITD had taken steps to support the bank.

| (2) | On 8 August and 10 October 2014, the Commission requested information from Italy, to which Italy replied on 16 September and 14 November 2014. |
| --- | --- |

(2)

On 8 August and 10 October 2014, the Commission requested information from Italy, to which Italy replied on 16 September and 14 November 2014.

| (3) | By letter dated 27 February 2015 (‘the opening decision’), the Commission informed Italy that it had decided to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (‘the Treaty’) in respect of the aid. |
| --- | --- |

(3)

By letter dated 27 February 2015 (‘the opening decision’), the Commission informed Italy that it had decided to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (‘the Treaty’) in respect of the aid.

| (4) | The opening decision was published in the Official Journal of the European Union on 24 April 2015 (2). The Commission invited interested parties to submit their comments on the aid. |
| --- | --- |

(4)

The opening decision was published in the Official Journal of the European Union on 24 April 2015 (2). The Commission invited interested parties to submit their comments on the aid.

Official Journal of the European Union

2

| (5) | On 2 April 2015, the Commission received comments from Italy. |
| --- | --- |

(5)

On 2 April 2015, the Commission received comments from Italy.

| (6) | On 22 May 2015, the Commission received comments from two interested parties, namely Tercas — Cassa di Risparmio della Provincia di Teramo SpA and Banca Popolare di Bari SCpA (‘BPB’). |
| --- | --- |

(6)

On 22 May 2015, the Commission received comments from two interested parties, namely Tercas — Cassa di Risparmio della Provincia di Teramo SpA and Banca Popolare di Bari SCpA (‘BPB’).

| (7) | On the same day, it received comments from the FITD and from the Italian central bank, the Banca d'Italia. |
| --- | --- |

(7)

On the same day, it received comments from the FITD and from the Italian central bank, the Banca d'Italia.

| (8) | On 9 June 2015, it forwarded those comments to Italy, and gave it the opportunity to reply. Italy informed the Commission that it did not have observations on the comments. |
| --- | --- |

(8)

On 9 June 2015, it forwarded those comments to Italy, and gave it the opportunity to reply. Italy informed the Commission that it did not have observations on the comments.

| (9) | On 13 August and 17 September 2015 two meetings were held with Italy and the interested parties. At those meetings Italy developed the arguments set out in its earlier official communications. |
| --- | --- |

(9)

On 13 August and 17 September 2015 two meetings were held with Italy and the interested parties. At those meetings Italy developed the arguments set out in its earlier official communications.

2.   BACKGROUND

BACKGROUND

2.1.   Tercas

Tercas

| (10) | Tercas — Cassa di Risparmio della Provincia di Teramo SpA is the holding company of a banking group (‘Tercas’) that operates mainly in the Abruzzo region. At the end of 2011, the main shareholder in the holding company was Fondazione Tercas, which had a 65 % stake at that time. |
| --- | --- |

(10)

Tercas — Cassa di Risparmio della Provincia di Teramo SpA is the holding company of a banking group (‘Tercas’) that operates mainly in the Abruzzo region. At the end of 2011, the main shareholder in the holding company was Fondazione Tercas, which had a 65 % stake at that time.

| (11) | At the end of 2011, Tercas included Banca Caripe SpA (‘Caripe’), a regional bank active mainly in the Abruzzo region, which was acquired by Tercas at the end of 2010, with a 90 % stake, and was consolidated in Tercas's financial reports. Tercas had capital of EUR 50 million and reserves of EUR 311 million. |
| --- | --- |

(11)

At the end of 2011, Tercas included Banca Caripe SpA (‘Caripe’), a regional bank active mainly in the Abruzzo region, which was acquired by Tercas at the end of 2010, with a 90 % stake, and was consolidated in Tercas's financial reports. Tercas had capital of EUR 50 million and reserves of EUR 311 million.

| (12) | Likewise at the end of 2011, Tercas had a consolidated total balance sheet of EUR 5,3 billion, EUR 4,5 billion in net customer loans, EUR 2,7 billion in customer deposits, 165 branches and 1 225 employees. |
| --- | --- |

(12)

Likewise at the end of 2011, Tercas had a consolidated total balance sheet of EUR 5,3 billion, EUR 4,5 billion in net customer loans, EUR 2,7 billion in customer deposits, 165 branches and 1 225 employees.

| (13) | On 17 April 2012, after conducting an inspection of Tercas (3), the Banca d'Italia recommended that the Italian Minister for Economic Affairs and Finance should put Tercas under special administration pursuant to Article 70 of the Italian Banking Act (the Testo Unico Bancario). |
| --- | --- |

(13)

On 17 April 2012, after conducting an inspection of Tercas (3), the Banca d'Italia recommended that the Italian Minister for Economic Affairs and Finance should put Tercas under special administration pursuant to Article 70 of the Italian Banking Act (the Testo Unico Bancario).

3

Testo Unico Bancario

| (14) | On 30 April 2012, the Minister for Economic Affairs and Finance made an order putting Tercas under special administration (4). The Banca d'Italia appointed a special administrator (commissario straordinario) to ascertain the situation, correct irregularities and promote solutions in the interests of depositors. |
| --- | --- |

(14)

On 30 April 2012, the Minister for Economic Affairs and Finance made an order putting Tercas under special administration (4). The Banca d'Italia appointed a special administrator (commissario straordinario) to ascertain the situation, correct irregularities and promote solutions in the interests of depositors.

4

commissario straordinario

| (15) | In the search for a solution to Tercas's difficulties the special administrator assessed various possibilities. Initially the administrator considered two options in which Tercas would be recapitalised either by Fondazione Tercas (Tercas's main shareholder) or by Credito Valtellinese (a shareholder with a 7,8 % stake), but then discarded them. |
| --- | --- |

(15)

In the search for a solution to Tercas's difficulties the special administrator assessed various possibilities. Initially the administrator considered two options in which Tercas would be recapitalised either by Fondazione Tercas (Tercas's main shareholder) or by Credito Valtellinese (a shareholder with a 7,8 % stake), but then discarded them.

| (16) | In October 2013, in agreement with the Banca d'Italia, the special administrator entered into contact with BPB, which manifested an interest in injecting capital into Tercas, subject to a due diligence inquiry into the assets of Tercas and of Caripe and on condition that Tercas's negative equity was covered in full by the FITD. |
| --- | --- |

(16)

In October 2013, in agreement with the Banca d'Italia, the special administrator entered into contact with BPB, which manifested an interest in injecting capital into Tercas, subject to a due diligence inquiry into the assets of Tercas and of Caripe and on condition that Tercas's negative equity was covered in full by the FITD.

| (17) | On 25 October 2013, on the basis of Article 29 of the FITD's constitution (Statuto), the special administrator asked the FITD to provide support worth up to EUR 280 million in the form of a recapitalisation to cover Tercas's negative equity at 30 September 2013 and a commitment by the FITD to acquire impaired assets. |
| --- | --- |

(17)

On 25 October 2013, on the basis of Article 29 of the FITD's constitution (Statuto), the special administrator asked the FITD to provide support worth up to EUR 280 million in the form of a recapitalisation to cover Tercas's negative equity at 30 September 2013 and a commitment by the FITD to acquire impaired assets.

Statuto

| (18) | At a meeting on 28 October 2013 the Executive Committee (Comitato di gestione) of the FITD decided to support Tercas, in accordance with Article 96-ter(1)(d) of the Banking Act, for an amount up to EUR 280 million. The decision to intervene was ratified by the FITD's Board (Consiglio) on 29 October 2013. |
| --- | --- |

(18)

At a meeting on 28 October 2013 the Executive Committee (Comitato di gestione) of the FITD decided to support Tercas, in accordance with Article 96-ter(1)(d) of the Banking Act, for an amount up to EUR 280 million. The decision to intervene was ratified by the FITD's Board (Consiglio) on 29 October 2013.

Comitato di gestione

ter

Consiglio

| (19) | On 30 October 2013, the FITD asked the Banca d'Italia for authorisation for that support measure: on 4 November 2013, the Banca d'Italia granted the authorisation. Ultimately, however, the FITD did not put the measure into effect. |
| --- | --- |

(19)

On 30 October 2013, the FITD asked the Banca d'Italia for authorisation for that support measure: on 4 November 2013, the Banca d'Italia granted the authorisation. Ultimately, however, the FITD did not put the measure into effect.

| (20) | A due diligence inquiry into Tercas's assets ended on 18 March 2014 with disagreement between the experts of the FITD and those of the banking group (‘BPB’) controlled by the holding company Banca Popolare di Bari SCpA. The issue was settled after the parties agreed to arbitration by an arbitrator designated by the Banca d'Italia. The due diligence inquiry disclosed further impairments of assets. |
| --- | --- |

(20)

A due diligence inquiry into Tercas's assets ended on 18 March 2014 with disagreement between the experts of the FITD and those of the banking group (‘BPB’) controlled by the holding company Banca Popolare di Bari SCpA. The issue was settled after the parties agreed to arbitration by an arbitrator designated by the Banca d'Italia. The due diligence inquiry disclosed further impairments of assets.

| (21) | On 1 July 2014, the FITD once again asked the Banca d'Italia to authorise support for Tercas, but on modified terms. |
| --- | --- |

(21)

On 1 July 2014, the FITD once again asked the Banca d'Italia to authorise support for Tercas, but on modified terms.

| (22) | The Banca d'Italia authorised that support, on modified terms (5), on 7 July 2014. |
| --- | --- |

(22)

The Banca d'Italia authorised that support, on modified terms (5), on 7 July 2014.

5

| (23) | The Banca d'Italia authorised Tercas's special administrator to call an extraordinary shareholders' meeting on 27 July 2014, which was to decide on measures to cover the losses which had occurred during the special administration and on a simultaneous capital increase of EUR 230 million, to be subscribed by BPB. |
| --- | --- |

(23)

The Banca d'Italia authorised Tercas's special administrator to call an extraordinary shareholders' meeting on 27 July 2014, which was to decide on measures to cover the losses which had occurred during the special administration and on a simultaneous capital increase of EUR 230 million, to be subscribed by BPB.

| (24) | Losses in Tercas in the period from 1 January 2012 to 31 March 2014 amounted to EUR 603 million. After a complete write-down of the remaining capital of EUR 337 million, Tercas's net equity on 31 March 2014 was therefore negative, and amounted to — EUR 266 million (6). |
| --- | --- |

(24)

Losses in Tercas in the period from 1 January 2012 to 31 March 2014 amounted to EUR 603 million. After a complete write-down of the remaining capital of EUR 337 million, Tercas's net equity on 31 March 2014 was therefore negative, and amounted to — EUR 266 million (6).

6

| (25) | On 27 July 2014, the Tercas shareholders' meeting (7) decided:






  (1) | to partially cover the losses, inter alia, by reducing the capital to zero and cancelling all the ordinary shares in circulation; and |
| --- | --- | --- |

(25)

On 27 July 2014, the Tercas shareholders' meeting (7) decided:

7

(1)

to partially cover the losses, inter alia, by reducing the capital to zero and cancelling all the ordinary shares in circulation; and

| (2) | to increase the capital to EUR 230 million, by issuing new ordinary shares to be offered exclusively to BPB; that capital increase took place on 27 July 2014 and was paid for partly by offsetting a EUR 480 million loan granted to Tercas by BPB on 5 November 2013. |
| --- | --- |

(2)

to increase the capital to EUR 230 million, by issuing new ordinary shares to be offered exclusively to BPB; that capital increase took place on 27 July 2014 and was paid for partly by offsetting a EUR 480 million loan granted to Tercas by BPB on 5 November 2013.

| (26) | In September 2014, Tercas recapitalised its subsidiary Caripe by means of a capital injection of EUR 75 million. |
| --- | --- |

(26)

In September 2014, Tercas recapitalised its subsidiary Caripe by means of a capital injection of EUR 75 million.

| (27) | On 1 October 2014 Tercas left special administration, and new management was appointed by BPB. |
| --- | --- |

(27)

On 1 October 2014 Tercas left special administration, and new management was appointed by BPB.

| (28) | On 30 September 2014, at the end of the special administration, Tercas had total assets of EUR 2 994 million, customer deposits of EUR 2 198, net performing loans of EUR 1 766 million, provisions for non-performing loans of EUR 716 million, and total tier 1 capital of EUR 182 million (8). |
| --- | --- |

(28)

On 30 September 2014, at the end of the special administration, Tercas had total assets of EUR 2 994 million, customer deposits of EUR 2 198, net performing loans of EUR 1 766 million, provisions for non-performing loans of EUR 716 million, and total tier 1 capital of EUR 182 million (8).

8

| (29) | In March 2015, BPB subscribed a new increase in Tercas's capital for an amount of EUR 135,4 million (including EUR 40,4 million for its subsidiary Caripe), to cope with additional losses incurred in the fourth quarter of 2014, to cover restructuring costs in 2015 and 2016, and to improve Tercas's capital ratios. |
| --- | --- |

(29)

In March 2015, BPB subscribed a new increase in Tercas's capital for an amount of EUR 135,4 million (including EUR 40,4 million for its subsidiary Caripe), to cope with additional losses incurred in the fourth quarter of 2014, to cover restructuring costs in 2015 and 2016, and to improve Tercas's capital ratios.

2.2.   BPB

BPB

| (30) | Banca Popolare di Bari SCpA is the holding company of the banking group BPB. BPB operates mainly in the south of Italy. At the end of 2013, BPB had a balance sheet total of EUR 10,3 billion, customer loans of EUR 6,9 billion, customer deposits of EUR 6,6 billion, 247 branches and 2 206 employees, a tier 1 capital ratio of 8,1 % and a total capital ratio of 11 %. |
| --- | --- |

(30)

Banca Popolare di Bari SCpA is the holding company of the banking group BPB. BPB operates mainly in the south of Italy. At the end of 2013, BPB had a balance sheet total of EUR 10,3 billion, customer loans of EUR 6,9 billion, customer deposits of EUR 6,6 billion, 247 branches and 2 206 employees, a tier 1 capital ratio of 8,1 % and a total capital ratio of 11 %.

| (31) | In December 2014, BPB carried out a capital increase of EUR 500 million, comprising the issuance of new shares up to EUR 300 million and the issuance of a tier 2 subordinated loan of up to EUR 200 million. The capital increase served to reinforce BPB's capital ratios, which had been affected by the acquisition of Tercas. |
| --- | --- |

(31)

In December 2014, BPB carried out a capital increase of EUR 500 million, comprising the issuance of new shares up to EUR 300 million and the issuance of a tier 2 subordinated loan of up to EUR 200 million. The capital increase served to reinforce BPB's capital ratios, which had been affected by the acquisition of Tercas.

2.3.   The Italian deposit guarantee scheme and the FITD

The Italian deposit guarantee scheme and the FITD

| (32) | Under Directive 94/19/EC of the European Parliament and of the Council (9), which was applicable at the time when the FITD intervention in relation to Tercas took place, no credit institution may take deposits unless it is a member of an officially recognised deposit guarantee scheme (10). According to Article 96 of the Italian Banking Act, ‘Italian banks shall be members of a deposit guarantee scheme established and recognised in Italy. Mutual banks (banche di credito cooperativo) shall be members of the deposit guarantee scheme established within their network’ (11). |
| --- | --- |

(32)

Under Directive 94/19/EC of the European Parliament and of the Council (9), which was applicable at the time when the FITD intervention in relation to Tercas took place, no credit institution may take deposits unless it is a member of an officially recognised deposit guarantee scheme (10). According to Article 96 of the Italian Banking Act, ‘Italian banks shall be members of a deposit guarantee scheme established and recognised in Italy. Mutual banks (banche di credito cooperativo) shall be members of the deposit guarantee scheme established within their network’ (11).

9

10

banche di credito cooperativo

11

| (33) | There are currently two deposit guarantee schemes established in Italy:






  (1) | The FITD, which was recognised as a deposit guarantee scheme on 10 December 1996, is a mandatory consortium (12) formed under private law. To date, it is the only established and recognised Italian deposit guarantee scheme whose membership is open to banks other than mutual banks (13). According to Article 2 of the FITD's constitution, approved by the Banca d'Italia: ‘Italian banks shall be members of the Fund, with the exception of mutual banks’. |
| --- | --- | --- |

(33)

There are currently two deposit guarantee schemes established in Italy:

(1)

The FITD, which was recognised as a deposit guarantee scheme on 10 December 1996, is a mandatory consortium (12) formed under private law. To date, it is the only established and recognised Italian deposit guarantee scheme whose membership is open to banks other than mutual banks (13). According to Article 2 of the FITD's constitution, approved by the Banca d'Italia: ‘Italian banks shall be members of the Fund, with the exception of mutual banks’.

12

13

| (2) | The Fondo di Garanzia dei Depositanti del Credito Cooperativo is a statutory deposit guarantee scheme whose membership is open only to mutual banks, which are required to be members. |
| --- | --- |

(2)

The Fondo di Garanzia dei Depositanti del Credito Cooperativo is a statutory deposit guarantee scheme whose membership is open only to mutual banks, which are required to be members.

| (34) | Under Article 96-bis of the Banking Act and Article 29 of the FITD's constitution, the FITD may under certain conditions take measures to support members that are subject to special administration. |
| --- | --- |

(34)

Under Article 96-bis of the Banking Act and Article 29 of the FITD's constitution, the FITD may under certain conditions take measures to support members that are subject to special administration.

bis

| (35) | Such measures are financed ex post, by mandatory contributions provided by the member banks. The amount of the individual contribution is determined under the relevant provisions of the FITD's constitution (14) in proportion to the guaranteed deposits held by each bank. Contributions are not entered directly in the FITD's balance sheet, but in a separate account for the particular support measure. |
| --- | --- |

(35)

Such measures are financed ex post, by mandatory contributions provided by the member banks. The amount of the individual contribution is determined under the relevant provisions of the FITD's constitution (14) in proportion to the guaranteed deposits held by each bank. Contributions are not entered directly in the FITD's balance sheet, but in a separate account for the particular support measure.

ex post,

14

| (36) | Decisions on support measures are taken by the two governing bodies of the FITD:






  (1) | First there is the Board (15), which decides by absolute majority of the members present at the meeting when the decision is taken. The Chairman of the Board is appointed by the members of the Board. The ordinary members are selected in proportion to the guaranteed deposits held by each bank, thus favouring larger contributors, but ensuring that smaller banks are also represented (16). The ordinary members of the Board, currently 23, are for the most part representatives of the largest member banks (17); at present there are two representatives each from Unicredit, Intesa Sanpaolo and Monte dei Paschi di Siena. The Chairman of the Associazione Bancaria Italiana (ABI) is also a member of the Board. |
| --- | --- | --- |

(36)

Decisions on support measures are taken by the two governing bodies of the FITD:

(1)

First there is the Board (15), which decides by absolute majority of the members present at the meeting when the decision is taken. The Chairman of the Board is appointed by the members of the Board. The ordinary members are selected in proportion to the guaranteed deposits held by each bank, thus favouring larger contributors, but ensuring that smaller banks are also represented (16). The ordinary members of the Board, currently 23, are for the most part representatives of the largest member banks (17); at present there are two representatives each from Unicredit, Intesa Sanpaolo and Monte dei Paschi di Siena. The Chairman of the Associazione Bancaria Italiana (ABI) is also a member of the Board.

15

16

17

| (2) | The other governing body is the Executive Committee (18), which decides by simple majority of the members present at the meeting when the decision is taken. Its members are the Chairman of the Board, the Deputy Chairman of the Board, who also acts as Deputy Chairman of the Committee, and six other members of the Board. |
| --- | --- |

(2)

The other governing body is the Executive Committee (18), which decides by simple majority of the members present at the meeting when the decision is taken. Its members are the Chairman of the Board, the Deputy Chairman of the Board, who also acts as Deputy Chairman of the Committee, and six other members of the Board.

18

| (37) | Support measures in the form of financing and guarantees are decided by the Executive Committee (19), while the acquisition of equity interests and other technical support has to be decided by the Board, on a proposal from the Executive Committee (20). |
| --- | --- |

(37)

Support measures in the form of financing and guarantees are decided by the Executive Committee (19), while the acquisition of equity interests and other technical support has to be decided by the Board, on a proposal from the Executive Committee (20).

19

20

3.   THE MEASURES

THE MEASURES

| (38) | The FITD support authorised by the Banca d'Italia on 7 July 2014 consists of the following measures:
  (1)   
  Measure 1
  : EUR 265 million as a non-repayable contribution to cover Tercas's negative equity.
  (2)   
  Measure 2
  : EUR 35 million as a three-year guarantee to cover the credit risk associated with certain exposures of Tercas towards [...] (21). Those exposures (two bullet loans maturing on 31 March 2015) were fully repaid by the debtors at maturity, and hence the guarantee expired without being triggered.
  (3)   
  Measure 3
  : Up to EUR 30 million as a guarantee to cover additional costs that might arise from the payment of tax on Measure 1. Such tax payments would be necessary if Measure 1 were not to be considered tax exempt under Italian law (*1). Under the relevant legislation, the specific tax exemption for support measures taken by the FITD was to be subject to the approval of the European Commission. In the event, the FITD paid out the full amount of EUR 30 million to Tercas before the Commission had taken a decision on the tax exemption. |
| --- | --- |

(38)

The FITD support authorised by the Banca d'Italia on 7 July 2014 consists of the following measures:

(1)   
  Measure 1
  : EUR 265 million as a non-repayable contribution to cover Tercas's negative equity.

Measure 1

(2)   
  Measure 2
  : EUR 35 million as a three-year guarantee to cover the credit risk associated with certain exposures of Tercas towards [...] (21). Those exposures (two bullet loans maturing on 31 March 2015) were fully repaid by the debtors at maturity, and hence the guarantee expired without being triggered.

Measure 2

21

(3)   
  Measure 3
  : Up to EUR 30 million as a guarantee to cover additional costs that might arise from the payment of tax on Measure 1. Such tax payments would be necessary if Measure 1 were not to be considered tax exempt under Italian law (*1). Under the relevant legislation, the specific tax exemption for support measures taken by the FITD was to be subject to the approval of the European Commission. In the event, the FITD paid out the full amount of EUR 30 million to Tercas before the Commission had taken a decision on the tax exemption.

Measure 3

*1

4.   GROUNDS FOR INITIATING THE PROCEDURE

GROUNDS FOR INITIATING THE PROCEDURE

| (39) | In the opening decision, the Commission came to the preliminary conclusion that the measures, which had not been notified, might contain State aid within the meaning of Article 107 of the Treaty, and that there were doubts as to their compatibility with the internal market. |
| --- | --- |

(39)

In the opening decision, the Commission came to the preliminary conclusion that the measures, which had not been notified, might contain State aid within the meaning of Article 107 of the Treaty, and that there were doubts as to their compatibility with the internal market.

| (40) | The Commission's preliminary finding was that the support measures to be taken by the FITD were imputable to the Italian State, and that FITD's resources were under public control. The FITD was acting in accordance with a public mandate laid down by the State: the basis for the recognition of the FITD as a mandatory deposit guarantee scheme was the Banking Act, Article 96-bis of the Banking Act allowed the FITD to intervene in ways other than reimbursing depositors in the event of a liquidation, and the constitution of the FITD was approved by the Banca d'Italia. In addition, when the FITD intervened in cases other than liquidations, or by other means, it always had to have authorisation by the Italian State via the Banca d'Italia. |
| --- | --- |

(40)

The Commission's preliminary finding was that the support measures to be taken by the FITD were imputable to the Italian State, and that FITD's resources were under public control. The FITD was acting in accordance with a public mandate laid down by the State: the basis for the recognition of the FITD as a mandatory deposit guarantee scheme was the Banking Act, Article 96-bis of the Banking Act allowed the FITD to intervene in ways other than reimbursing depositors in the event of a liquidation, and the constitution of the FITD was approved by the Banca d'Italia. In addition, when the FITD intervened in cases other than liquidations, or by other means, it always had to have authorisation by the Italian State via the Banca d'Italia.

bis

| (41) | On the question whether there was a selective advantage, the Commission observed that the FITD was not acting in the capacity of an operator in a market economy, since it was granting a non-repayable contribution to cover the negative equity, and for the guarantees issued in favour of Tercas it did not charge any fee. The measures permitted Tercas to avoid exiting the market, as it would likely have had to do in the absence of such support. |
| --- | --- |

(41)

On the question whether there was a selective advantage, the Commission observed that the FITD was not acting in the capacity of an operator in a market economy, since it was granting a non-repayable contribution to cover the negative equity, and for the guarantees issued in favour of Tercas it did not charge any fee. The measures permitted Tercas to avoid exiting the market, as it would likely have had to do in the absence of such support.

| (42) | The Commission came to the preliminary conclusion that the measures were selective, given that they related to Tercas only, and that they distorted competition by preventing Tercas from becoming insolvent and exiting the market. And Tercas was in competition with foreign undertakings, so that trade between Member States was affected. |
| --- | --- |

(42)

The Commission came to the preliminary conclusion that the measures were selective, given that they related to Tercas only, and that they distorted competition by preventing Tercas from becoming insolvent and exiting the market. And Tercas was in competition with foreign undertakings, so that trade between Member States was affected.

| (43) | The Commission considered that if measures 1, 2 and 3 constituted aid they had been granted in breach of the obligations laid down by Article 108(3) of the Treaty. |
| --- | --- |

(43)

The Commission considered that if measures 1, 2 and 3 constituted aid they had been granted in breach of the obligations laid down by Article 108(3) of the Treaty.

5.   COMMENTS FROM ITALY AND INTERESTED PARTIES

COMMENTS FROM ITALY AND INTERESTED PARTIES

5.1.   State resources and imputability to the State

State resources and imputability to the State

5.1.1.   Observations from Italy (22)

Observations from Italy

22

| (44) | Italy submits that the support measures at issue are not of a mandatory nature, since the time, extent and choice of measures are left entirely to the FITD's discretion. Furthermore, those measures are not directly comparable to the mandatory missions laid down by the Banking Act: instead they are directly aimed at achieving a different purpose, or in any case an additional purpose, namely turning around banks in difficulty. Any coincidence of aims with respect to the protection of depositors is purely fortuitous. In that context, the Commission's reference to the judgment in the Austrian Green Electricity Act case (23) is misplaced. That case concerned a rule establishing a tax exemption, which by definition was of a public nature and hence justified the presumption of imputability of the measure to the State. |
| --- | --- |

(44)

Italy submits that the support measures at issue are not of a mandatory nature, since the time, extent and choice of measures are left entirely to the FITD's discretion. Furthermore, those measures are not directly comparable to the mandatory missions laid down by the Banking Act: instead they are directly aimed at achieving a different purpose, or in any case an additional purpose, namely turning around banks in difficulty. Any coincidence of aims with respect to the protection of depositors is purely fortuitous. In that context, the Commission's reference to the judgment in the Austrian Green Electricity Act case (23) is misplaced. That case concerned a rule establishing a tax exemption, which by definition was of a public nature and hence justified the presumption of imputability of the measure to the State.

Austrian Green Electricity Act

23

| (45) | Furthermore, Italy claims that the interpretation proposed by the Commission, which is based on a form of presumption that there is State aid in any intervention whatsoever by a deposit guarantee scheme, has no basis in Directive 2014/49/EU of the European Parliament and of the Council (24) (which had not been transposed by Italy and for which the transposition deadline had not yet expired at the time of adoption of the measures). The Commission's interpretation of this point has no basis in the 2013 Banking Communication either (25). More specifically, under point 63 of the Communication, to establish whether any given decision on the use of deposit guarantee funds is imputable to the State a specific case-by-case assessment has to be carried out, while Article 11 of Directive 2014/49/EU does not impose a general obligation to give prior notice of any measure to be taken by a guarantee fund. Prior notification to the Commission is necessary only if it is established that a support measure constitutes aid following an examination of the specific case. |
| --- | --- |

(45)

Furthermore, Italy claims that the interpretation proposed by the Commission, which is based on a form of presumption that there is State aid in any intervention whatsoever by a deposit guarantee scheme, has no basis in Directive 2014/49/EU of the European Parliament and of the Council (24) (which had not been transposed by Italy and for which the transposition deadline had not yet expired at the time of adoption of the measures). The Commission's interpretation of this point has no basis in the 2013 Banking Communication either (25). More specifically, under point 63 of the Communication, to establish whether any given decision on the use of deposit guarantee funds is imputable to the State a specific case-by-case assessment has to be carried out, while Article 11 of Directive 2014/49/EU does not impose a general obligation to give prior notice of any measure to be taken by a guarantee fund. Prior notification to the Commission is necessary only if it is established that a support measure constitutes aid following an examination of the specific case.

24

25

| (46) | As regards the imputability of the FITD measure to Italy, Italy bases its analysis on the test of imputability developed in Stardust Marine (26), which it contends is not satisfied in the case at hand, for the following reasons. First, the FITD is a private-law entity and takes all its decisions through its general meeting and governing bodies, whose membership is composed entirely of representatives of the member banks and which acts in complete independence. The decision-making process for support measures is entirely independent, and there is no provision for the active involvement of the Banca d'Italia or any other public body. The fact that a representative of the Banca d'Italia participates in the meetings of the FITD's governing bodies cannot be construed as an indicator of the Banca d'Italia's active participation in the decision-making process, since the role of the representative is merely that of a passive observer. |
| --- | --- |

(46)

As regards the imputability of the FITD measure to Italy, Italy bases its analysis on the test of imputability developed in Stardust Marine (26), which it contends is not satisfied in the case at hand, for the following reasons. First, the FITD is a private-law entity and takes all its decisions through its general meeting and governing bodies, whose membership is composed entirely of representatives of the member banks and which acts in complete independence. The decision-making process for support measures is entirely independent, and there is no provision for the active involvement of the Banca d'Italia or any other public body. The fact that a representative of the Banca d'Italia participates in the meetings of the FITD's governing bodies cannot be construed as an indicator of the Banca d'Italia's active participation in the decision-making process, since the role of the representative is merely that of a passive observer.

Stardust Marine

26

| (47) | Italy further submits that the Banca d'Italia's power to approve the FITD's constitution and amendments thereto, and to authorise the individual measures taken, does not affect the autonomous decision-making of the FITD, since it is limited to a mere ex post authorisation by the Banca d'Italia in its capacity as the authority supervising and directing the management of crises pursuant to the Banking Act. The Banca d'Italia's decision is a ratification which is confined to a formal retrospective check on the legality of a private decision that is already complete in every respect. That analysis is confirmed by the facts, and particularly by the Banca d'Italia's order authorising the FITD measure, where the Banca d'Italia acknowledges that it has not carried out any investigation into the merits of the choices made by the FITD. To strengthen that argument, Italy claims that the case at hand bears clear analogies with the Sicilcassa case (27), where the Commission concluded that the measure did not constitute State aid in view of the decisive participation of private entities. |
| --- | --- |

(47)

Italy further submits that the Banca d'Italia's power to approve the FITD's constitution and amendments thereto, and to authorise the individual measures taken, does not affect the autonomous decision-making of the FITD, since it is limited to a mere ex post authorisation by the Banca d'Italia in its capacity as the authority supervising and directing the management of crises pursuant to the Banking Act. The Banca d'Italia's decision is a ratification which is confined to a formal retrospective check on the legality of a private decision that is already complete in every respect. That analysis is confirmed by the facts, and particularly by the Banca d'Italia's order authorising the FITD measure, where the Banca d'Italia acknowledges that it has not carried out any investigation into the merits of the choices made by the FITD. To strengthen that argument, Italy claims that the case at hand bears clear analogies with the Sicilcassa case (27), where the Commission concluded that the measure did not constitute State aid in view of the decisive participation of private entities.

ex post

Sicilcassa

27

| (48) | Italy submits that the evidence referred to by the Commission in the opening decision does not demonstrate interference on the part of the Banca d'Italia in the FITD's decision-making process. First, although a special administrator is appointed by the Banca d'Italia, he or she has no power to directly influence the FITD's decision to grant funding to a bank in difficulty. Instead, the special administrator acts as the manager and legal representative of the bank in special administration, and not on behalf of the Banca d'Italia. In other words, he or she takes over all the private-law powers of the dissolved governing bodies. Second, Italy denies that there is in fact any evidence of interference on the part of the Banca d'Italia. The passage in a memo from the Director-General of the FITD dated 28 May 2014 which mentions that the representative of the Banca d'Italia ‘invited the Fund to look for a balanced agreement with BPB to cover the negative equity’ has to be understood as expressing a hope, and certainly not a command. Finally, Italy observes that none of the minutes of the decisions taken by the governing bodies of the FITD regarding the action to help Tercas record any positions put forward by the Banca d'Italia that might suggest that it was exercising influence over the Fund. |
| --- | --- |

(48)

Italy submits that the evidence referred to by the Commission in the opening decision does not demonstrate interference on the part of the Banca d'Italia in the FITD's decision-making process. First, although a special administrator is appointed by the Banca d'Italia, he or she has no power to directly influence the FITD's decision to grant funding to a bank in difficulty. Instead, the special administrator acts as the manager and legal representative of the bank in special administration, and not on behalf of the Banca d'Italia. In other words, he or she takes over all the private-law powers of the dissolved governing bodies. Second, Italy denies that there is in fact any evidence of interference on the part of the Banca d'Italia. The passage in a memo from the Director-General of the FITD dated 28 May 2014 which mentions that the representative of the Banca d'Italia ‘invited the Fund to look for a balanced agreement with BPB to cover the negative equity’ has to be understood as expressing a hope, and certainly not a command. Finally, Italy observes that none of the minutes of the decisions taken by the governing bodies of the FITD regarding the action to help Tercas record any positions put forward by the Banca d'Italia that might suggest that it was exercising influence over the Fund.

5.1.2.   Observations from the Banca d'Italia (28)

Observations from the Banca d'Italia

28

| (49) | In its comments on the opening decision, the Banca d'Italia denies that the FITD's support measures are imputable to the State, because:






  (1) | in supporting credit institutions the FITD is not complying with a public policy mandate; |
| --- | --- | --- |

(49)

In its comments on the opening decision, the Banca d'Italia denies that the FITD's support measures are imputable to the State, because:

(1)

in supporting credit institutions the FITD is not complying with a public policy mandate;

| (2) | the Banca d'Italia does not decide jointly with the FITD to intervene in support of a given undertaking, either generally or in the case at issue, and does not check to see that the FITD is acting consistently with any public policy mandate given to it; |
| --- | --- |

(2)

the Banca d'Italia does not decide jointly with the FITD to intervene in support of a given undertaking, either generally or in the case at issue, and does not check to see that the FITD is acting consistently with any public policy mandate given to it;

| (3) | the case at issue is significantly different from the State aid measures taken by Denmark, Spain and Poland cited in footnote 28 to the opening decision, where the Commission found that the resources used in measures regarding deposit guarantee schemes were at the disposal of the public authorities and the measures were therefore imputable to the State. |
| --- | --- |

(3)

the case at issue is significantly different from the State aid measures taken by Denmark, Spain and Poland cited in footnote 28 to the opening decision, where the Commission found that the resources used in measures regarding deposit guarantee schemes were at the disposal of the public authorities and the measures were therefore imputable to the State.

| (50) | As regards the first point, according to the Banca d'Italia, the sole public mandate of deposit guarantee schemes is to reimburse depositors: the last sentence of Article 96-bis(1) of the Banking Act, which allows the FITD to intervene in ways other than directly reimbursing covered depositors in the event of liquidation, cannot be construed either as evidence of the imputability to the State of measures taken by the FITD, other than reimbursements of depositors, or as conferring a public mandate on the FITD. That provision merely allows for recourse to other forms of intervention. |
| --- | --- |

(50)

As regards the first point, according to the Banca d'Italia, the sole public mandate of deposit guarantee schemes is to reimburse depositors: the last sentence of Article 96-bis(1) of the Banking Act, which allows the FITD to intervene in ways other than directly reimbursing covered depositors in the event of liquidation, cannot be construed either as evidence of the imputability to the State of measures taken by the FITD, other than reimbursements of depositors, or as conferring a public mandate on the FITD. That provision merely allows for recourse to other forms of intervention.

bis

| (51) | The reference in Directive 2014/49/EU to the failure of credit institutions merely indicates that the role of the measures is generally to contain the costs of intervention on the part of deposit guarantee schemes, by avoiding the need to reimburse depositors, and hence preventing bank failures. The fact that Directive 2014/49/EU does not impose a condition requiring that deposit guarantee scheme support measures be notified to the Commission means that the exercise of discretion with respect to such measures does not by itself show that the deposit guarantee scheme has thereby had a public mandate conferred on it. |
| --- | --- |

(51)

The reference in Directive 2014/49/EU to the failure of credit institutions merely indicates that the role of the measures is generally to contain the costs of intervention on the part of deposit guarantee schemes, by avoiding the need to reimburse depositors, and hence preventing bank failures. The fact that Directive 2014/49/EU does not impose a condition requiring that deposit guarantee scheme support measures be notified to the Commission means that the exercise of discretion with respect to such measures does not by itself show that the deposit guarantee scheme has thereby had a public mandate conferred on it.

| (52) | The Banca d'Italia also submits that Article 29 of the FITD's constitution, under which the FITD may intervene in support of a bank placed under special administration only ‘if there are reasonable prospects for recovery and if the costs may be presumed to be less than would be incurred in the event of liquidation’, indicates something quite different from the Commission's assertion in the opening decision that Italy chose to allow its deposit guarantee scheme to intervene ‘to prevent the failure of a credit institution’. |
| --- | --- |

(52)

The Banca d'Italia also submits that Article 29 of the FITD's constitution, under which the FITD may intervene in support of a bank placed under special administration only ‘if there are reasonable prospects for recovery and if the costs may be presumed to be less than would be incurred in the event of liquidation’, indicates something quite different from the Commission's assertion in the opening decision that Italy chose to allow its deposit guarantee scheme to intervene ‘to prevent the failure of a credit institution’.

| (53) | Finally, the fact that the Banca d'Italia must approve support measures taken by the FITD does not show that the FITD is pursuing an objective in the public interest. To consider otherwise would mean that all banking activities subject to the supervision of the ECB or the Banca d'Italia were activities driven by public policy. In addition, the Banca d'Italia is required to act independently from the State by Article 19 of Council Regulation (EU) No 1024/2013 (29). |
| --- | --- |

(53)

Finally, the fact that the Banca d'Italia must approve support measures taken by the FITD does not show that the FITD is pursuing an objective in the public interest. To consider otherwise would mean that all banking activities subject to the supervision of the ECB or the Banca d'Italia were activities driven by public policy. In addition, the Banca d'Italia is required to act independently from the State by Article 19 of Council Regulation (EU) No 1024/2013 (29).

29

| (54) | As regards the second point, the Banca d'Italia exercises supervisory powers only with respect to the objectives of protecting depositors, the stability of the banking system, and sound and prudent management of the banks (Article 5 of the Banking Act). Article 96-ter(1)(b) of the Banking Act, which states that the Banca d'Italia ‘coordinates the activity of the guarantee schemes by making rules for banking crises and by conducting supervisory activities’, merely confers on the Banca d'Italia a general power intended to guarantee that the activities of deposit guarantee schemes are compatible with the exercise of its own supervisory power; that power is exercised only by means of authorisation of the measures taken. |
| --- | --- |

(54)

As regards the second point, the Banca d'Italia exercises supervisory powers only with respect to the objectives of protecting depositors, the stability of the banking system, and sound and prudent management of the banks (Article 5 of the Banking Act). Article 96-ter(1)(b) of the Banking Act, which states that the Banca d'Italia ‘coordinates the activity of the guarantee schemes by making rules for banking crises and by conducting supervisory activities’, merely confers on the Banca d'Italia a general power intended to guarantee that the activities of deposit guarantee schemes are compatible with the exercise of its own supervisory power; that power is exercised only by means of authorisation of the measures taken.

ter

| (55) | As the Banca d'Italia is required to act independently from the State, the exercise of its powers over the FITD when the FITD takes steps to support a bank cannot be regarded as State control over the use of resources or as being tied to any public mandate. The case at issue is therefore clearly analogous to Doux Élevage (30). |
| --- | --- |

(55)

As the Banca d'Italia is required to act independently from the State, the exercise of its powers over the FITD when the FITD takes steps to support a bank cannot be regarded as State control over the use of resources or as being tied to any public mandate. The case at issue is therefore clearly analogous to Doux Élevage (30).

Doux Élevage

30

| (56) | Moreover, the Banca d'Italia submits that it did not contribute to the design or to the implementation of the FITD's support measures, and that any contact between itself and the FITD prior to formal submission of the FITD's application for Banca d'Italia authorisation cannot be classified as a contribution to those measures. The Banca d'Italia merely provided initial guidance, entirely on the basis of the legislative parameters that would govern the subsequent authorisation procedure. |
| --- | --- |

(56)

Moreover, the Banca d'Italia submits that it did not contribute to the design or to the implementation of the FITD's support measures, and that any contact between itself and the FITD prior to formal submission of the FITD's application for Banca d'Italia authorisation cannot be classified as a contribution to those measures. The Banca d'Italia merely provided initial guidance, entirely on the basis of the legislative parameters that would govern the subsequent authorisation procedure.

| (57) | The fact that the Banca d'Italia appointed and supervised the special administrator had no bearing on the case at issue, as the tasks and aims of a special administrator's activities do not differ greatly from those of a ‘normal’ director of a private undertaking in a state of crisis, so that the special administrator did not act on behalf of the Banca d'Italia. |
| --- | --- |

(57)

The fact that the Banca d'Italia appointed and supervised the special administrator had no bearing on the case at issue, as the tasks and aims of a special administrator's activities do not differ greatly from those of a ‘normal’ director of a private undertaking in a state of crisis, so that the special administrator did not act on behalf of the Banca d'Italia.

| (58) | The Banca d'Italia representative attending the meetings of the FITD Board and Executive Committee sat only as an observer and had no voting rights. The fact that a dispute between the FITD and BPB regarding the scale of Tercas's negative equity was settled by an arbitrator nominated by the Banca d'Italia is irrelevant, because it was the parties, on a fully independent basis and by mutual agreement, that asked the Banca d'Italia to suggest an individual, whom they then proceeded to appoint as arbitrator. BPB would not have agreed to ask the Banca d'Italia to nominate an arbitrator if the Banca d'Italia played a management and strategic role in the FITD. |
| --- | --- |

(58)

The Banca d'Italia representative attending the meetings of the FITD Board and Executive Committee sat only as an observer and had no voting rights. The fact that a dispute between the FITD and BPB regarding the scale of Tercas's negative equity was settled by an arbitrator nominated by the Banca d'Italia is irrelevant, because it was the parties, on a fully independent basis and by mutual agreement, that asked the Banca d'Italia to suggest an individual, whom they then proceeded to appoint as arbitrator. BPB would not have agreed to ask the Banca d'Italia to nominate an arbitrator if the Banca d'Italia played a management and strategic role in the FITD.

| (59) | As regards the third point, the case at issue differs from those cited in recital 44 to the opening decision, in which the Commission found that intervention by a deposit guarantee scheme in the restructuring and liquidation of banks constituted State aid. |
| --- | --- |

(59)

As regards the third point, the case at issue differs from those cited in recital 44 to the opening decision, in which the Commission found that intervention by a deposit guarantee scheme in the restructuring and liquidation of banks constituted State aid.

| (60) | In the case of the Danish winding-up scheme (31), (1) the national legislation regulated the conditions for support measures in detail; (2) the committee responsible for assessing the costs of the various options was appointed by the Minister for Economic Affairs and Finance; (3) the same committee was required to assess whether the purchaser would be able to operate the bank in difficulty and whether the solution was commercially sustainable; (4) the decision made by the deposit guarantee scheme was based on the assessment and recommendation made by that committee; (5) the board of directors of the deposit guarantee scheme was appointed by the Minister for Economic Affairs and Finance; and (6) the agreement between the purchaser bank and the deposit guarantee scheme was to be approved by the Minister. |
| --- | --- |

(60)

In the case of the Danish winding-up scheme (31), (1) the national legislation regulated the conditions for support measures in detail; (2) the committee responsible for assessing the costs of the various options was appointed by the Minister for Economic Affairs and Finance; (3) the same committee was required to assess whether the purchaser would be able to operate the bank in difficulty and whether the solution was commercially sustainable; (4) the decision made by the deposit guarantee scheme was based on the assessment and recommendation made by that committee; (5) the board of directors of the deposit guarantee scheme was appointed by the Minister for Economic Affairs and Finance; and (6) the agreement between the purchaser bank and the deposit guarantee scheme was to be approved by the Minister.

31

| (61) | In the case of the Polish credit unions liquidation scheme (32), the incentives provided by the deposit guarantee scheme constituted an integral part of a liquidation scheme for credit unions, which was designed by the Polish authorities and notified to the Commission as State aid. The deposit guarantee scheme was controlled by the government through voting rights on the board of the fund, and in a number of cases the Minister for Finance was entitled to intervene and take direct decisions affecting the functioning of the fund. In addition, the chairman of the board of the fund, who was appointed by the Minister for Finance, had a casting vote in the event of a tie. |
| --- | --- |

(61)

In the case of the Polish credit unions liquidation scheme (32), the incentives provided by the deposit guarantee scheme constituted an integral part of a liquidation scheme for credit unions, which was designed by the Polish authorities and notified to the Commission as State aid. The deposit guarantee scheme was controlled by the government through voting rights on the board of the fund, and in a number of cases the Minister for Finance was entitled to intervene and take direct decisions affecting the functioning of the fund. In addition, the chairman of the board of the fund, who was appointed by the Minister for Finance, had a casting vote in the event of a tie.

32

| (62) | As for the decision on the restructuring of CAM and Banco CAM in Spain (33), the Spanish authorities made use of the financial assistance of the Fund for Orderly Bank Restructuring (34), a fund dedicated to aid for liquidation and controlled by the State and by the Spanish deposit guarantee fund. The Fund's decision to intervene was not an independent decision by the Fund, but was part of a wider restructuring and rescue operation decided upon and implemented by the Spanish authorities. |
| --- | --- |

(62)

As for the decision on the restructuring of CAM and Banco CAM in Spain (33), the Spanish authorities made use of the financial assistance of the Fund for Orderly Bank Restructuring (34), a fund dedicated to aid for liquidation and controlled by the State and by the Spanish deposit guarantee fund. The Fund's decision to intervene was not an independent decision by the Fund, but was part of a wider restructuring and rescue operation decided upon and implemented by the Spanish authorities.

33

34

5.1.3.   Observations from other interested parties

Observations from other interested parties

| (63) | First, the other interested parties, namely the FITD, BPB and Tercas, make the general remark that the public character of the resources and imputability to the State are two distinct conditions, both of which must be fulfilled. Hence, resources of private origin cannot be considered public as a result of an assessment that the use of those resources is imputable to the State. |
| --- | --- |

(63)

First, the other interested parties, namely the FITD, BPB and Tercas, make the general remark that the public character of the resources and imputability to the State are two distinct conditions, both of which must be fulfilled. Hence, resources of private origin cannot be considered public as a result of an assessment that the use of those resources is imputable to the State.

| (64) | These three interested parties submit that the Commission erred in stating that deposit guarantee schemes are extremely likely to provide State aid, since they act under a public mandate and remain under the control of the public authorities. They point out that in the 2013 Banking Communication there is no mention of deposit guarantee schemes constituting State aid, that Directive 94/19/EC says nothing on the compatibility with the State aid rules of measures taken as an alternative to reimbursement of depositors, and that Directive 2014/49/EU takes a neutral position with regard to the compatibility of such measures with the State aid rules. |
| --- | --- |

(64)

These three interested parties submit that the Commission erred in stating that deposit guarantee schemes are extremely likely to provide State aid, since they act under a public mandate and remain under the control of the public authorities. They point out that in the 2013 Banking Communication there is no mention of deposit guarantee schemes constituting State aid, that Directive 94/19/EC says nothing on the compatibility with the State aid rules of measures taken as an alternative to reimbursement of depositors, and that Directive 2014/49/EU takes a neutral position with regard to the compatibility of such measures with the State aid rules.

| (65) | These interested parties consider that the Commission came to the preliminary conclusion that the action taken by the FITD was imputable to the State on the mere ground that such action was required by law, while in PreussenElektra (35) and Doux Élevage (36) the Court of Justice expressly ruled that the fact that a measure was imposed by national law was not capable of conferring upon it the character of State aid. In the case of the Austrian Green Electricity Act (37), the General Court took into account many additional elements which indicated the pervasive influence and control of the State over ÖMAG, the public limited company in charge of controlling the measure at issue. |
| --- | --- |

(65)

These interested parties consider that the Commission came to the preliminary conclusion that the action taken by the FITD was imputable to the State on the mere ground that such action was required by law, while in PreussenElektra (35) and Doux Élevage (36) the Court of Justice expressly ruled that the fact that a measure was imposed by national law was not capable of conferring upon it the character of State aid. In the case of the Austrian Green Electricity Act (37), the General Court took into account many additional elements which indicated the pervasive influence and control of the State over ÖMAG, the public limited company in charge of controlling the measure at issue.

PreussenElektra

35

Doux Élevage

36

Austrian Green Electricity Act

37

| (66) | These interested parties consider that a correct reading of the Italian legislation and of the FITD's decision-making mechanisms for support measures
  aimed at averting

  irreversible bank crises shows the insubstantial nature of the evidence cited by the Commission in support of its preliminary conclusion that the action taken by the FITD responds to a public mandate. They base their argument on the fact that Article 96-bis of the Banking Act provides only that guarantee schemes ‘may engage in other types and forms of intervention.’ (38). The measures are not mandatory, which severs the link between the FITD's action and the mission set out in its constitution. |
| --- | --- |

(66)

These interested parties consider that a correct reading of the Italian legislation and of the FITD's decision-making mechanisms for support measures
  aimed at averting

  irreversible bank crises shows the insubstantial nature of the evidence cited by the Commission in support of its preliminary conclusion that the action taken by the FITD responds to a public mandate. They base their argument on the fact that Article 96-bis of the Banking Act provides only that guarantee schemes ‘may engage in other types and forms of intervention.’ (38). The measures are not mandatory, which severs the link between the FITD's action and the mission set out in its constitution.

aimed at averting

irreversible bank crises

bis

may

38

| (67) | The three interested parties point out that forms of action other than the reimbursement of depositors have been available since the establishment of the FITD in 1987, prior to the entry into force of Article 96-bis of the Banking Act. |
| --- | --- |

(67)

The three interested parties point out that forms of action other than the reimbursement of depositors have been available since the establishment of the FITD in 1987, prior to the entry into force of Article 96-bis of the Banking Act.

bis

| (68) | The FITD argues that it is a private-law entity controlled and managed by its member banks, and that it acts as a vehicle for measures that are directly attributable to the member banks using resources that continue to belong to the member banks. Moreover, the decision to support Tercas was taken by the FITD's governing bodies, which are made up entirely of representatives of the member banks. The documentary evidence shows that the FITD's governing bodies carefully assessed the possible alternatives and the application of the least-cost requirement in order better to protect the interests of member banks by reducing the costs and risks of the intervention. |
| --- | --- |

(68)

The FITD argues that it is a private-law entity controlled and managed by its member banks, and that it acts as a vehicle for measures that are directly attributable to the member banks using resources that continue to belong to the member banks. Moreover, the decision to support Tercas was taken by the FITD's governing bodies, which are made up entirely of representatives of the member banks. The documentary evidence shows that the FITD's governing bodies carefully assessed the possible alternatives and the application of the least-cost requirement in order better to protect the interests of member banks by reducing the costs and risks of the intervention.

| (69) | The FITD contends that its governing body decided in its own discretion whether, when and how to take support measures, the only requirement being that the action must be less costly than reimbursing depositors. When it takes support measures the FITD does not act under any public mandate. The FITD's constitution is fully in line with the legislation governing the sector, even in so far as it does not provide for any form of alternative action or expressly prohibits any such action. No public body can oblige the FITD to intervene, and the Banca d'Italia's subsequent authorisation is intended only to ensure verification that the action taken for the beneficiary bank is appropriate from the viewpoint of prudential supervision and that it is compatible with the need to protect depositors and with the stability of the banking system. |
| --- | --- |

(69)

The FITD contends that its governing body decided in its own discretion whether, when and how to take support measures, the only requirement being that the action must be less costly than reimbursing depositors. When it takes support measures the FITD does not act under any public mandate. The FITD's constitution is fully in line with the legislation governing the sector, even in so far as it does not provide for any form of alternative action or expressly prohibits any such action. No public body can oblige the FITD to intervene, and the Banca d'Italia's subsequent authorisation is intended only to ensure verification that the action taken for the beneficiary bank is appropriate from the viewpoint of prudential supervision and that it is compatible with the need to protect depositors and with the stability of the banking system.

discretion

he FITD does not act under any public mandate

prohibits

| (70) | In addition, the three interested parties point out that according to its constitution membership of the FITD is not mandatory, and that banks can choose to establish an alternative deposit guarantee scheme to which to belong. They point to the existence of a deposit guarantee scheme, the Fondo di Garanzia dei Depositanti del Credito Cooperativo, specifically for mutual banks (39), which are not members of the FITD. |
| --- | --- |

(70)

In addition, the three interested parties point out that according to its constitution membership of the FITD is not mandatory, and that banks can choose to establish an alternative deposit guarantee scheme to which to belong. They point to the existence of a deposit guarantee scheme, the Fondo di Garanzia dei Depositanti del Credito Cooperativo, specifically for mutual banks (39), which are not members of the FITD.

39

| (71) | These interested parties submit that there is no interference by the State either with the appointment of the members of the FITD's governing bodies or with its decision-making (the fact that the Banca d'Italia participates as an observer, without voting rights, does not affect the independent decision-making of the FITD). They argue that, in its decision on the rescue of the Danish bank Roskilde (40), the Commission found that a body that had provided a guarantee took its decisions independently, before concluding that no State resources were involved where a guarantee was granted to a bank in crisis by an association made up of domestic banks, and funded solely by them, for the purpose of supporting financial institutions. Referring to EARL Salvat père et fils (41), the three interested parties take the view that there can be State aid only if the State is present in the decision-making bodies of the organisation and is in a position to impose its own decisions. |
| --- | --- |

(71)

These interested parties submit that there is no interference by the State either with the appointment of the members of the FITD's governing bodies or with its decision-making (the fact that the Banca d'Italia participates as an observer, without voting rights, does not affect the independent decision-making of the FITD). They argue that, in its decision on the rescue of the Danish bank Roskilde (40), the Commission found that a body that had provided a guarantee took its decisions independently, before concluding that no State resources were involved where a guarantee was granted to a bank in crisis by an association made up of domestic banks, and funded solely by them, for the purpose of supporting financial institutions. Referring to EARL Salvat père et fils (41), the three interested parties take the view that there can be State aid only if the State is present in the decision-making bodies of the organisation and is in a position to impose its own decisions.

40

EARL Salvat père et fils

41

| (72) | The three interested parties submit that the FITD is a body representing the interests of its member banks, and that the powers assigned to the Banca d'Italia in respect of the FITD's actions merely permit the Banca d'Italia to pursue its general supervisory aims, and specifically to monitor the sound and prudent management of the entities it supervises and to protect depositors' interests. Given the general nature of the Banca d'Italia's task of coordinating the activities of deposit guarantee schemes via the rules on banking crises and its own supervisory activities, that task cannot serve as evidence that the resources of the FITD are under the constant control of the State. |
| --- | --- |

(72)

The three interested parties submit that the FITD is a body representing the interests of its member banks, and that the powers assigned to the Banca d'Italia in respect of the FITD's actions merely permit the Banca d'Italia to pursue its general supervisory aims, and specifically to monitor the sound and prudent management of the entities it supervises and to protect depositors' interests. Given the general nature of the Banca d'Italia's task of coordinating the activities of deposit guarantee schemes via the rules on banking crises and its own supervisory activities, that task cannot serve as evidence that the resources of the FITD are under the constant control of the State.

| (73) | The fact that the Banca d'Italia appoints a special administrator for a bank in crisis does not indicate a link with the public sphere, because the legal basis of that power (Article 70 et seq. of the Banking Act) is essentially technical in nature, and its rationale and foundation lie in the specific features of the sector. Moreover, mere indications that a measure pursues objectives in the public interest are not enough to show that it constitutes State aid (42). |
| --- | --- |

(73)

The fact that the Banca d'Italia appoints a special administrator for a bank in crisis does not indicate a link with the public sphere, because the legal basis of that power (Article 70 et seq. of the Banking Act) is essentially technical in nature, and its rationale and foundation lie in the specific features of the sector. Moreover, mere indications that a measure pursues objectives in the public interest are not enough to show that it constitutes State aid (42).

et seq.

42

| (74) | The Banca d'Italia's power to authorise individual measures under Article 96-ter(1)(d) of the Banking Act and Article 3(2) of the FITD's constitution does not strip the FITD of its independent judgment as to whether to take alternative measures and, if so, as to their timing, amount and form. The Banca d'Italia's authorisation of the FITD's actions is merely an ex post check on decisions taken independently by the FITD, carried out to ensure the safeguard of the general interest for which the Banca d'Italia is responsible. |
| --- | --- |

(74)

The Banca d'Italia's power to authorise individual measures under Article 96-ter(1)(d) of the Banking Act and Article 3(2) of the FITD's constitution does not strip the FITD of its independent judgment as to whether to take alternative measures and, if so, as to their timing, amount and form. The Banca d'Italia's authorisation of the FITD's actions is merely an ex post check on decisions taken independently by the FITD, carried out to ensure the safeguard of the general interest for which the Banca d'Italia is responsible.

ter

authorisation

ex post

| (75) | The three interested parties also refer to the Commission decision on the aid to Banco di Sicilia and Sicilcassa (43), where the Commission concluded that the intervention of the FITD in favour of those banks did not constitute State aid, without considering the role of the Banca d'Italia in respect of the activities of the FITD. |
| --- | --- |

(75)

The three interested parties also refer to the Commission decision on the aid to Banco di Sicilia and Sicilcassa (43), where the Commission concluded that the intervention of the FITD in favour of those banks did not constitute State aid, without considering the role of the Banca d'Italia in respect of the activities of the FITD.

43

| (76) | The three interested parties submit that, as in Doux Élevage, public supervision of the FITD does not go beyond the exercise of a mere formal verification of the validity and the lawfulness of the FITD's behaviour; it does not extend to verification of political appropriateness or of compliance with policy pursued by the public authorities: as in Doux Élevage, the FITD itself decides how to use its resources. Similarly, in the Pearle case (44), the Dutch government confirmed that the bye-laws adopted by bodies such as HBA, which imposed levies that were at issue in that case, required the approval of the public authorities. |
| --- | --- |

(76)

The three interested parties submit that, as in Doux Élevage, public supervision of the FITD does not go beyond the exercise of a mere formal verification of the validity and the lawfulness of the FITD's behaviour; it does not extend to verification of political appropriateness or of compliance with policy pursued by the public authorities: as in Doux Élevage, the FITD itself decides how to use its resources. Similarly, in the Pearle case (44), the Dutch government confirmed that the bye-laws adopted by bodies such as HBA, which imposed levies that were at issue in that case, required the approval of the public authorities.

Doux Élevage

Doux Élevage

Pearle

44

| (77) | The FITD points out that the special administrator, although appointed by the Banca d'Italia, is not a representative of the supervisory authority. The special administrator operates with broad discretion and on his or her own initiative. He or she can only request action on the part of the FITD, which is in no way bound by the request and remains free to take alternative measures in the best interest of its member banks. In the case at issue, the special administrator did not replace the general meeting of the bank, which was the only body empowered to approve operations of an exceptional nature. Furthermore, the authorisation of the Banca d'Italia is issued only after the FITD has taken its own independent decision to intervene. That authorisation is part of the normal supervisory role of the Banca d'Italia. The Banca d'Italia representative attending the meetings of the FITD Board and Executive Committee sits only as an observer, without voting rights. |
| --- | --- |

(77)

The FITD points out that the special administrator, although appointed by the Banca d'Italia, is not a representative of the supervisory authority. The special administrator operates with broad discretion and on his or her own initiative. He or she can only request action on the part of the FITD, which is in no way bound by the request and remains free to take alternative measures in the best interest of its member banks. In the case at issue, the special administrator did not replace the general meeting of the bank, which was the only body empowered to approve operations of an exceptional nature. Furthermore, the authorisation of the Banca d'Italia is issued only after the FITD has taken its own independent decision to intervene. That authorisation is part of the normal supervisory role of the Banca d'Italia. The Banca d'Italia representative attending the meetings of the FITD Board and Executive Committee sits only as an observer, without voting rights.

| (78) | The arbitrator in the dispute between the FITD and BPB regarding the amount of Tercas's negative equity was appointed not by the Banca d'Italia, but by the parties themselves (the FITD and BPB), on the Banca d'Italia's recommendation. Moreover, the appointment of an arbitrator was intended to resolve the dispute at issue; any decision concerning the cost-effectiveness of the measures from the point of view of member banks remained entirely a matter for the FITD. |
| --- | --- |

(78)

The arbitrator in the dispute between the FITD and BPB regarding the amount of Tercas's negative equity was appointed not by the Banca d'Italia, but by the parties themselves (the FITD and BPB), on the Banca d'Italia's recommendation. Moreover, the appointment of an arbitrator was intended to resolve the dispute at issue; any decision concerning the cost-effectiveness of the measures from the point of view of member banks remained entirely a matter for the FITD.

| (79) | The cases cited by the Commission concerning deposit guarantee schemes are not comparable to the case at issue. The three interested parties put forward the same arguments as Italy in that respect, adding that the cases of the Danish winding-up scheme and the Polish credit unions liquidation scheme concerned measures taken by guarantee schemes in connection with the liquidation of banks, and not measures taken for preventive purposes, aimed at the banks' long-term recovery. |
| --- | --- |

(79)

The cases cited by the Commission concerning deposit guarantee schemes are not comparable to the case at issue. The three interested parties put forward the same arguments as Italy in that respect, adding that the cases of the Danish winding-up scheme and the Polish credit unions liquidation scheme concerned measures taken by guarantee schemes in connection with the liquidation of banks, and not measures taken for preventive purposes, aimed at the banks' long-term recovery.

5.2.   Advantage

Advantage

5.2.1.   Observations from Italy

Observations from Italy

| (80) | Italy submits that the Commission is applying the market economy operator principle as developed in the context of the most recent bank restructuring cases (the ‘burden-sharing test’), overlooking the fact that a burden-sharing test is irrelevant for assessing the rationality of the behaviour of a private entity, because it aims primarily at protecting the interests of the general public (all taxpayers) and not the specific interests of those directly exposed to the failing bank (such as the FITD). Besides, the FITD complied with the principle of least cost. In deciding to intervene in order to support Tercas, the FITD sought the solution which was least onerous financially for its member banks on the basis of the opinion of a reputable consultancy firm and long discussions on the Board and the Executive Committee. |
| --- | --- |

(80)

Italy submits that the Commission is applying the market economy operator principle as developed in the context of the most recent bank restructuring cases (the ‘burden-sharing test’), overlooking the fact that a burden-sharing test is irrelevant for assessing the rationality of the behaviour of a private entity, because it aims primarily at protecting the interests of the general public (all taxpayers) and not the specific interests of those directly exposed to the failing bank (such as the FITD). Besides, the FITD complied with the principle of least cost. In deciding to intervene in order to support Tercas, the FITD sought the solution which was least onerous financially for its member banks on the basis of the opinion of a reputable consultancy firm and long discussions on the Board and the Executive Committee.

| (81) | Italy submits that when the Commission compared the reorganisation of Tercas with the alternative scenario of liquidation, it did not refer to the correct figures. The comparison between the recovery measure and the liquidation scenario should be made after deducting the [...] position, the risk of which was not evaluated in the estimate of the cost of liquidation. That deduction leads to a commitment not exceeding EUR 295 million for the rescue operation, whereas the estimated cost of the liquidation scenario was EUR 333 million. Italy concludes that the actual difference between the two scenarios was almost EUR 40 million, and not EUR 3 million, as stated in the preliminary view put forward by the Commission in the opening decision. |
| --- | --- |

(81)

Italy submits that when the Commission compared the reorganisation of Tercas with the alternative scenario of liquidation, it did not refer to the correct figures. The comparison between the recovery measure and the liquidation scenario should be made after deducting the [...] position, the risk of which was not evaluated in the estimate of the cost of liquidation. That deduction leads to a commitment not exceeding EUR 295 million for the rescue operation, whereas the estimated cost of the liquidation scenario was EUR 333 million. Italy concludes that the actual difference between the two scenarios was almost EUR 40 million, and not EUR 3 million, as stated in the preliminary view put forward by the Commission in the opening decision.

| (82) | Italy considers that the FITD's action is in any event in line with the market economy operator principle. First, the FITD could not have required Tercas to impose burden-sharing on subordinated creditors beyond the contractual terms of individual loans, which provide for write-off only in the event of liquidation. Second, imposing burden-sharing on subordinated creditors would not have reduced the costs to the FITD's member banks in any way. The Commission was wrong to take the view that in the event of a compulsory administrative winding up (liquidazione coatta amministrativa) of Tercas the costs to the member banks, and consequently to the FITD, would have been minimised if subordinated creditors had been made to bear some of the losses. On the basis of the evidence in the minutes of the meetings of the FITD Board and Executive Committee, Italy contends that the measures ultimately taken by the FITD avoided the risk of possible legal actions arising out of losses suffered by subordinated creditors. Italy observes that the FITD's action also avoided the negative impact on the reputation of the banking system which would have resulted from a failure to pay back subordinated loans in the event of a compulsory administrative winding up of Tercas. |
| --- | --- |

(82)

Italy considers that the FITD's action is in any event in line with the market economy operator principle. First, the FITD could not have required Tercas to impose burden-sharing on subordinated creditors beyond the contractual terms of individual loans, which provide for write-off only in the event of liquidation. Second, imposing burden-sharing on subordinated creditors would not have reduced the costs to the FITD's member banks in any way. The Commission was wrong to take the view that in the event of a compulsory administrative winding up (liquidazione coatta amministrativa) of Tercas the costs to the member banks, and consequently to the FITD, would have been minimised if subordinated creditors had been made to bear some of the losses. On the basis of the evidence in the minutes of the meetings of the FITD Board and Executive Committee, Italy contends that the measures ultimately taken by the FITD avoided the risk of possible legal actions arising out of losses suffered by subordinated creditors. Italy observes that the FITD's action also avoided the negative impact on the reputation of the banking system which would have resulted from a failure to pay back subordinated loans in the event of a compulsory administrative winding up of Tercas.

liquidazione coatta amministrativa

| (83) | Therefore, in Italy's view, the FITD's decision not to involve subordinated bondholders was reasonable, was in line with the market economy operator principle, and was such as to prevent the FITD and its member banks from being exposed to further costs. |
| --- | --- |

(83)

Therefore, in Italy's view, the FITD's decision not to involve subordinated bondholders was reasonable, was in line with the market economy operator principle, and was such as to prevent the FITD and its member banks from being exposed to further costs.

5.2.2.   Observations from the Banca d'Italia

Observations from the Banca d'Italia

| (84) | The Commission received no comments from Banca d'Italia on the selective advantage of the measures taken. |
| --- | --- |

(84)

The Commission received no comments from Banca d'Italia on the selective advantage of the measures taken.

5.2.3.   Observations from other interested parties

Observations from other interested parties

| (85) | With regard to the economic soundness of the measures in terms of the market economy operator principle, the three other interested parties submit that the action taken was a rational and sound choice for private undertakings such as the FITD and its member banks. According to those parties the present case has obvious similarities to the Sicilcassa case, where the Commission concluded that the measures at issue did not constitute State aid in view of the decisive participation of private entities. As in the Sicilcassa case, the FITD here acted as guarantor for the reimbursement of depositors in accordance with the legislation on deposit guarantee schemes; the FITD's actions were decided by the same governing bodies on the basis of the same criteria, and the Banca d'Italia performed the same functions. They observe that there are no longer any banks under public control in Italy, so that all of the FITD's members are private banks. The FITD can consequently operate only as a private entity. |
| --- | --- |

(85)

With regard to the economic soundness of the measures in terms of the market economy operator principle, the three other interested parties submit that the action taken was a rational and sound choice for private undertakings such as the FITD and its member banks. According to those parties the present case has obvious similarities to the Sicilcassa case, where the Commission concluded that the measures at issue did not constitute State aid in view of the decisive participation of private entities. As in the Sicilcassa case, the FITD here acted as guarantor for the reimbursement of depositors in accordance with the legislation on deposit guarantee schemes; the FITD's actions were decided by the same governing bodies on the basis of the same criteria, and the Banca d'Italia performed the same functions. They observe that there are no longer any banks under public control in Italy, so that all of the FITD's members are private banks. The FITD can consequently operate only as a private entity.

Sicilcassa

Sicilcassa

| (86) | The three interested parties have reviewed earlier cases of alternative measures taken by the FITD (45) and their economic rationale, including cases during the period when participation in a deposit guarantee scheme was purely voluntary. Private undertakings have chosen to join the deposit guarantee scheme even when they were not legally bound to do so. The interested parties reject the thesis that a market economy operator would not be exposed to the costs of reimbursing depositors, and would not issue non-repayable contributions or guarantees not subject to a premium, as the Commission stated in the opening decision. |
| --- | --- |

(86)

The three interested parties have reviewed earlier cases of alternative measures taken by the FITD (45) and their economic rationale, including cases during the period when participation in a deposit guarantee scheme was purely voluntary. Private undertakings have chosen to join the deposit guarantee scheme even when they were not legally bound to do so. The interested parties reject the thesis that a market economy operator would not be exposed to the costs of reimbursing depositors, and would not issue non-repayable contributions or guarantees not subject to a premium, as the Commission stated in the opening decision.

45

would not be exposed to the costs of reimbursing depositors

non-repayable

| (87) | Furthermore, the three interested parties stress that the behaviour of the FITD and its member banks should be assessed not in abstract terms, by referring to a hypothetical non-regulated scenario, but rather on the basis of the regulatory framework in which they operate. If, as in the present case, the obligation under the regulatory framework to repay deposits up to a certain threshold means that the least costly measure for member banks is to cover the negative equity, then covering the negative equity is the most rational choice from the point of view of a private operator in a market economy. |
| --- | --- |

(87)

Furthermore, the three interested parties stress that the behaviour of the FITD and its member banks should be assessed not in abstract terms, by referring to a hypothetical non-regulated scenario, but rather on the basis of the regulatory framework in which they operate. If, as in the present case, the obligation under the regulatory framework to repay deposits up to a certain threshold means that the least costly measure for member banks is to cover the negative equity, then covering the negative equity is the most rational choice from the point of view of a private operator in a market economy.

| (88) | These three interested parties dispute the Commission's argument that the costs of reimbursing depositors in the event of a compulsory administrative winding up of Tercas are not to be taken into account in the application of the market economy operator principle, since they arise from obligations imposed on the FITD as a deposit guarantee scheme required to protect depositors in the public interest. They argue that in the case of the resolution of Banco Espírito Santo in Portugal (46) the Commission considered that for the purpose of applying the market economy operator principle the costs of reimbursing depositors in the event of liquidation should be included. Moreover, the Commission could not compare the case at issue with the Court of Justice's ruling in Land Burgenland (47), as the Court there distinguished between measures imputable to the State acting in its capacity as a shareholder and those where the State acted as a public authority. |
| --- | --- |

(88)

These three interested parties dispute the Commission's argument that the costs of reimbursing depositors in the event of a compulsory administrative winding up of Tercas are not to be taken into account in the application of the market economy operator principle, since they arise from obligations imposed on the FITD as a deposit guarantee scheme required to protect depositors in the public interest. They argue that in the case of the resolution of Banco Espírito Santo in Portugal (46) the Commission considered that for the purpose of applying the market economy operator principle the costs of reimbursing depositors in the event of liquidation should be included. Moreover, the Commission could not compare the case at issue with the Court of Justice's ruling in Land Burgenland (47), as the Court there distinguished between measures imputable to the State acting in its capacity as a shareholder and those where the State acted as a public authority.

46

Land Burgenland

47

| (89) | The three interested parties observe that the measures were designed on the basis of the least-cost criterion, and that a reputable auditing and advisory firm was engaged to help to identify the least costly and risky solution for the member banks. On that basis, the FITD designed a set of measures which enabled it to reduce costs for member banks significantly, to avoid the risks of a liquidation, and to prevent the possible negative externalities that would be generated by a compulsory administrative winding up of Tercas. |
| --- | --- |

(89)

The three interested parties observe that the measures were designed on the basis of the least-cost criterion, and that a reputable auditing and advisory firm was engaged to help to identify the least costly and risky solution for the member banks. On that basis, the FITD designed a set of measures which enabled it to reduce costs for member banks significantly, to avoid the risks of a liquidation, and to prevent the possible negative externalities that would be generated by a compulsory administrative winding up of Tercas.

| (90) | As to the estimation of whether the total cost of the support measures for the FITD was lower than in the case of a liquidation of Tercas, these three interested parties submit that the cost of the guarantee to cover the credit risk of the bullet loans to [...] should not have been included in the Commission's cost assessment for the support measure. It was not included in the estimated cost to be borne by the FITD in the event of a liquidation of Tercas. The Commission's calculation that the cost savings achieved by the action taken amounted to only EUR 3 million is accordingly erroneous. In the [...] report, which identified the least costly and least risky solution for the FITD and its member banks, the estimated costs of compulsory administrative winding up did not include the risk associated with the [...] loans, which amounted to approximately EUR 35 million. To compare correctly the two scenarios of depositor reimbursement and alternative action, ‘the comparison between the recovery measure and the liquidation scenario should be made after deducting the [...] position, the risk of which was not evaluated in the estimate of the cost of liquidation’ (48). The resulting comparison is between a commitment ‘not exceeding EUR 295 million for the rescue operation and an estimated cost of EUR 333 million in case of liquidation’ (49). Therefore, the three interested parties submit that the actual difference between the two scenarios is at least EUR 38 million. That position is confirmed in their view by the fact that the loans covered by the FITD guarantee were indeed repaid to Tercas (50). The FITD made no payment in respect of the EUR 35 million guarantee, which the Commission was wrong to include in its calculation of the cost of the intervention. |
| --- | --- |

(90)

As to the estimation of whether the total cost of the support measures for the FITD was lower than in the case of a liquidation of Tercas, these three interested parties submit that the cost of the guarantee to cover the credit risk of the bullet loans to [...] should not have been included in the Commission's cost assessment for the support measure. It was not included in the estimated cost to be borne by the FITD in the event of a liquidation of Tercas. The Commission's calculation that the cost savings achieved by the action taken amounted to only EUR 3 million is accordingly erroneous. In the [...] report, which identified the least costly and least risky solution for the FITD and its member banks, the estimated costs of compulsory administrative winding up did not include the risk associated with the [...] loans, which amounted to approximately EUR 35 million. To compare correctly the two scenarios of depositor reimbursement and alternative action, ‘the comparison between the recovery measure and the liquidation scenario should be made after deducting the [...] position, the risk of which was not evaluated in the estimate of the cost of liquidation’ (48). The resulting comparison is between a commitment ‘not exceeding EUR 295 million for the rescue operation and an estimated cost of EUR 333 million in case of liquidation’ (49). Therefore, the three interested parties submit that the actual difference between the two scenarios is at least EUR 38 million. That position is confirmed in their view by the fact that the loans covered by the FITD guarantee were indeed repaid to Tercas (50). The FITD made no payment in respect of the EUR 35 million guarantee, which the Commission was wrong to include in its calculation of the cost of the intervention.

48

49

50

| (91) | For the purpose of evaluating the lowest cost, likewise, the amount of EUR 30 million accruing from the tax exemption should not be included in its entirety among the costs. The FITD would incur that cost only if the Commission were not to authorise the tax measure. |
| --- | --- |

(91)

For the purpose of evaluating the lowest cost, likewise, the amount of EUR 30 million accruing from the tax exemption should not be included in its entirety among the costs. The FITD would incur that cost only if the Commission were not to authorise the tax measure.

| (92) | The three interested parties refer to an estimated EUR 1,9 billion expense in the event of liquidation, only part of which could have been recovered (calculated in the [...] report at EUR 1,5 billion). They argue that the EUR 1,9 billion in deposits that in the event of liquidation would not have been covered by the deposit repayment scheme would have created a risk of contagion of the member banks and the banking system in general. Such a risk might have had ‘potentially enormous’ legal and reputation implications. They also contend that if Tercas had been put into compulsory winding up the prospects of recovering some part of the initial cost, estimated at EUR 1,9 billion, could have been further compromised by compensation claims brought by subordinated creditors. |
| --- | --- |

(92)

The three interested parties refer to an estimated EUR 1,9 billion expense in the event of liquidation, only part of which could have been recovered (calculated in the [...] report at EUR 1,5 billion). They argue that the EUR 1,9 billion in deposits that in the event of liquidation would not have been covered by the deposit repayment scheme would have created a risk of contagion of the member banks and the banking system in general. Such a risk might have had ‘potentially enormous’ legal and reputation implications. They also contend that if Tercas had been put into compulsory winding up the prospects of recovering some part of the initial cost, estimated at EUR 1,9 billion, could have been further compromised by compensation claims brought by subordinated creditors.

| (93) | The [...] report on the basis of which the FITD calculated the lowest cost was based on the accounting situation at 31 December 2013; but the three interested parties say that BPB presented an updated assessment of the impact of the liquidation scenario on the FITD at 31 July 2014, i.e. the date on which the extraordinary shareholders' meeting for the recapitalisation of Tercas was held, which is the date when the support measures were defined formally. The estimated cost under that updated assessment is EUR [350-750] million. The difference between it and the estimate in the report based on the situation at 31 December 2013 is due to the reclassification of accounting positions recorded as ‘performing’ at 31 December 2013 and ‘non-performing’ at 31 July 2014, and to the increased volume of deposits which the FITD would have been required to repay. |
| --- | --- |

(93)

The [...] report on the basis of which the FITD calculated the lowest cost was based on the accounting situation at 31 December 2013; but the three interested parties say that BPB presented an updated assessment of the impact of the liquidation scenario on the FITD at 31 July 2014, i.e. the date on which the extraordinary shareholders' meeting for the recapitalisation of Tercas was held, which is the date when the support measures were defined formally. The estimated cost under that updated assessment is EUR [350-750] million. The difference between it and the estimate in the report based on the situation at 31 December 2013 is due to the reclassification of accounting positions recorded as ‘performing’ at 31 December 2013 and ‘non-performing’ at 31 July 2014, and to the increased volume of deposits which the FITD would have been required to repay.

| (94) | These other interested parties reject the Commission's argument that the purported cost of the support measures to the FITD could have been further reduced by writing down the subordinated debt. At the date on which the FITD decided to intervene, the option of bailing in the subordinated debt was not legally feasible. The Italian legislation provided for debt to be written down only in the case of compulsory administrative winding up. Had such a bail-in been attempted, the FITD's members would have incurred huge expense immediately, with no certainty of recovery. Disputes with subordinated debt holders would have increased the cost of the liquidation proceedings and the costs for the FITD's members due to the decrease in the value of the assets being liquidated. The subsequent spill-over effect would have a negative impact on customers' confidence, and on the reputation and stability of the banking system itself. Moreover, the three interested parties contend that the majority of Tercas's subordinated creditors was made up of individual savers and deposit holders, and that the special administrator had already adopted the only possible burden-sharing measure vis-à-vis subordinated creditors, which consisted in postponing coupon payments on the bonds held by Banco Popolare Sc. |
| --- | --- |

(94)

These other interested parties reject the Commission's argument that the purported cost of the support measures to the FITD could have been further reduced by writing down the subordinated debt. At the date on which the FITD decided to intervene, the option of bailing in the subordinated debt was not legally feasible. The Italian legislation provided for debt to be written down only in the case of compulsory administrative winding up. Had such a bail-in been attempted, the FITD's members would have incurred huge expense immediately, with no certainty of recovery. Disputes with subordinated debt holders would have increased the cost of the liquidation proceedings and the costs for the FITD's members due to the decrease in the value of the assets being liquidated. The subsequent spill-over effect would have a negative impact on customers' confidence, and on the reputation and stability of the banking system itself. Moreover, the three interested parties contend that the majority of Tercas's subordinated creditors was made up of individual savers and deposit holders, and that the special administrator had already adopted the only possible burden-sharing measure vis-à-vis subordinated creditors, which consisted in postponing coupon payments on the bonds held by Banco Popolare Sc.

| (95) | Finally, these other interested parties argue that the [...] report, in its analysis of the least cost, chose a valuation scenario which was not the most pessimistic. The estimated cost of liquidation was based on (a) the possibility of finding a party willing to purchase some of the branches even in the event of a liquidation, and (b) the dismissal of staff not transferred elsewhere with a severance payment of 12 months' salary to each employee. The [...] report, used by the FITD as the basis for its decision to intervene, was based on an intermediate scenario, but other worse-case scenarios had also been considered. |
| --- | --- |

(95)

Finally, these other interested parties argue that the [...] report, in its analysis of the least cost, chose a valuation scenario which was not the most pessimistic. The estimated cost of liquidation was based on (a) the possibility of finding a party willing to purchase some of the branches even in the event of a liquidation, and (b) the dismissal of staff not transferred elsewhere with a severance payment of 12 months' salary to each employee. The [...] report, used by the FITD as the basis for its decision to intervene, was based on an intermediate scenario, but other worse-case scenarios had also been considered.

| (96) | Moreover, it should be presumed that the FITD's intervention did not confer any advantage on Tercas, as it occurred alongside the injection of capital into Tercas by BPB, which was concurrent, significant and comparable to the FITD's action. |
| --- | --- |

(96)

Moreover, it should be presumed that the FITD's intervention did not confer any advantage on Tercas, as it occurred alongside the injection of capital into Tercas by BPB, which was concurrent, significant and comparable to the FITD's action.

| (97) | In light of those considerations, the action taken should be considered to be the less costly and risky solution for the FITD's member banks. |
| --- | --- |

(97)

In light of those considerations, the action taken should be considered to be the less costly and risky solution for the FITD's member banks.

5.3.   Compatibility

Compatibility

5.3.1.   Observations from Italy

Observations from Italy

| (98) | The Commission received no comments from Italy on the compatibility of the measures. |
| --- | --- |

(98)

The Commission received no comments from Italy on the compatibility of the measures.

5.3.2.   Observations from the Banca d'Italia

Observations from the Banca d'Italia

| (99) | The Commission received no comments from the Banca d'Italia on the compatibility of the measures. |
| --- | --- |

(99)

The Commission received no comments from the Banca d'Italia on the compatibility of the measures.

5.3.3.   Observations from other interested parties

Observations from other interested parties

| (100) | The three other interested parties submit that even if the measures did constitute State aid, they would be compatible with the internal market. They take the view that Tercas's restructuring plan will allow it to restore its long-term viability, that the FITD's action is limited to the minimum necessary, and that the measures limit any potential impact on the competitive structure of the market. |
| --- | --- |

(100)

The three other interested parties submit that even if the measures did constitute State aid, they would be compatible with the internal market. They take the view that Tercas's restructuring plan will allow it to restore its long-term viability, that the FITD's action is limited to the minimum necessary, and that the measures limit any potential impact on the competitive structure of the market.

| (101) | As regards the restoration of long-term viability, these three interested parties submit that the special administrator acted to remedy deficiencies in Tercas's organisation and internal control system. He focused his attention on management anomalies (credit, equity investments, disputes) and on the correct valuation of the associated risks (doubtful outcomes, write-downs, provisions). He carried out a gradual deleveraging in order to offset the substantial decrease in funding due to the reduction in the customer base. He rationalised structures (review of the business model with closure of certain branches, staff downsizing plan, simplification of organisational structures, reduction of administrative expenses) to achieve significant cost containment on a structural basis. Tercas's recapitalisation by the FITD and BPB was the best way to remedy the liquidity shortage rapidly. BPB took upon itself the business risk associated with the recovery of Tercas, injecting significant financial and other resources to ensure the success of its business plan. |
| --- | --- |

(101)

As regards the restoration of long-term viability, these three interested parties submit that the special administrator acted to remedy deficiencies in Tercas's organisation and internal control system. He focused his attention on management anomalies (credit, equity investments, disputes) and on the correct valuation of the associated risks (doubtful outcomes, write-downs, provisions). He carried out a gradual deleveraging in order to offset the substantial decrease in funding due to the reduction in the customer base. He rationalised structures (review of the business model with closure of certain branches, staff downsizing plan, simplification of organisational structures, reduction of administrative expenses) to achieve significant cost containment on a structural basis. Tercas's recapitalisation by the FITD and BPB was the best way to remedy the liquidity shortage rapidly. BPB took upon itself the business risk associated with the recovery of Tercas, injecting significant financial and other resources to ensure the success of its business plan.

| (102) | BPB also argues that it developed an intervention strategy based on improvements in lending and deposit margins (51), cost rationalisation (52), development of group synergies, careful monitoring of credit quality, optimisation of the management of impaired receivables by selling non-performing loans, strengthening of liquidity profiles (53) and deployment of management resources. The structural elements of the recovery plan were developed within BPB's business plan for 2015-2019. Those elements show a coherent sequence of actions directed at restoring Tercas's profitability; the absence of a detailed restructuring plan should not prevent the Commission from making a positive assessment of ‘general programmes’ that follow a ‘coherent direction’ (54). |
| --- | --- |

(102)

BPB also argues that it developed an intervention strategy based on improvements in lending and deposit margins (51), cost rationalisation (52), development of group synergies, careful monitoring of credit quality, optimisation of the management of impaired receivables by selling non-performing loans, strengthening of liquidity profiles (53) and deployment of management resources. The structural elements of the recovery plan were developed within BPB's business plan for 2015-2019. Those elements show a coherent sequence of actions directed at restoring Tercas's profitability; the absence of a detailed restructuring plan should not prevent the Commission from making a positive assessment of ‘general programmes’ that follow a ‘coherent direction’ (54).

51

52

non-performing loans

53

54

| (103) | The intervention was limited to the minimum necessary (1) for the reasons set out in recitals 90 to 93 above; (2) because it was the only feasible option; and (3) because the FITD contributed only partly to resolving the negative equity and restoring minimum capital ratios. The three interested parties submit that given the size of Tercas's losses, there were no less costly alternatives to the takeover of Tercas by BPB, despite the special administrator's efforts to find other purchasers (55). The effort to keep the cost to the minimum necessary is also confirmed by the fact that in order to reach an agreement as to the actual amount of Tercas's negative equity the parties resorted to arbitration, which resulted in a reduction of the total sum demanded by BPB from EUR [300-800] million to EUR 265 million. |
| --- | --- |

(103)

The intervention was limited to the minimum necessary (1) for the reasons set out in recitals 90 to 93 above; (2) because it was the only feasible option; and (3) because the FITD contributed only partly to resolving the negative equity and restoring minimum capital ratios. The three interested parties submit that given the size of Tercas's losses, there were no less costly alternatives to the takeover of Tercas by BPB, despite the special administrator's efforts to find other purchasers (55). The effort to keep the cost to the minimum necessary is also confirmed by the fact that in order to reach an agreement as to the actual amount of Tercas's negative equity the parties resorted to arbitration, which resulted in a reduction of the total sum demanded by BPB from EUR [300-800] million to EUR 265 million.

55

| (104) | The costs of intervention were further limited by means of burden-sharing measures. The share capital was reduced to zero, and as a result the shareholders lost the entirety of their investment. In addition, where possible, the payment of the coupons of subordinated bonds was suspended. These other interested parties argue that no other forms of sacrifice on the part of subordinated debt holders were legally feasible, since under the current law the subordinated debt holders could be forced to share losses only in the event of compulsory administrative winding up. But the fact that no further burdens could be imposed on the subordinated debt holders did not result in higher costs for the public finances, since the resources for the intervention came entirely from private parties. Furthermore, sacrificing subordinated debt holders could have generated additional costs and significant risks for the FITD's member banks. Those downsides would have been a consequence of a break-up of Tercas, the risks of legal action brought by Tercas's customers, and the negative impact on Tercas's reputation and the overall stability of the banking system. Finally, the absence of further burdens on subordinated debt holders did not carry any moral hazard, since the costs of covering the negative equity were absorbed entirely by the banking system without any added cost to taxpayers. |
| --- | --- |

(104)

The costs of intervention were further limited by means of burden-sharing measures. The share capital was reduced to zero, and as a result the shareholders lost the entirety of their investment. In addition, where possible, the payment of the coupons of subordinated bonds was suspended. These other interested parties argue that no other forms of sacrifice on the part of subordinated debt holders were legally feasible, since under the current law the subordinated debt holders could be forced to share losses only in the event of compulsory administrative winding up. But the fact that no further burdens could be imposed on the subordinated debt holders did not result in higher costs for the public finances, since the resources for the intervention came entirely from private parties. Furthermore, sacrificing subordinated debt holders could have generated additional costs and significant risks for the FITD's member banks. Those downsides would have been a consequence of a break-up of Tercas, the risks of legal action brought by Tercas's customers, and the negative impact on Tercas's reputation and the overall stability of the banking system. Finally, the absence of further burdens on subordinated debt holders did not carry any moral hazard, since the costs of covering the negative equity were absorbed entirely by the banking system without any added cost to taxpayers.

| (105) | The three interested parties submit that the absence of a conversion or writing down of subordinated debt was in line with point 42 of the Banking Communication, which makes clear that contributions from depositors are not a mandatory component of burden-sharing. It was also in line with point 45 of the Communication, which allows an exception to the principle of conversion or writing-down of subordinated debts where ‘implementing such measures would endanger financial stability or lead to disproportionate results’. |
| --- | --- |

(105)

The three interested parties submit that the absence of a conversion or writing down of subordinated debt was in line with point 42 of the Banking Communication, which makes clear that contributions from depositors are not a mandatory component of burden-sharing. It was also in line with point 45 of the Communication, which allows an exception to the principle of conversion or writing-down of subordinated debts where ‘implementing such measures would endanger financial stability or lead to disproportionate results’.

| (106) | Moreover, the three interested parties submit that the absence or inadequacy of a return is acceptable where, as here, it is offset by an in-depth and broad restructuring and is justified by the search for a purchaser for the bank in crisis. |
| --- | --- |

(106)

Moreover, the three interested parties submit that the absence or inadequacy of a return is acceptable where, as here, it is offset by an in-depth and broad restructuring and is justified by the search for a purchaser for the bank in crisis.

| (107) | Furthermore, the intervention does not distort the internal market, given that:






  (1) | Tercas's operations were small in size and limited in their geographical reach; |
| --- | --- | --- |

(107)

Furthermore, the intervention does not distort the internal market, given that:

(1)

Tercas's operations were small in size and limited in their geographical reach;

| (2) | BPB was the only operator to express a real interest in injecting capital into Tercas, and the Commission has held that the sale of a failing bank, whose activity is the beneficiary of the alleged aid, to a private market player in the framework of an open sale process constitutes a form of mitigation of potential distortions of competition (56); |
| --- | --- |

(2)

BPB was the only operator to express a real interest in injecting capital into Tercas, and the Commission has held that the sale of a failing bank, whose activity is the beneficiary of the alleged aid, to a private market player in the framework of an open sale process constitutes a form of mitigation of potential distortions of competition (56);

56

| (3) | Tercas's restructuring plan was sufficiently far-reaching, and provided for the integration of Tercas into BPB. |
| --- | --- |

(3)

Tercas's restructuring plan was sufficiently far-reaching, and provided for the integration of Tercas into BPB.

| (108) | The transfer of Tercas to BPB was the only feasible option to overcome the issues addressed by the Italian supervisory authority and prevent possible distortion of competition. Furthermore, the restructuring transaction required a complete recapitalisation of Tercas and a significant increase in BPB's capital. |
| --- | --- |

(108)

The transfer of Tercas to BPB was the only feasible option to overcome the issues addressed by the Italian supervisory authority and prevent possible distortion of competition. Furthermore, the restructuring transaction required a complete recapitalisation of Tercas and a significant increase in BPB's capital.

| (109) | Finally, relying on the Commission's earlier decisions (57), these other interested parties claim that the recapitalisation of Tercas, and its incorporation into BPB following the unremunerated coverage of its negative equity by the FITD, can be considered to be justified on the ground that they were necessary in order to ensure the transfer of the company's assets and to implement deep and extensive restructuring of the bank. In the case at hand, no option that was capable of overcoming Tercas's deep crisis would have ensured a return. Had the FITD demanded a return Tercas's equity position would have worsened, thus increasing the cost to the purchasing bank. |
| --- | --- |

(109)

Finally, relying on the Commission's earlier decisions (57), these other interested parties claim that the recapitalisation of Tercas, and its incorporation into BPB following the unremunerated coverage of its negative equity by the FITD, can be considered to be justified on the ground that they were necessary in order to ensure the transfer of the company's assets and to implement deep and extensive restructuring of the bank. In the case at hand, no option that was capable of overcoming Tercas's deep crisis would have ensured a return. Had the FITD demanded a return Tercas's equity position would have worsened, thus increasing the cost to the purchasing bank.

57

6.   ASSESSMENT OF THE MEASURES

ASSESSMENT OF THE MEASURES

6.1.   Existence of State aid

Existence of State aid

| (110) | Article 107(1) of the Treaty states that ‘any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.’ All these conditions must be fulfilled; in what follows the Commission will assess whether they are met in the case of the measures taken by the FITD. |
| --- | --- |

(110)

Article 107(1) of the Treaty states that ‘any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.’ All these conditions must be fulfilled; in what follows the Commission will assess whether they are met in the case of the measures taken by the FITD.

| (111) | The tax exemption scheme mentioned in recital 4 to the opening decision was not notified by Italy. On the basis of the information currently available to the Commission, it was not applied in the case at issue. Hence the tax exemption scheme falls outside the scope of the present Decision. |
| --- | --- |

(111)

The tax exemption scheme mentioned in recital 4 to the opening decision was not notified by Italy. On the basis of the information currently available to the Commission, it was not applied in the case at issue. Hence the tax exemption scheme falls outside the scope of the present Decision.

6.1.1.   State resources and imputability to the State

State resources and imputability to the State

| (112) | The Court of Justice has repeatedly confirmed that all financial means by which the public authorities may actually support undertakings fall under State aid control, irrespective of whether or not those means are permanent assets of the public sector. Compulsory contributions that are imposed, managed and apportioned in accordance with the law or other public rules imply the presence of State resources, even if they are not administered by the public authorities (58). The mere fact that resources are financed by private contributions does not prevent them from being of a public character. The relevant factor is not the immediate origin of the resources but the degree of intervention of the public authority in defining those measures and their methods of financing (59). |
| --- | --- |

(112)

The Court of Justice has repeatedly confirmed that all financial means by which the public authorities may actually support undertakings fall under State aid control, irrespective of whether or not those means are permanent assets of the public sector. Compulsory contributions that are imposed, managed and apportioned in accordance with the law or other public rules imply the presence of State resources, even if they are not administered by the public authorities (58). The mere fact that resources are financed by private contributions does not prevent them from being of a public character. The relevant factor is not the immediate origin of the resources but the degree of intervention of the public authority in defining those measures and their methods of financing (59).

58

59

| (113) | Moreover, as the Court of Justice pointed out in Ladbroke (60), Stardust Marine and Doux Élevage, resources that remain under public control and are therefore available to the public authorities constitute State resources. |
| --- | --- |

(113)

Moreover, as the Court of Justice pointed out in Ladbroke (60), Stardust Marine and Doux Élevage, resources that remain under public control and are therefore available to the public authorities constitute State resources.

Ladbroke

60

Stardust Marine

Doux Élevage

| (114) | In Doux Élevage, the activities of an inter-trade organisation were financed out of resources raised by levies made mandatory by the State: the Court of Justice held that it could not be concluded that the organisation's activities were imputable to the State. The Court observed that the objectives pursued in the use of the resources had been determined entirely by the organisation, and that the mandatory nature of the levies in that case was not ‘dependent upon the pursuit of political objectives which are specific, fixed and defined by the public authorities’. The State merely checked the validity and lawfulness of the inter-trade organisations levying of contributions, i.e. the procedural framework, and had no power to influence the administration of the funds. |
| --- | --- |

(114)

In Doux Élevage, the activities of an inter-trade organisation were financed out of resources raised by levies made mandatory by the State: the Court of Justice held that it could not be concluded that the organisation's activities were imputable to the State. The Court observed that the objectives pursued in the use of the resources had been determined entirely by the organisation, and that the mandatory nature of the levies in that case was not ‘dependent upon the pursuit of political objectives which are specific, fixed and defined by the public authorities’. The State merely checked the validity and lawfulness of the inter-trade organisations levying of contributions, i.e. the procedural framework, and had no power to influence the administration of the funds.

Doux Élevage

| (115) | In the case-law of the Union courts, therefore, a measure is imputable to the State and financed through State resources where a set of indicators show that under the national legislation the State exercises control and influence to ensure that the use of the resources of a private body fulfils a public policy objective with which that body is entrusted. |
| --- | --- |

(115)

In the case-law of the Union courts, therefore, a measure is imputable to the State and financed through State resources where a set of indicators show that under the national legislation the State exercises control and influence to ensure that the use of the resources of a private body fulfils a public policy objective with which that body is entrusted.

| (116) | In Stardust Marine the Court of Justice also held that the imputability to the State of an aid measure taken by a body that was prima facie independent, and did not itself form part of the State, could be inferred from a set of indicators arising from the circumstances of the case. One such indicator would be that the body in question could not take the decision allegedly involving State aid without taking account of the instructions or directives of the public authorities. Other indicators might, in certain circumstances, be relevant in concluding that an aid measure taken by an undertaking was imputable to the State. |
| --- | --- |

(116)

In Stardust Marine the Court of Justice also held that the imputability to the State of an aid measure taken by a body that was prima facie independent, and did not itself form part of the State, could be inferred from a set of indicators arising from the circumstances of the case. One such indicator would be that the body in question could not take the decision allegedly involving State aid without taking account of the instructions or directives of the public authorities. Other indicators might, in certain circumstances, be relevant in concluding that an aid measure taken by an undertaking was imputable to the State.

Stardust Marine

| (117) | With regard to the measures in respect of which the Commission opened the formal investigation procedure in the present case, it should be recalled that in Directive 94/19/EC the Union legislature introduced deposit guarantee schemes with the policy objective of preserving and increasing ‘the stability of the banking system’ (61) and gave them a mandate to protect depositors (62). Directive 94/19/EC requires Member States to introduce one or more deposit guarantee schemes, which are to reimburse depositors in the event that a credit institution fails. On the possibility of other forms of intervention Directive 94/19/EC is silent, so that Member States retain discretion on whether to allow deposit guarantee schemes to go beyond a pure reimbursement function and to use the available financial resources in other ways. |
| --- | --- |

(117)

With regard to the measures in respect of which the Commission opened the formal investigation procedure in the present case, it should be recalled that in Directive 94/19/EC the Union legislature introduced deposit guarantee schemes with the policy objective of preserving and increasing ‘the stability of the banking system’ (61) and gave them a mandate to protect depositors (62). Directive 94/19/EC requires Member States to introduce one or more deposit guarantee schemes, which are to reimburse depositors in the event that a credit institution fails. On the possibility of other forms of intervention Directive 94/19/EC is silent, so that Member States retain discretion on whether to allow deposit guarantee schemes to go beyond a pure reimbursement function and to use the available financial resources in other ways.

61

62

| (118) | The situation remains unchanged under Directive 2014/49/EU, which is, however, more explicit as to the nature of such alternative measures. They must have the aim of preventing the failure of the credit institution with a view to avoiding not only ‘the costs of reimbursing depositors’, but also ‘the costs of the failure of a credit institution to the economy as a whole’ and ‘other adverse impacts’, such as an ‘adverse impact on financial stability and the confidence of depositors’ (63). |
| --- | --- |

(118)

The situation remains unchanged under Directive 2014/49/EU, which is, however, more explicit as to the nature of such alternative measures. They must have the aim of preventing the failure of the credit institution with a view to avoiding not only ‘the costs of reimbursing depositors’, but also ‘the costs of the failure of a credit institution to the economy as a whole’ and ‘other adverse impacts’, such as an ‘adverse impact on financial stability and the confidence of depositors’ (63).

63

| (119) | Under Directive 2014/49/EU Member States may allow deposit guarantee schemes to be used in order to preserve the access of depositors to the deposits covered, both in an initial, going-concern phase and in the context of domestic insolvency proceedings (64). The Commission would point out that, contrary to the position of the other interested parties mentioned in recital 79, alternative measures taken by a deposit guarantee scheme may constitute aid irrespective of whether they are aimed at preventing the failure of a credit institution or whether they are taken in connection with a liquidation. |
| --- | --- |

(119)

Under Directive 2014/49/EU Member States may allow deposit guarantee schemes to be used in order to preserve the access of depositors to the deposits covered, both in an initial, going-concern phase and in the context of domestic insolvency proceedings (64). The Commission would point out that, contrary to the position of the other interested parties mentioned in recital 79, alternative measures taken by a deposit guarantee scheme may constitute aid irrespective of whether they are aimed at preventing the failure of a credit institution or whether they are taken in connection with a liquidation.

64

| (120) | The protection of savings and depositors has a specific position in Italian national law: under Article 47 of the Italian Constitution, ‘The Republic ... shall protect savings in all their forms’ (65). The Banca d'Italia is a body established under public law, and for that reason alone its behaviour is imputable to the Member State, and does not fall outside the scope of Article 107 of the Treaty on the ground that it is constitutionally independent (66); it has the task of safeguarding the stability of the Italian banking system (67) and protecting depositors (68). |
| --- | --- |

(120)

The protection of savings and depositors has a specific position in Italian national law: under Article 47 of the Italian Constitution, ‘The Republic ... shall protect savings in all their forms’ (65). The Banca d'Italia is a body established under public law, and for that reason alone its behaviour is imputable to the Member State, and does not fall outside the scope of Article 107 of the Treaty on the ground that it is constitutionally independent (66); it has the task of safeguarding the stability of the Italian banking system (67) and protecting depositors (68).

65

66

67

68

| (121) | In view of the foregoing, Article 96-bis of the Banking Act has to be read as a specific definition of the public mandate of protecting depositors that applies to deposit guarantee schemes recognised in Italy. By including the last sentence in Article 96-bis(1), according to which deposit guarantee schemes ‘may engage in other types and forms of intervention’ in addition to repayment of depositors, the Italian authorities have chosen to allow their recognised deposit guarantee schemes to use the resources collected from member banks for different types of action. Article 96-bis of the Banking Act is therefore the basis for recognition of the FITD as a mandatory deposit guarantee scheme in Italy, and at the same time grants the FITD the power to take support measures. |
| --- | --- |

(121)

In view of the foregoing, Article 96-bis of the Banking Act has to be read as a specific definition of the public mandate of protecting depositors that applies to deposit guarantee schemes recognised in Italy. By including the last sentence in Article 96-bis(1), according to which deposit guarantee schemes ‘may engage in other types and forms of intervention’ in addition to repayment of depositors, the Italian authorities have chosen to allow their recognised deposit guarantee schemes to use the resources collected from member banks for different types of action. Article 96-bis of the Banking Act is therefore the basis for recognition of the FITD as a mandatory deposit guarantee scheme in Italy, and at the same time grants the FITD the power to take support measures.

bis

bis

bis

| (122) | From that perspective the fact that the FITD is organised as a consortium under private law (69) is irrelevant, as the mere fact that a body is constituted under ordinary law cannot be regarded as sufficient to exclude the possibility of an aid measure taken by such a body being imputable to the State, as the Court of Justice held in Stardust Marine. The FITD's objectives — pursuit of the common interests of its members by strengthening the safety of deposits and the protection of the reputation of the banking system — clearly coincide with the public interest. But that does not necessarily mean that the undertaking could have taken its decision without taking into account the requirements of the public authorities. Moreover, it is not necessary that the State's influence should result from a legally binding act of a public authority. The autonomy that the undertaking in principle enjoys does not prevent the practical involvement of the State. |
| --- | --- |

(122)

From that perspective the fact that the FITD is organised as a consortium under private law (69) is irrelevant, as the mere fact that a body is constituted under ordinary law cannot be regarded as sufficient to exclude the possibility of an aid measure taken by such a body being imputable to the State, as the Court of Justice held in Stardust Marine. The FITD's objectives — pursuit of the common interests of its members by strengthening the safety of deposits and the protection of the reputation of the banking system — clearly coincide with the public interest. But that does not necessarily mean that the undertaking could have taken its decision without taking into account the requirements of the public authorities. Moreover, it is not necessary that the State's influence should result from a legally binding act of a public authority. The autonomy that the undertaking in principle enjoys does not prevent the practical involvement of the State.

69

Stardust Marine

| (123) | In any event, Union and Italian legislation gives the Banca d'Italia the authority and the means to ensure that all actions taken by the FITD as a deposit guarantee scheme recognised under the Banking Act comply with that public policy mandate and contribute to the protection of depositors. This is made clear in the introductory sentence of Article 96-ter(1) of the Banking Act, where the list of all the powers exercised by the Banca d'Italia with respect to Italian deposit guarantee schemes is preceded by a statement that those powers are to be exercised ‘having regard to the protection of depositors and the stability of the banking system’. |
| --- | --- |

(123)

In any event, Union and Italian legislation gives the Banca d'Italia the authority and the means to ensure that all actions taken by the FITD as a deposit guarantee scheme recognised under the Banking Act comply with that public policy mandate and contribute to the protection of depositors. This is made clear in the introductory sentence of Article 96-ter(1) of the Banking Act, where the list of all the powers exercised by the Banca d'Italia with respect to Italian deposit guarantee schemes is preceded by a statement that those powers are to be exercised ‘having regard to the protection of depositors and the stability of the banking system’.

ter

| (124) | In view of that evidence, and by contrast with Doux Élevage, where the object of the ex post approval by the public administration was purely procedural in nature, the Banca d'Italia has to approve every intervention by the FITD on its merits, assessing whether it complies with the FITD's public mandate under the Banking Act. |
| --- | --- |

(124)

In view of that evidence, and by contrast with Doux Élevage, where the object of the ex post approval by the public administration was purely procedural in nature, the Banca d'Italia has to approve every intervention by the FITD on its merits, assessing whether it complies with the FITD's public mandate under the Banking Act.

Doux Élevage

ex post

| (125) | Italy has affirmed that if this line of reasoning were to be followed prudential supervision of banks would have to be considered to be the exercise of public control, and the banks' resources would consequently have to be considered public resources (recital 53); this is clearly immaterial. The Commission will merely observe that the supervision of banks carried out by the Banca d'Italia does not serve to verify compliance with a public policy mandate that is entrusted to the supervised banks. |
| --- | --- |

(125)

Italy has affirmed that if this line of reasoning were to be followed prudential supervision of banks would have to be considered to be the exercise of public control, and the banks' resources would consequently have to be considered public resources (recital 53); this is clearly immaterial. The Commission will merely observe that the supervision of banks carried out by the Banca d'Italia does not serve to verify compliance with a public policy mandate that is entrusted to the supervised banks.

| (126) | The precedence of the public mandate and the related public controls are recognised in the constitution of the FITD (70), according to which all support measures must comply with the concurrent conditions that there must be a reasonable prospect of recovery and that the cost to the Fund may be presumed to be less than would be incurred by measures taken in the event of liquidation (the ‘least-cost principle’). Those concurrent conditions mean that a decision to take support measures is permissible only if it allows the FITD to fulfil its public mandate of protecting depositors. That precedence is corroborated by the requirement of approval by the Banca d'Italia in accordance with the Banking Act. |
| --- | --- |

(126)

The precedence of the public mandate and the related public controls are recognised in the constitution of the FITD (70), according to which all support measures must comply with the concurrent conditions that there must be a reasonable prospect of recovery and that the cost to the Fund may be presumed to be less than would be incurred by measures taken in the event of liquidation (the ‘least-cost principle’). Those concurrent conditions mean that a decision to take support measures is permissible only if it allows the FITD to fulfil its public mandate of protecting depositors. That precedence is corroborated by the requirement of approval by the Banca d'Italia in accordance with the Banking Act.

70

| (127) | In addition, the Banking Act provides the Banca d'Italia with wide-ranging powers over deposit guarantee schemes:






  (1) | point (d) of Article 96-ter(1) of the Banking Act, provides that the Banca d'Italia must ‘authorise the interventions of the guarantee schemes’; |
| --- | --- | --- |

(127)

In addition, the Banking Act provides the Banca d'Italia with wide-ranging powers over deposit guarantee schemes:

(1)

point (d) of Article 96-ter(1) of the Banking Act, provides that the Banca d'Italia must ‘authorise the interventions of the guarantee schemes’;

ter

| (2) | point (b) of Article 96-ter(1) of the Banking Act provides that the Banca d'Italia is to ‘coordinate the activity of the guarantee schemes with the rules governing banking crises and with its own supervisory activity’ (71); |
| --- | --- |

(2)

point (b) of Article 96-ter(1) of the Banking Act provides that the Banca d'Italia is to ‘coordinate the activity of the guarantee schemes with the rules governing banking crises and with its own supervisory activity’ (71);

ter

71

| (3) | point (a) of Article 96-ter(1), of the Banking Act provides that the Banca d'Italia is to ‘recognise guarantee schemes, approving their constitutions, provided that the schemes do not have characteristics which could lead to an unbalanced distribution of insolvency risks in the banking system’ (72); |
| --- | --- |

(3)

point (a) of Article 96-ter(1), of the Banking Act provides that the Banca d'Italia is to ‘recognise guarantee schemes, approving their constitutions, provided that the schemes do not have characteristics which could lead to an unbalanced distribution of insolvency risks in the banking system’ (72);

ter

72

| (4) | point (h) of Article 96-ter(1) of the Banking Act provides that the Banca d'Italia ‘can make rules implementing the rules set out’ in Section IV of the Banking Act, on deposit guarantee schemes (73). |
| --- | --- |

(4)

point (h) of Article 96-ter(1) of the Banking Act provides that the Banca d'Italia ‘can make rules implementing the rules set out’ in Section IV of the Banking Act, on deposit guarantee schemes (73).

ter

73

| (128) | In addition to the powers over the FITD thus given to the Banca d'Italia by the Banking Act, only banks under special administration qualify for FITD support measures (74). A bank is put into special administration, on a proposal from the Banca d'Italia, by an order made by the Ministry of Economic Affairs and Finance. At that stage, according to the FITD's constitution, ‘the Fund shall intervene ... in cases of special administration of member banks authorised to do business in Italy’ (75). Only the special administrator of the bank can send the FITD a request for intervention, and the request must then be approved by a meeting of the bank's shareholders. The special administrator is a public official, who represents the public interest and is appointed and supervised by the Banca d'Italia. The Banca d'Italia also has the power to recall or replace the special administrator (76), and to give instructions imposing specific safeguards and limitations on the management of the bank (77). Intervention on the part of the FITD is thus initiated by a public official under the control of the Banca d'Italia. |
| --- | --- |

(128)

In addition to the powers over the FITD thus given to the Banca d'Italia by the Banking Act, only banks under special administration qualify for FITD support measures (74). A bank is put into special administration, on a proposal from the Banca d'Italia, by an order made by the Ministry of Economic Affairs and Finance. At that stage, according to the FITD's constitution, ‘the Fund shall intervene ... in cases of special administration of member banks authorised to do business in Italy’ (75). Only the special administrator of the bank can send the FITD a request for intervention, and the request must then be approved by a meeting of the bank's shareholders. The special administrator is a public official, who represents the public interest and is appointed and supervised by the Banca d'Italia. The Banca d'Italia also has the power to recall or replace the special administrator (76), and to give instructions imposing specific safeguards and limitations on the management of the bank (77). Intervention on the part of the FITD is thus initiated by a public official under the control of the Banca d'Italia.

74

75

76

77

| (129) | Regarding the power to authorise action by deposit guarantee schemes, the Commission observes that the concept of authorisation calls for an administrative act which necessarily precedes the entry into force of the measure to be authorised. Otherwise the exercise of the Banca d'Italia's powers in respect of FITD measures to ensure the stability of the financial system and the protection of depositors would be ineffective. In practice, authorisation has to occur at a stage where the FITD can still reconsider and amend the proposed measure if the Banca d'Italia objects to it. Authorisation cannot be considered as occurring after the FITD's decision to intervene (as suggested by Italy, the FITD, Tercas and BPB (78)). The fact that the Banca d'Italia participates as an observer in all meetings of the Board and the Executive Committee of the FITD (79) is material in that connection (contrary to claims of Italy, the FITD, Tercas and BPB (80)), as it can be supposed to enable the Banca d'Italia to voice any concerns about planned intervention at an early stage. |
| --- | --- |

(129)

Regarding the power to authorise action by deposit guarantee schemes, the Commission observes that the concept of authorisation calls for an administrative act which necessarily precedes the entry into force of the measure to be authorised. Otherwise the exercise of the Banca d'Italia's powers in respect of FITD measures to ensure the stability of the financial system and the protection of depositors would be ineffective. In practice, authorisation has to occur at a stage where the FITD can still reconsider and amend the proposed measure if the Banca d'Italia objects to it. Authorisation cannot be considered as occurring after the FITD's decision to intervene (as suggested by Italy, the FITD, Tercas and BPB (78)). The fact that the Banca d'Italia participates as an observer in all meetings of the Board and the Executive Committee of the FITD (79) is material in that connection (contrary to claims of Italy, the FITD, Tercas and BPB (80)), as it can be supposed to enable the Banca d'Italia to voice any concerns about planned intervention at an early stage.

78

79

80

| (130) | In summary, the public authorities have the power to initiate action at their request, and by virtue of their power to authorise the substance of the action they influence the action before it is actually decided. Their influence is procedurally embedded further by their presence in all decision-making meetings, where they are able to voice any concerns. Nonetheless, and even though the Banca d'Italia's authorisation must in principle be considered to be ex ante rather than ex post (81), the Commission points out that even ex post control can be considered among the set of indicators of imputability referred to in Stardust Marine. |
| --- | --- |

(130)

In summary, the public authorities have the power to initiate action at their request, and by virtue of their power to authorise the substance of the action they influence the action before it is actually decided. Their influence is procedurally embedded further by their presence in all decision-making meetings, where they are able to voice any concerns. Nonetheless, and even though the Banca d'Italia's authorisation must in principle be considered to be ex ante rather than ex post (81), the Commission points out that even ex post control can be considered among the set of indicators of imputability referred to in Stardust Marine.

ex ante

ex post

81

ex post

Stardust Marine

| (131) | The powers available to the public authorities were in fact exercised in connection with the adoption of the support measures at issue:






  (1) | The documents communicated by Italy to the Commission show that the Banca d'Italia authorised the specific measures for Tercas having regard to the interests of depositors and clients within the meaning of Article 96-ter(1)(d) of the Banking Act (82). Thus the Banca d'Italia authorised the specific FITD measures in the light of specific provisions of national public law. |
| --- | --- | --- |

(131)

The powers available to the public authorities were in fact exercised in connection with the adoption of the support measures at issue:

(1)

The documents communicated by Italy to the Commission show that the Banca d'Italia authorised the specific measures for Tercas having regard to the interests of depositors and clients within the meaning of Article 96-ter(1)(d) of the Banking Act (82). Thus the Banca d'Italia authorised the specific FITD measures in the light of specific provisions of national public law.

ter

82

| (2) | The negotiations between BPB and the special administrator of Tercas were conducted ‘in coordination with the Bank of Italy’ (83). |
| --- | --- |

(2)

The negotiations between BPB and the special administrator of Tercas were conducted ‘in coordination with the Bank of Italy’ (83).

83

| (3) | The Banca d'Italia ‘invited’ the FITD ‘to look for a balanced agreement with BPB’ to cover Tercas's negative equity, taking account of the possible negative impact of the liquidation of Tercas and its subsidiary Caripe (84). |
| --- | --- |

(3)

The Banca d'Italia ‘invited’ the FITD ‘to look for a balanced agreement with BPB’ to cover Tercas's negative equity, taking account of the possible negative impact of the liquidation of Tercas and its subsidiary Caripe (84).

84

| (132) | The Commission concludes that in contrast to the situation in Doux Élevage, where the Court found that the aims and purposes of intervention were determined entirely by the organisation, in this case the aims and purposes of the intervention are certainly not determined entirely by the FITD. They are laid down in detail by its public mandate under the Banking Act, and in substance they are controlled by the public authorities. The FITD is indeed free not to intervene, but that does not affect the Commission's conclusion regarding the action actually taken by the FITD. |
| --- | --- |

(132)

The Commission concludes that in contrast to the situation in Doux Élevage, where the Court found that the aims and purposes of intervention were determined entirely by the organisation, in this case the aims and purposes of the intervention are certainly not determined entirely by the FITD. They are laid down in detail by its public mandate under the Banking Act, and in substance they are controlled by the public authorities. The FITD is indeed free not to intervene, but that does not affect the Commission's conclusion regarding the action actually taken by the FITD.

Doux Élevage,

| (133) | In addition to the substantial public control demonstrated above, the Commission must underline the mandatory nature of the contributions to the FITD resources used in intervention. |
| --- | --- |

(133)

In addition to the substantial public control demonstrated above, the Commission must underline the mandatory nature of the contributions to the FITD resources used in intervention.

| (134) | As described in Section 2.3, membership of the FITD is mandatory for Italian banks (85). In that respect, the reference to the Fondo di Garanzia dei Depositanti del Credito Cooperativo (see recital 70), intended to corroborate the alleged voluntary nature of membership of the FITD, is erroneous, since under the Banking Act (86) Italian mutual banks are required to establish a distinct deposit guarantee scheme within their own network: as a consequence, mutual banks cannot be members of the FITD, and conversely, non-mutual banks cannot be members of the Fondo di Garanzia dei Depositanti del Credito Cooperativo and must be members of the FITD. Hence the provision of the FITD's constitution (87) allowing member banks to withdraw their membership, which has been highlighted by the interested parties in their comments (see recital 70), is a mere theoretical possibility that cannot be put into effect, since those banks cannot become members of any other recognised deposit guarantee scheme. |
| --- | --- |

(134)

As described in Section 2.3, membership of the FITD is mandatory for Italian banks (85). In that respect, the reference to the Fondo di Garanzia dei Depositanti del Credito Cooperativo (see recital 70), intended to corroborate the alleged voluntary nature of membership of the FITD, is erroneous, since under the Banking Act (86) Italian mutual banks are required to establish a distinct deposit guarantee scheme within their own network: as a consequence, mutual banks cannot be members of the FITD, and conversely, non-mutual banks cannot be members of the Fondo di Garanzia dei Depositanti del Credito Cooperativo and must be members of the FITD. Hence the provision of the FITD's constitution (87) allowing member banks to withdraw their membership, which has been highlighted by the interested parties in their comments (see recital 70), is a mere theoretical possibility that cannot be put into effect, since those banks cannot become members of any other recognised deposit guarantee scheme.

85

86

87

| (135) | Moreover, the decision to take support measures is taken by the governing bodies of the FITD. Regardless of their individual interests, member banks can neither veto such a decision nor opt out of the measures (88), and have to contribute to the funding of the action decided. The fact that such resources are not recorded on the FITD's balance sheet, but in separate accounts, is a mere formality, since the resources are managed directly by the FITD. |
| --- | --- |

(135)

Moreover, the decision to take support measures is taken by the governing bodies of the FITD. Regardless of their individual interests, member banks can neither veto such a decision nor opt out of the measures (88), and have to contribute to the funding of the action decided. The fact that such resources are not recorded on the FITD's balance sheet, but in separate accounts, is a mere formality, since the resources are managed directly by the FITD.

88

| (136) | This leads the Commission to conclude that the intervention is imputable to the FITD and not to its members, and that the resources used to take measures are the FITD's resources and not the member banks' own. |
| --- | --- |

(136)

This leads the Commission to conclude that the intervention is imputable to the FITD and not to its members, and that the resources used to take measures are the FITD's resources and not the member banks' own.

| (137) | Therefore, since both membership of the FITD and contributions to support measures decided by the FITD are mandatory, the Commission concludes that in order to operate as a non-mutual bank in Italy it is mandatory under Italian law to contribute to the costs of FITD's support measures. The resources used to finance such support measures are clearly required, managed and apportioned according to the law and other public rules, and consequently have a public character. |
| --- | --- |

(137)

Therefore, since both membership of the FITD and contributions to support measures decided by the FITD are mandatory, the Commission concludes that in order to operate as a non-mutual bank in Italy it is mandatory under Italian law to contribute to the costs of FITD's support measures. The resources used to finance such support measures are clearly required, managed and apportioned according to the law and other public rules, and consequently have a public character.

| (138) | Accordingly, the Commission concludes that in the case at issue, both in principle and in practice, the Italian authorities exercise constant control of compliance in the use of the FITD's resources with public objectives, and influence the use of those resources by the FITD. |
| --- | --- |

(138)

Accordingly, the Commission concludes that in the case at issue, both in principle and in practice, the Italian authorities exercise constant control of compliance in the use of the FITD's resources with public objectives, and influence the use of those resources by the FITD.

| (139) | In particular, given that the public authorities have the formal powers both to request intervention and to approve the substance of the action taken with respect to compliance with the public mandate (recital 126), the Commission concludes that the role of the Banca d'Italia cannot be considered as limited to a purely informative step or a mere formal check of validity and lawfulness (89). |
| --- | --- |

(139)

In particular, given that the public authorities have the formal powers both to request intervention and to approve the substance of the action taken with respect to compliance with the public mandate (recital 126), the Commission concludes that the role of the Banca d'Italia cannot be considered as limited to a purely informative step or a mere formal check of validity and lawfulness (89).

89

| (140) | In particular, the Court of Justice pointed out in Doux Élevage that the mandatory nature of the levies in that case was not dependent upon ‘the pursuit of political objectives which are specific, fixed and defined by the public authorities’. But the FITD's actions are indeed dependent upon public objectives that are specific, fixed and defined by the public authorities, and controlled by them, notably the policy objectives of protecting depositors. |
| --- | --- |

(140)

In particular, the Court of Justice pointed out in Doux Élevage that the mandatory nature of the levies in that case was not dependent upon ‘the pursuit of political objectives which are specific, fixed and defined by the public authorities’. But the FITD's actions are indeed dependent upon public objectives that are specific, fixed and defined by the public authorities, and controlled by them, notably the policy objectives of protecting depositors.

Doux Élevage

| (141) | The measures at issue are under the supervision of the Banca d'Italia, and consequently they are supervised among other things in the light of the objectives of the Banca d'Italia, including the preservation of the stability of the financial system. Here, the following facts need to be recalled:






  (1) | the importance of the Banca d'Italia's role in ensuring the stability of the Italian banking system and protecting depositors; |
| --- | --- | --- |

(141)

The measures at issue are under the supervision of the Banca d'Italia, and consequently they are supervised among other things in the light of the objectives of the Banca d'Italia, including the preservation of the stability of the financial system. Here, the following facts need to be recalled:

(1)

the importance of the Banca d'Italia's role in ensuring the stability of the Italian banking system and protecting depositors;

| (2) | the extensive powers that the Banca d'Italia can exercise to ensure that the FITD takes account of those requirements. |
| --- | --- |

(2)

the extensive powers that the Banca d'Italia can exercise to ensure that the FITD takes account of those requirements.

| (142) | The factors referred to in recitals 127 to 131 above (legislation that makes the organisation subject to tight control, and effective coordination by the Banca d'Italia in order to ensure that the FITD contributes to the achievement of major public objectives) show that the FITD enjoys an exceptional legal status compared to normal private consortia under Italian law, and that its purpose, witnessed by its public mandate, extends clearly beyond, for instance, that of the CIDEF (90), which was assessed in the Doux Élevage judgment. Such an exceptional status is a valid indicator of imputability under the Stardust Marine test. |
| --- | --- |

(142)

The factors referred to in recitals 127 to 131 above (legislation that makes the organisation subject to tight control, and effective coordination by the Banca d'Italia in order to ensure that the FITD contributes to the achievement of major public objectives) show that the FITD enjoys an exceptional legal status compared to normal private consortia under Italian law, and that its purpose, witnessed by its public mandate, extends clearly beyond, for instance, that of the CIDEF (90), which was assessed in the Doux Élevage judgment. Such an exceptional status is a valid indicator of imputability under the Stardust Marine test.

90

Doux Élevage

Stardust Marine

| (143) | In view of the factors mentioned above, the content, compass and object of the measures show how unlikely it is that the public authorities should have no hand in their adoption. Not only did the measures confer a competitive advantage on an undertaking, they prevented it from failing altogether, thanks to public support provided through measures 1, 2 and 3 described in recital 38, in order to protect depositors and the stability of the Italian banking system. |
| --- | --- |

(143)

In view of the factors mentioned above, the content, compass and object of the measures show how unlikely it is that the public authorities should have no hand in their adoption. Not only did the measures confer a competitive advantage on an undertaking, they prevented it from failing altogether, thanks to public support provided through measures 1, 2 and 3 described in recital 38, in order to protect depositors and the stability of the Italian banking system.

| (144) | The Commission accordingly considers that there is sufficient evidence to show that the measure is imputable to the State and financed through public resources. |
| --- | --- |

(144)

The Commission accordingly considers that there is sufficient evidence to show that the measure is imputable to the State and financed through public resources.

| (145) | Even if some of the factors to which the Commission has given weight, taken individually, did not by themselves suffice to justify the conclusion that the measures were imputable to the State, it is plain from recitals 118 to 144 that taken together the evidence considered there demonstrates that the measures assessed by the Commission show the imputability to the State of FITD's action. |
| --- | --- |

(145)

Even if some of the factors to which the Commission has given weight, taken individually, did not by themselves suffice to justify the conclusion that the measures were imputable to the State, it is plain from recitals 118 to 144 that taken together the evidence considered there demonstrates that the measures assessed by the Commission show the imputability to the State of FITD's action.

| (146) | Regarding the comments put forward by Italy and the interested parties in relation to the Commission decision on the aid to Banco di Sicilia and Sicilcassa, it should first be recalled that the existence of State aid is an objective concept and cannot be determined on the basis of an alleged practice adopted by the Commission in its decisions, even if such a practice were to be demonstrated. In addition, the Commission points out that at the time when the support measures for Tercas were approved, by contrast with 1999, the Commission had already developed and published in considerable detail the conditions under which support from a deposit guarantee scheme constitutes State aid. |
| --- | --- |

(146)

Regarding the comments put forward by Italy and the interested parties in relation to the Commission decision on the aid to Banco di Sicilia and Sicilcassa, it should first be recalled that the existence of State aid is an objective concept and cannot be determined on the basis of an alleged practice adopted by the Commission in its decisions, even if such a practice were to be demonstrated. In addition, the Commission points out that at the time when the support measures for Tercas were approved, by contrast with 1999, the Commission had already developed and published in considerable detail the conditions under which support from a deposit guarantee scheme constitutes State aid.

| (147) | Moreover, at the time of the Sicilcassa decision the Commission had not adapted its own assessment of imputability in the light of the findings of the Union law courts in Stardust Marine and subsequent rulings. |
| --- | --- |

(147)

Moreover, at the time of the Sicilcassa decision the Commission had not adapted its own assessment of imputability in the light of the findings of the Union law courts in Stardust Marine and subsequent rulings.

Sicilcassa

Stardust Marine

| (148) | Contrary to the arguments put forward by Italy and the interested parties, the Commission's practice in its decisions with regard to intervention by deposit guarantee schemes (91) provides ample indication that the action taken by the FITD is in the nature of State aid. In light of the above, the Sicilcassa decision provides no grounds for invoking legitimate expectations on the part of Italy and the interested parties. |
| --- | --- |

(148)

Contrary to the arguments put forward by Italy and the interested parties, the Commission's practice in its decisions with regard to intervention by deposit guarantee schemes (91) provides ample indication that the action taken by the FITD is in the nature of State aid. In light of the above, the Sicilcassa decision provides no grounds for invoking legitimate expectations on the part of Italy and the interested parties.

91

Sicilcassa

6.1.2.   Selective advantage distorting competition and affecting trade between Member States

Selective advantage distorting competition and affecting trade between Member States

| (149) | The support measures taken by the FITD conferred a selective advantage on Tercas, and the FITD was not acting in the capacity of an operator in a market economy. Measures 1, 2 and 3, for which there is no expectation or possibility of any return, are not measures that would be taken by a market economy operator. They show that the FITD was acting not as a market economy operator but as a body fulfilling a public mandate (92). All three measures are grants of assistance without any fee, remuneration or associated return, whose combined effect was that Tercas did not exit the market as it would likely have done in the absence of such support, and which thereby conferred a selective advantage on Tercas. |
| --- | --- |

(149)

The support measures taken by the FITD conferred a selective advantage on Tercas, and the FITD was not acting in the capacity of an operator in a market economy. Measures 1, 2 and 3, for which there is no expectation or possibility of any return, are not measures that would be taken by a market economy operator. They show that the FITD was acting not as a market economy operator but as a body fulfilling a public mandate (92). All three measures are grants of assistance without any fee, remuneration or associated return, whose combined effect was that Tercas did not exit the market as it would likely have done in the absence of such support, and which thereby conferred a selective advantage on Tercas.

92

| (150) | Even if it were to be accepted that the measures ought to be assessed in the light of the conduct of a comparably situated market economy operator, it would in any event be for the Member State concerned to furnish the Commission with objective and verifiable evidence to show that the decision was based on a prior economic assessment, comparable to the assessment that might be carried out by a rational private operator in a similar situation in order to determine the future profitability of the measure. In the case at hand, no evidence has been supplied to the Commission to demonstrate that the FITD demanded a business plan or a calculation of the return on the capital invested, which are fundamental requirements for any investment decision on the part of a private operator. |
| --- | --- |

(150)

Even if it were to be accepted that the measures ought to be assessed in the light of the conduct of a comparably situated market economy operator, it would in any event be for the Member State concerned to furnish the Commission with objective and verifiable evidence to show that the decision was based on a prior economic assessment, comparable to the assessment that might be carried out by a rational private operator in a similar situation in order to determine the future profitability of the measure. In the case at hand, no evidence has been supplied to the Commission to demonstrate that the FITD demanded a business plan or a calculation of the return on the capital invested, which are fundamental requirements for any investment decision on the part of a private operator.

| (151) | Italy and the interested parties claim that those measures were in fact compliant with the principle of the operator in a market economy (93), in particular because the action enabled the FITD to limit costs to which it would otherwise have been exposed, namely the costs to the FITD of reimbursing depositors at the stage of compulsory administrative winding up of Tercas. |
| --- | --- |

(151)

Italy and the interested parties claim that those measures were in fact compliant with the principle of the operator in a market economy (93), in particular because the action enabled the FITD to limit costs to which it would otherwise have been exposed, namely the costs to the FITD of reimbursing depositors at the stage of compulsory administrative winding up of Tercas.

93

| (152) | The interested parties claim further that the actions of the FITD are within the sphere of the private autonomy of the member banks. |
| --- | --- |

(152)

The interested parties claim further that the actions of the FITD are within the sphere of the private autonomy of the member banks.

| (153) | The Commission takes the view that the measures are clearly imputable to the FITD, which is controlled by the public authorities (see the assessment in recitals 134 to 136), and not to the member banks. Any comparison with action taken by the FITD before the member banks were legally bound to belong to it are irrelevant, in view of the fact that member banks now have no way of opting out of particular measures, as explained in recitals 134 and 135. This is aggravated by the mechanism by which the FITD decides such measures, as described in recital 36, which is skewed in favour of large banks (94) in such a way that decisions to intervene can be taken against the will of the majority of the member banks. |
| --- | --- |

(153)

The Commission takes the view that the measures are clearly imputable to the FITD, which is controlled by the public authorities (see the assessment in recitals 134 to 136), and not to the member banks. Any comparison with action taken by the FITD before the member banks were legally bound to belong to it are irrelevant, in view of the fact that member banks now have no way of opting out of particular measures, as explained in recitals 134 and 135. This is aggravated by the mechanism by which the FITD decides such measures, as described in recital 36, which is skewed in favour of large banks (94) in such a way that decisions to intervene can be taken against the will of the majority of the member banks.

94

| (154) | The costs in question thus arise from obligations imposed on the FITD as a deposit guarantee scheme acting under a public mandate to protect depositors. No market economy operator would have to fulfil the obligations deriving from a public mandate, such as the obligation to reimburse depositors in the event of a liquidation of Tercas. According to established case-law, obligations incurred under a public mandate cannot be taken into account in the application of the market economy operator principle (95). |
| --- | --- |

(154)

The costs in question thus arise from obligations imposed on the FITD as a deposit guarantee scheme acting under a public mandate to protect depositors. No market economy operator would have to fulfil the obligations deriving from a public mandate, such as the obligation to reimburse depositors in the event of a liquidation of Tercas. According to established case-law, obligations incurred under a public mandate cannot be taken into account in the application of the market economy operator principle (95).

95

| (155) | Leaving aside the obligations incurred under the FITD's public mandate, therefore, the Commission concludes that none of the three measures would have been adopted by a market economy operator. The absence of a business plan and any prospect of any return on investment whatsoever is fundamental to that assessment, and cannot but confirm the conclusion. |
| --- | --- |

(155)

Leaving aside the obligations incurred under the FITD's public mandate, therefore, the Commission concludes that none of the three measures would have been adopted by a market economy operator. The absence of a business plan and any prospect of any return on investment whatsoever is fundamental to that assessment, and cannot but confirm the conclusion.

| (156) | Finally, BPB and Tercas contend that the action taken by the FITD can be considered to be concurrent with the contribution of BPB as a private operator. The Commission points out that concurrent investment of this kind must be on fully equal conditions for the private and the public co-investors. That condition is clearly not fulfilled here. BPB obtained full ownership of Tercas, whereas the FITD received no return on its investment. |
| --- | --- |

(156)

Finally, BPB and Tercas contend that the action taken by the FITD can be considered to be concurrent with the contribution of BPB as a private operator. The Commission points out that concurrent investment of this kind must be on fully equal conditions for the private and the public co-investors. That condition is clearly not fulfilled here. BPB obtained full ownership of Tercas, whereas the FITD received no return on its investment.

| (157) | For the reasons set out in recitals 149 to 156, the measures taken by the FITD in favour of Tercas provided Tercas with an advantage, namely a non-repayable contribution to cover its negative equity, an unremunerated guarantee on some credit exposures towards [...], and a conditional non-repayable contribution if needed in order to shield Tercas from part of its tax liabilities under the then applicable income tax rules. Taken together those measures prevented Tercas's exit from the market. Tercas would not have benefited from those measures under normal market conditions. |
| --- | --- |

(157)

For the reasons set out in recitals 149 to 156, the measures taken by the FITD in favour of Tercas provided Tercas with an advantage, namely a non-repayable contribution to cover its negative equity, an unremunerated guarantee on some credit exposures towards [...], and a conditional non-repayable contribution if needed in order to shield Tercas from part of its tax liabilities under the then applicable income tax rules. Taken together those measures prevented Tercas's exit from the market. Tercas would not have benefited from those measures under normal market conditions.

| (158) | The Commission is of the opinion that the measures at issue are selective, because they relate to Tercas only. Such support measures are available only to banks in special administration, and only on a case-by-case basis. The Commission consequently takes the view that the measures assessed in this Decision were aimed at Tercas specifically and exclusively, in order to prevent its exit from the market, and were therefore selective. |
| --- | --- |

(158)

The Commission is of the opinion that the measures at issue are selective, because they relate to Tercas only. Such support measures are available only to banks in special administration, and only on a case-by-case basis. The Commission consequently takes the view that the measures assessed in this Decision were aimed at Tercas specifically and exclusively, in order to prevent its exit from the market, and were therefore selective.

| (159) | Finally, the advantages conferred on Tercas by the FITD action distort competition by preventing the failure and market exit of Tercas. Tercas is in competition with foreign undertakings, so that trade between Member States is affected. |
| --- | --- |

(159)

Finally, the advantages conferred on Tercas by the FITD action distort competition by preventing the failure and market exit of Tercas. Tercas is in competition with foreign undertakings, so that trade between Member States is affected.

| (160) | Regarding measure 1, the grant of EUR 265 million took the legal form of a non-repayable contribution to cover Tercas's negative equity without any element of remuneration. The Commission considers the aid component to be the full amount of EUR 265 million. |
| --- | --- |

(160)

Regarding measure 1, the grant of EUR 265 million took the legal form of a non-repayable contribution to cover Tercas's negative equity without any element of remuneration. The Commission considers the aid component to be the full amount of EUR 265 million.

| (161) | Regarding measure 2, the EUR 35 million guarantee was provided for a duration of up to three years to cover the credit risk associated with certain exposures of Tercas towards [...]. According to the Commission Notice on Guarantees (96), the aid component should be calculated as the gross grant equivalent of the difference between the premium that the beneficiary would have had to pay to a market operator in order to obtain such a guarantee and the premium it actually paid for the same guarantee for the time it was in place. |
| --- | --- |

(161)

Regarding measure 2, the EUR 35 million guarantee was provided for a duration of up to three years to cover the credit risk associated with certain exposures of Tercas towards [...]. According to the Commission Notice on Guarantees (96), the aid component should be calculated as the gross grant equivalent of the difference between the premium that the beneficiary would have had to pay to a market operator in order to obtain such a guarantee and the premium it actually paid for the same guarantee for the time it was in place.

96

| (162) | The Commission has no information concerning the fee that a market operator would have charged for insuring the credit exposure to [...] or the credit quality of [...]. However, given that the exposure was performing at the time, and that the loan was ultimately repaid on schedule, and taking into account the much more significant volumes of aid provided through measures 1 and 3, the Commission takes the view that it is sufficient to establish a lower bound for an estimate of the amount of aid involved here. |
| --- | --- |

(162)

The Commission has no information concerning the fee that a market operator would have charged for insuring the credit exposure to [...] or the credit quality of [...]. However, given that the exposure was performing at the time, and that the loan was ultimately repaid on schedule, and taking into account the much more significant volumes of aid provided through measures 1 and 3, the Commission takes the view that it is sufficient to establish a lower bound for an estimate of the amount of aid involved here.

| (163) | That lower bound can be established by taking as a benchmark the average of three-year credit default swap (‘CDS’) (97) values at the time the aid was granted for the largest Italian non-financial corporates with actively traded CDSs. That average amounts to 53 basis points (98). Considering that the guarantee covered EUR 35 million of exposures and was in place for only nine months, the cash value of the guarantee premium is EUR 0,14 million. The agreements did not provide for any premium to the FITD that can be subtracted from that figure, and the Commission accordingly considers that the amount of the aid is EUR 0,14 million. |
| --- | --- |

(163)

That lower bound can be established by taking as a benchmark the average of three-year credit default swap (‘CDS’) (97) values at the time the aid was granted for the largest Italian non-financial corporates with actively traded CDSs. That average amounts to 53 basis points (98). Considering that the guarantee covered EUR 35 million of exposures and was in place for only nine months, the cash value of the guarantee premium is EUR 0,14 million. The agreements did not provide for any premium to the FITD that can be subtracted from that figure, and the Commission accordingly considers that the amount of the aid is EUR 0,14 million.

97

98

| (164) | Regarding measure 3, the Commission observes that Italian law made the tax exemption subject to notification and approval by the European Commission. At the time the aid was granted or thereafter the Commission had not taken a decision on measure 3, so that the guarantee has to be considered to have fallen due. The tax exemption had not been formally notified to the Commission, which means that it could not be applied. Hence, the Commission cannot consider the measure to be a guarantee but rather another non-repayable contribution without remuneration. The Commission considers that the aid component is the full amount of EUR 30 million. |
| --- | --- |

(164)

Regarding measure 3, the Commission observes that Italian law made the tax exemption subject to notification and approval by the European Commission. At the time the aid was granted or thereafter the Commission had not taken a decision on measure 3, so that the guarantee has to be considered to have fallen due. The tax exemption had not been formally notified to the Commission, which means that it could not be applied. Hence, the Commission cannot consider the measure to be a guarantee but rather another non-repayable contribution without remuneration. The Commission considers that the aid component is the full amount of EUR 30 million.

6.1.3.   Conclusions on the existence of aid

Conclusions on the existence of aid

| (165) | For the reasons set out in recitals 149 to 164 above, the Commission concludes that measure 1 (a non-repayable contribution of EUR 265 million), measure 2 (a guarantee for EUR 35 million of credit exposures to [...] with an aid component of EUR 0,14 million) and measure 3 (a further non-repayable contribution of EUR 30 million), totalling EUR 295,14 million in State aid given by the FITD, conferred a selective advantage on Tercas that distorted competition and affected trade between Member States. That selective advantage was granted through State resources via the action taken by the FITD, which is imputable to the State for the reasons set out in recitals 112 to 148. The aid was granted on 7 July 2014. |
| --- | --- |

(165)

For the reasons set out in recitals 149 to 164 above, the Commission concludes that measure 1 (a non-repayable contribution of EUR 265 million), measure 2 (a guarantee for EUR 35 million of credit exposures to [...] with an aid component of EUR 0,14 million) and measure 3 (a further non-repayable contribution of EUR 30 million), totalling EUR 295,14 million in State aid given by the FITD, conferred a selective advantage on Tercas that distorted competition and affected trade between Member States. That selective advantage was granted through State resources via the action taken by the FITD, which is imputable to the State for the reasons set out in recitals 112 to 148. The aid was granted on 7 July 2014.

6.2.   Beneficiary of the aid

Beneficiary of the aid

| (166) | The Commission recalls its assessment that all three measures in question confer an advantage on Tercas. The Commission therefore considers that the measures have favoured Tercas's economic activities, by preventing its exit from the market and allowing the continuation of those economic activities within the purchasing undertaking, BPB. |
| --- | --- |

(166)

The Commission recalls its assessment that all three measures in question confer an advantage on Tercas. The Commission therefore considers that the measures have favoured Tercas's economic activities, by preventing its exit from the market and allowing the continuation of those economic activities within the purchasing undertaking, BPB.

| (167) | To determine whether the sale of the bank's activities entails State aid to the buyer, in line with points 79, 80 and 81 of the 2013 Banking Communication and point 20 of the Restructuring Communication (99), the Commission needs to assess whether certain requirements are met. It needs to examine in particular whether (i) the sale process was open, unconditional and non-discriminatory; (ii) the sale took place on market terms; and (iii) the credit institution or the government maximised the sale price for the assets and liabilities involved. |
| --- | --- |

(167)

To determine whether the sale of the bank's activities entails State aid to the buyer, in line with points 79, 80 and 81 of the 2013 Banking Communication and point 20 of the Restructuring Communication (99), the Commission needs to assess whether certain requirements are met. It needs to examine in particular whether (i) the sale process was open, unconditional and non-discriminatory; (ii) the sale took place on market terms; and (iii) the credit institution or the government maximised the sale price for the assets and liabilities involved.

99

| (168) | As it said in the opening decision, the Commission has no evidence that would allow it to conclude (i) that the sales process was not open, unconditional and non-discriminatory, (ii) that the sale did not take place on market terms, or (iii) that the Italian authorities did not maximise the sale price for Tercas. |
| --- | --- |

(168)

As it said in the opening decision, the Commission has no evidence that would allow it to conclude (i) that the sales process was not open, unconditional and non-discriminatory, (ii) that the sale did not take place on market terms, or (iii) that the Italian authorities did not maximise the sale price for Tercas.

| (169) | The Commission concludes that the sole beneficiary of the aid measure is Tercas, and that there was no aid to the buyer, BPB. |
| --- | --- |

(169)

The Commission concludes that the sole beneficiary of the aid measure is Tercas, and that there was no aid to the buyer, BPB.

7.   LAWFULNESS OF THE AID

LAWFULNESS OF THE AID

| (170) | In view of the above, the Commission concludes that the measures identified entail State aid within the meaning of Article 107(1) of the Treaty, and have been granted in breach of the notification and stand-still obligations imposed by Article 108(3) of the Treaty. The Commission therefore considers that the measures granted to Tercas constitute unlawful State aid. |
| --- | --- |

(170)

In view of the above, the Commission concludes that the measures identified entail State aid within the meaning of Article 107(1) of the Treaty, and have been granted in breach of the notification and stand-still obligations imposed by Article 108(3) of the Treaty. The Commission therefore considers that the measures granted to Tercas constitute unlawful State aid.

8.   COMPATIBILITY OF THE AID

COMPATIBILITY OF THE AID

8.1.   Legal basis for the assessment of compatibility

Legal basis for the assessment of compatibility

| (171) | Italy has not claimed that the measures are compatible with the internal market. None of the provisions of Article 107(2) of the Treaty are applicable. In the same way, subparagraphs (a) and (d) of Article 107(3) clearly do not apply, while the requirements of Article 107(3)(c) are more restrictive than those which the Commission currently applies to financial institutions in difficulty pursuant to Article 107(3)(b). The Commission will therefore examine the compatibility of the FITD's intervention solely on the basis of the last mentioned provision. |
| --- | --- |

(171)

Italy has not claimed that the measures are compatible with the internal market. None of the provisions of Article 107(2) of the Treaty are applicable. In the same way, subparagraphs (a) and (d) of Article 107(3) clearly do not apply, while the requirements of Article 107(3)(c) are more restrictive than those which the Commission currently applies to financial institutions in difficulty pursuant to Article 107(3)(b). The Commission will therefore examine the compatibility of the FITD's intervention solely on the basis of the last mentioned provision.

| (172) | Article 107(3)(b) of the Treaty empowers the Commission to find that aid is compatible with the internal market if it is intended ‘to remedy a serious disturbance in the economy of a Member State’. The Commission has acknowledged that the global financial crisis can create a serious disturbance in the economy of a Member State, and that measures to assist banks can be appropriate in order to remedy that disturbance. That view has been successively detailed and developed in the seven Crisis Communications (100) and was confirmed again in the 2013 Banking Communication, where the Commission lays out the reasons why it considers that the requirements for the application of Article 107(3)(b) continue to be fulfilled. |
| --- | --- |

(172)

Article 107(3)(b) of the Treaty empowers the Commission to find that aid is compatible with the internal market if it is intended ‘to remedy a serious disturbance in the economy of a Member State’. The Commission has acknowledged that the global financial crisis can create a serious disturbance in the economy of a Member State, and that measures to assist banks can be appropriate in order to remedy that disturbance. That view has been successively detailed and developed in the seven Crisis Communications (100) and was confirmed again in the 2013 Banking Communication, where the Commission lays out the reasons why it considers that the requirements for the application of Article 107(3)(b) continue to be fulfilled.

100

| (173) | In order for an aid measure to be compatible under Article 107(3)(b) of the Treaty, it must comply with the general principles for compatibility in Article 107(3), viewed in the light of the general objectives of the Treaty. In previous decisions (101), therefore, the Commission has held that any aid measure or scheme must satisfy three tests: (i) appropriateness, (ii) necessity, and (iii) proportionality. |
| --- | --- |

(173)

In order for an aid measure to be compatible under Article 107(3)(b) of the Treaty, it must comply with the general principles for compatibility in Article 107(3), viewed in the light of the general objectives of the Treaty. In previous decisions (101), therefore, the Commission has held that any aid measure or scheme must satisfy three tests: (i) appropriateness, (ii) necessity, and (iii) proportionality.

101

| (174) | The 2013 Banking Communication applies to State aid granted from 1 August 2013 onwards. The FITD support intervention was authorised by the Banca d'Italia on 7 July 2014. |
| --- | --- |

(174)

The 2013 Banking Communication applies to State aid granted from 1 August 2013 onwards. The FITD support intervention was authorised by the Banca d'Italia on 7 July 2014.

| (175) | In order to establish whether the measures are compatible with the relevant Crisis Communications, the Commission will assess the aid granted in the three measures as follows:
  (1)   
  Measure 1
  : The non-repayable contribution of EUR 265 million will be treated as a recapitalisation operation for the purposes of examination under the 2013 Banking Communication and the Restructuring Communication, despite the fact that it differs from a standard recapitalisation measure in that no rights were acquired by the granting authority and no remuneration was paid.
  (2)   
  Measure 2
  : The EUR 35 million guarantee intended to cover the credit risk associated with certain exposures of Tercas towards [...], containing an aid component of EUR 0,14 million, can be assessed under the Impaired Assets Communication (102) and also under the 2013 Banking Communication and the Restructuring Communication as aid for the restructuring of Tercas.
  (3)   
  Measure 3
  : Because no decision had been taken by the Commission, the EUR 30 million guarantee will be assessed as additional support through a non-repayable contribution. As a result, it must be treated as a recapitalisation, to be examined in the same way as Measure 1. |
| --- | --- |

(175)

In order to establish whether the measures are compatible with the relevant Crisis Communications, the Commission will assess the aid granted in the three measures as follows:

(1)   
  Measure 1
  : The non-repayable contribution of EUR 265 million will be treated as a recapitalisation operation for the purposes of examination under the 2013 Banking Communication and the Restructuring Communication, despite the fact that it differs from a standard recapitalisation measure in that no rights were acquired by the granting authority and no remuneration was paid.

Measure 1

(2)   
  Measure 2
  : The EUR 35 million guarantee intended to cover the credit risk associated with certain exposures of Tercas towards [...], containing an aid component of EUR 0,14 million, can be assessed under the Impaired Assets Communication (102) and also under the 2013 Banking Communication and the Restructuring Communication as aid for the restructuring of Tercas.

Measure 2

102

(3)   
  Measure 3
  : Because no decision had been taken by the Commission, the EUR 30 million guarantee will be assessed as additional support through a non-repayable contribution. As a result, it must be treated as a recapitalisation, to be examined in the same way as Measure 1.

Measure 3

| (176) | The Commission will first assess the compatibility of Measure 2 with the internal market in the light of the Impaired Assets Communication, and then make a combined assessment of all three measures under the 2013 Banking Communication and the Restructuring Communication. |
| --- | --- |

(176)

The Commission will first assess the compatibility of Measure 2 with the internal market in the light of the Impaired Assets Communication, and then make a combined assessment of all three measures under the 2013 Banking Communication and the Restructuring Communication.

8.2.   Compatibility of Measure 2 with the Impaired Assets Communication

Compatibility of Measure 2 with the Impaired Assets Communication

| (177) | Measure 2 has to be assessed under the compatibility criteria listed in the Impaired Assets Communication, as its purpose is to ‘free the beneficiary bank from (or compensate for) the need to register either a loss or a reserve for a possible loss on its impaired assets’. Those criteria are: (i) the eligibility of the assets; (ii) transparency and disclosure of impairments; (iii) the management of the assets; (iv) a correct and consistent approach to valuation; and (v) the appropriateness of remuneration and burden-sharing. |
| --- | --- |

(177)

Measure 2 has to be assessed under the compatibility criteria listed in the Impaired Assets Communication, as its purpose is to ‘free the beneficiary bank from (or compensate for) the need to register either a loss or a reserve for a possible loss on its impaired assets’. Those criteria are: (i) the eligibility of the assets; (ii) transparency and disclosure of impairments; (iii) the management of the assets; (iv) a correct and consistent approach to valuation; and (v) the appropriateness of remuneration and burden-sharing.

8.2.1.   Eligibility of assets

Eligibility of assets

| (178) | As regards the eligibility of the assets, Section 5.4 of the Impaired Assets Communication indicates that asset relief requires clear identification of impaired assets and that certain limits apply in relation to eligibility. |
| --- | --- |

(178)

As regards the eligibility of the assets, Section 5.4 of the Impaired Assets Communication indicates that asset relief requires clear identification of impaired assets and that certain limits apply in relation to eligibility.

| (179) | Whilst the Impaired Assets Communication cites as eligible assets those that triggered the financial crisis, it also allows Member States ‘to extend eligibility to well-defined categories of assets corresponding to a systemic threat upon due justification, without quantitative restrictions’. Point 35 of the Impaired Assets Communication states that ‘assets that cannot presently be considered impaired should not be covered by a relief programme’. |
| --- | --- |

(179)

Whilst the Impaired Assets Communication cites as eligible assets those that triggered the financial crisis, it also allows Member States ‘to extend eligibility to well-defined categories of assets corresponding to a systemic threat upon due justification, without quantitative restrictions’. Point 35 of the Impaired Assets Communication states that ‘assets that cannot presently be considered impaired should not be covered by a relief programme’.

| (180) | In the present case, an FITD report from July 2014 mentions that the exposures referred to in Measure 2 relate to performing but problematic loans. According to the criteria set out in Section 5.4 of the Impaired Assets Communication, performing loans are not eligible. On that basis, the Commission concludes that Measure 2 does not comply with the criteria for eligibility of assets set down in the Impaired Assets Communication. |
| --- | --- |

(180)

In the present case, an FITD report from July 2014 mentions that the exposures referred to in Measure 2 relate to performing but problematic loans. According to the criteria set out in Section 5.4 of the Impaired Assets Communication, performing loans are not eligible. On that basis, the Commission concludes that Measure 2 does not comply with the criteria for eligibility of assets set down in the Impaired Assets Communication.

8.2.2.   Transparency and disclosure, management and valuation

Transparency and disclosure, management and valuation

| (181) | According to Section 5.1 of the Impaired Assets Communication, the Commission requires full ex ante transparency and disclosure of impairments on assets which are to be covered by relief measures. However, the Commission has not received any information on the exposures in question or on the underlying company. |
| --- | --- |

(181)

According to Section 5.1 of the Impaired Assets Communication, the Commission requires full ex ante transparency and disclosure of impairments on assets which are to be covered by relief measures. However, the Commission has not received any information on the exposures in question or on the underlying company.

ex ante

| (182) | Moreover, neither the Member State concerned nor any interested party provided any valuation of the impaired assets, as required by Section 5.5 of the Impaired Assets Communication, nor is there any information allowing the Commission to conclude that, as required by Section 5.6 of the Communication, the assets were properly separated functionally or organisationally. |
| --- | --- |

(182)

Moreover, neither the Member State concerned nor any interested party provided any valuation of the impaired assets, as required by Section 5.5 of the Impaired Assets Communication, nor is there any information allowing the Commission to conclude that, as required by Section 5.6 of the Communication, the assets were properly separated functionally or organisationally.

| (183) | The Commission concludes that the criteria regarding transparency and disclosure are not fulfilled, and that there is no evidence based on which the Commission could conclude that the criteria regarding management and valuation are fulfilled. |
| --- | --- |

(183)

The Commission concludes that the criteria regarding transparency and disclosure are not fulfilled, and that there is no evidence based on which the Commission could conclude that the criteria regarding management and valuation are fulfilled.

8.2.3.   Burden-sharing and remuneration

Burden-sharing and remuneration

| (184) | As regards remuneration, Section 5.2 of the Impaired Assets Communication repeats the general principle that banks ought to bear the losses associated with impaired assets to the maximum extent and provide for correct remuneration so as to ensure equivalent shareholder responsibility and burden-sharing. |
| --- | --- |

(184)

As regards remuneration, Section 5.2 of the Impaired Assets Communication repeats the general principle that banks ought to bear the losses associated with impaired assets to the maximum extent and provide for correct remuneration so as to ensure equivalent shareholder responsibility and burden-sharing.

| (185) | As described in recitals 195 to 212, adequate burden-sharing measures have not been taken. In addition, the Commission observes that for the guarantee related to the exposure to [...] no remuneration was provided for. |
| --- | --- |

(185)

As described in recitals 195 to 212, adequate burden-sharing measures have not been taken. In addition, the Commission observes that for the guarantee related to the exposure to [...] no remuneration was provided for.

| (186) | Based on the above, the Commission concludes that measure 2 fulfils none of the cumulative requirements outlined in the Impaired Assets Communication. In consequence, measure 2 cannot be considered compatible with the internal market. |
| --- | --- |

(186)

Based on the above, the Commission concludes that measure 2 fulfils none of the cumulative requirements outlined in the Impaired Assets Communication. In consequence, measure 2 cannot be considered compatible with the internal market.

8.3.   Compatibility of Measures 1, 2 and 3 with the 2013 Banking Communication and the Restructuring Communication

Compatibility of Measures 1, 2 and 3 with the 2013 Banking Communication and the Restructuring Communication

| (187) | Regarding measures 1 and 3, the form of the measures is legally that of a non-repayable grant, i.e. a cash contribution with no consideration in exchange (in the form of rights of ownership or remuneration). The compatibility criteria set out in the 2013 Banking Communication do not contemplate grants as such. |
| --- | --- |

(187)

Regarding measures 1 and 3, the form of the measures is legally that of a non-repayable grant, i.e. a cash contribution with no consideration in exchange (in the form of rights of ownership or remuneration). The compatibility criteria set out in the 2013 Banking Communication do not contemplate grants as such.

| (188) | The only form of aid similar to a grant in the 2013 Banking Communication is aid for recapitalisation. However, recapitalisation requires a number of compatibility criteria to be fulfilled: there must be: (i) a capital raising plan, outlining all possibilities available for the bank in question to raise capital from private sources, (ii) a restructuring plan that will lead to the restoration of the viability of the financial institution, (iii) a sufficient contribution on the part of the beneficiary itself, with holders of capital and subordinated debt instruments contributing as much as possible (burden-sharing), and (iv) measures sufficient to limit the distortion of competition. While a capital raising plan may have been implemented by Tercas's special administrator (see recital 15), the Commission has not been provided with evidence that the compatibility requirements described here have been met. |
| --- | --- |

(188)

The only form of aid similar to a grant in the 2013 Banking Communication is aid for recapitalisation. However, recapitalisation requires a number of compatibility criteria to be fulfilled: there must be: (i) a capital raising plan, outlining all possibilities available for the bank in question to raise capital from private sources, (ii) a restructuring plan that will lead to the restoration of the viability of the financial institution, (iii) a sufficient contribution on the part of the beneficiary itself, with holders of capital and subordinated debt instruments contributing as much as possible (burden-sharing), and (iv) measures sufficient to limit the distortion of competition. While a capital raising plan may have been implemented by Tercas's special administrator (see recital 15), the Commission has not been provided with evidence that the compatibility requirements described here have been met.

| (189) | In essence, the non-repayable contributions under measures 1 and 3 were provided in order to bring the negative equity of Tercas up to zero before the business was taken over by BPB. The Commission has in the past found similar transactions to be compatible with the internal market, but only as aid to facilitate resolution or to support the orderly wind-down of a bank (103). As Italy has that the measures to assist Tercas did not apply resolution or liquidation schemes, the Commission cannot follow the same reasoning in the case of Tercas. It therefore has to assess the measure as recapitalisation aid. |
| --- | --- |

(189)

In essence, the non-repayable contributions under measures 1 and 3 were provided in order to bring the negative equity of Tercas up to zero before the business was taken over by BPB. The Commission has in the past found similar transactions to be compatible with the internal market, but only as aid to facilitate resolution or to support the orderly wind-down of a bank (103). As Italy has that the measures to assist Tercas did not apply resolution or liquidation schemes, the Commission cannot follow the same reasoning in the case of Tercas. It therefore has to assess the measure as recapitalisation aid.

103

| (190) | Measure 2 was intended to shield Tercas from possible losses as a result of its exposure to [...]. It is thus akin to recapitalisation aid for the restructuring of Tercas. Independently of its compliance with the Impaired Assets Communication, if measure 2 is to be declared compatible it would also need to be in line with the 2013 Banking Communication and the Restructuring Communication. Moreover, it would not be possible to assess measures 1 and 3 under those Communications without having regard to measure 2. |
| --- | --- |

(190)

Measure 2 was intended to shield Tercas from possible losses as a result of its exposure to [...]. It is thus akin to recapitalisation aid for the restructuring of Tercas. Independently of its compliance with the Impaired Assets Communication, if measure 2 is to be declared compatible it would also need to be in line with the 2013 Banking Communication and the Restructuring Communication. Moreover, it would not be possible to assess measures 1 and 3 under those Communications without having regard to measure 2.

8.3.1.   Restoration of long-term viability

Restoration of long-term viability

| (191) | The 2013 Banking Communication requires both a capital raising plan, to ensure that all possible sources of private capital have been tapped before requiring State aid, and a restructuring plan, to demonstrate the return to long-term viability. Long-term viability is achieved when a bank is able to compete in the marketplace for capital on its own merits in compliance with the relevant regulatory requirements. For a bank to do so, it must be able to cover all its costs and provide an appropriate return on equity, taking into account the risk profile of the bank. According to point 17 of the Restructuring Communication, viability can also be achieved through the sale of the bank. |
| --- | --- |

(191)

The 2013 Banking Communication requires both a capital raising plan, to ensure that all possible sources of private capital have been tapped before requiring State aid, and a restructuring plan, to demonstrate the return to long-term viability. Long-term viability is achieved when a bank is able to compete in the marketplace for capital on its own merits in compliance with the relevant regulatory requirements. For a bank to do so, it must be able to cover all its costs and provide an appropriate return on equity, taking into account the risk profile of the bank. According to point 17 of the Restructuring Communication, viability can also be achieved through the sale of the bank.

| (192) | The interested parties argue that the special administrator took steps ‘to remedy deficiencies in Tercas's organisation and internal control system. BPB also claims that the structural elements of the recovery plan were developed within the BPB's business plan 2015-2019. |
| --- | --- |

(192)

The interested parties argue that the special administrator took steps ‘to remedy deficiencies in Tercas's organisation and internal control system. BPB also claims that the structural elements of the recovery plan were developed within the BPB's business plan 2015-2019.

| (193) | The Commission observes that it has not received a restructuring or recovery plan showing a return to long-term viability, despite making a formal request for such a plan to Italy. |
| --- | --- |

(193)

The Commission observes that it has not received a restructuring or recovery plan showing a return to long-term viability, despite making a formal request for such a plan to Italy.

| (194) | The Commission recognises that it may examine a restructuring plan submitted after the implementation of a recapitalisation measure. The 2013 Banking Communication provides for such a possibility in particular when the aid has been notified and implemented as rescue aid under strict conditions. Nonetheless, as no rescue measure has been notified, and given the information available, in particular the absence of a restructuring plan, the Commission cannot take the view that the requirement of long-term viability demonstrated by a detailed restructuring plan is fulfilled. |
| --- | --- |

(194)

The Commission recognises that it may examine a restructuring plan submitted after the implementation of a recapitalisation measure. The 2013 Banking Communication provides for such a possibility in particular when the aid has been notified and implemented as rescue aid under strict conditions. Nonetheless, as no rescue measure has been notified, and given the information available, in particular the absence of a restructuring plan, the Commission cannot take the view that the requirement of long-term viability demonstrated by a detailed restructuring plan is fulfilled.

8.3.2.   Aid limited to the minimum and burden-sharing

Aid limited to the minimum and burden-sharing

| (195) | The Restructuring Communication, supplemented by the 2013 Banking Communication, indicates that an appropriate contribution by the beneficiary is necessary in order to limit the aid to a minimum and to address distortions of competition and moral hazard. To that end, it provides (i) that both the restructuring costs and the amount of aid should be limited and (ii) that there should be maximum burden-sharing by existing shareholders and subordinated creditors. |
| --- | --- |

(195)

The Restructuring Communication, supplemented by the 2013 Banking Communication, indicates that an appropriate contribution by the beneficiary is necessary in order to limit the aid to a minimum and to address distortions of competition and moral hazard. To that end, it provides (i) that both the restructuring costs and the amount of aid should be limited and (ii) that there should be maximum burden-sharing by existing shareholders and subordinated creditors.

| (196) | According to point 29 of the Communication, the Commission can authorise aid measures only once the Member State concerned demonstrates that all measures to limit such aid to the minimum necessary have been exploited to the maximum extent. To that end, Member States are invited to submit a capital raising plan, before or as part of the restructuring plan. |
| --- | --- |

(196)

According to point 29 of the Communication, the Commission can authorise aid measures only once the Member State concerned demonstrates that all measures to limit such aid to the minimum necessary have been exploited to the maximum extent. To that end, Member States are invited to submit a capital raising plan, before or as part of the restructuring plan.

| (197) | According to point 44 of the Communication, ‘subordinated debt must be converted or written down, in principle before State aid is granted. State aid must not be granted before equity, hybrid capital and subordinated debt have fully contributed to offset any losses’. |
| --- | --- |

(197)

According to point 44 of the Communication, ‘subordinated debt must be converted or written down, in principle before State aid is granted. State aid must not be granted before equity, hybrid capital and subordinated debt have fully contributed to offset any losses’.

| (198) | According to point 47 of the Communication, outflows of funds must be prevented at the earliest stage possible in order to limit the amount of aid to the minimum necessary. |
| --- | --- |

(198)

According to point 47 of the Communication, outflows of funds must be prevented at the earliest stage possible in order to limit the amount of aid to the minimum necessary.

| (199) | According to point 52 of the Communication, the Commission will authorise rescue aid in the form of recapitalisation measures (and allow a restructuring plan to be submitted after the implementation of the measure) only if the rescue aid does not prevent compliance with the burden-sharing requirements set out in the Communication. |
| --- | --- |

(199)

According to point 52 of the Communication, the Commission will authorise rescue aid in the form of recapitalisation measures (and allow a restructuring plan to be submitted after the implementation of the measure) only if the rescue aid does not prevent compliance with the burden-sharing requirements set out in the Communication.

| (200) | The Commission observes that a complete write-down of shareholders' equity was performed in Tercas. |
| --- | --- |

(200)

The Commission observes that a complete write-down of shareholders' equity was performed in Tercas.

| (201) | In line with the requirements set out in the 2013 Banking Commission, however, EUR 189 million (at 31 March 2014) of Tercas's subordinated debt on a consolidated basis (including its subsidiary Caripe) should have been converted or written down in line with the requirements set out in the 2013 Banking Commission in order to reduce the capital shortfall and minimise the amount of aid. No such conversion or write-down took place, and according to information provided by Tercas subordinated debt issued by the holding company, amounting to EUR 36 million, expired and was repaid in December 2014. The Commission has no information on whether any subordinated debt issued by Caripe expired and was repaid. |
| --- | --- |

(201)

In line with the requirements set out in the 2013 Banking Commission, however, EUR 189 million (at 31 March 2014) of Tercas's subordinated debt on a consolidated basis (including its subsidiary Caripe) should have been converted or written down in line with the requirements set out in the 2013 Banking Commission in order to reduce the capital shortfall and minimise the amount of aid. No such conversion or write-down took place, and according to information provided by Tercas subordinated debt issued by the holding company, amounting to EUR 36 million, expired and was repaid in December 2014. The Commission has no information on whether any subordinated debt issued by Caripe expired and was repaid.

| (202) | The Commission considers that the outflow of funds related to the expiry of that subordinated debt, and the pay-out made subsequently, in principle violate the conditions under which recapitalisation aid can be found compatible under the 2013 Banking Communication. |
| --- | --- |

(202)

The Commission considers that the outflow of funds related to the expiry of that subordinated debt, and the pay-out made subsequently, in principle violate the conditions under which recapitalisation aid can be found compatible under the 2013 Banking Communication.

| (203) | The interested parties claim that the option of bailing in the subordinated debt was not legally feasible under the Italian legislation in force, and that debt can be written down only in the event of compulsory administrative winding up. The 2013 Banking Communication outlines the factors which the Commission will consider in order to establish whether a State aid measure is compatible with the internal market, amongst which is the bail-in requirement. Such burden-sharing is possible in a liquidation, as is clear from the context of the decision adopted in the case of Banca Romagna (104), in which aid granted by Italy was approved and the burden-sharing requirements with regard to subordinated debt were met. |
| --- | --- |

(203)

The interested parties claim that the option of bailing in the subordinated debt was not legally feasible under the Italian legislation in force, and that debt can be written down only in the event of compulsory administrative winding up. The 2013 Banking Communication outlines the factors which the Commission will consider in order to establish whether a State aid measure is compatible with the internal market, amongst which is the bail-in requirement. Such burden-sharing is possible in a liquidation, as is clear from the context of the decision adopted in the case of Banca Romagna (104), in which aid granted by Italy was approved and the burden-sharing requirements with regard to subordinated debt were met.

104

| (204) | The interested parties refer to point 42 of the 2013 Banking Communication, but the Commission observes that point 42 speaks of senior debt holders and not subordinated debt holders. |
| --- | --- |

(204)

The interested parties refer to point 42 of the 2013 Banking Communication, but the Commission observes that point 42 speaks of senior debt holders and not subordinated debt holders.

| (205) | The interested parties also make reference to point 45 of the Communication, which allows an exception to the principle of conversion or writing-down of subordinated creditors where implementing such measures would endanger financial stability or lead to disproportionate results. |
| --- | --- |

(205)

The interested parties also make reference to point 45 of the Communication, which allows an exception to the principle of conversion or writing-down of subordinated creditors where implementing such measures would endanger financial stability or lead to disproportionate results.

| (206) | The Commission observes that in line with the 2013 Banking Communication burden-sharing by subordinated debtholders was applied to a large proportion of the entire banking system in Slovenia (105) and to Portugal's third-largest bank (106). It was also applied to a large proportion of the banking system in Spain prior to the adoption of the 2013 Banking Communication, without putting financial stability in danger or leading to disproportionate results. In view of the small scale of Tercas, the Commission cannot accept that there is such a risk in this case. The only cases where the Commission has accepted a deviation from normal burden-sharing on the grounds of disproportionate results are not relevant here (107). |
| --- | --- |

(206)

The Commission observes that in line with the 2013 Banking Communication burden-sharing by subordinated debtholders was applied to a large proportion of the entire banking system in Slovenia (105) and to Portugal's third-largest bank (106). It was also applied to a large proportion of the banking system in Spain prior to the adoption of the 2013 Banking Communication, without putting financial stability in danger or leading to disproportionate results. In view of the small scale of Tercas, the Commission cannot accept that there is such a risk in this case. The only cases where the Commission has accepted a deviation from normal burden-sharing on the grounds of disproportionate results are not relevant here (107).

105

106

107

| (207) | The Commission concludes that the holders of subordinated debt instruments did not contribute to the maximum extent possible, and that the FITD's action is not in line with a fundamental aspect of the 2013 Banking Communication. |
| --- | --- |

(207)

The Commission concludes that the holders of subordinated debt instruments did not contribute to the maximum extent possible, and that the FITD's action is not in line with a fundamental aspect of the 2013 Banking Communication.

| (208) | In the comments it submitted the FITD claims that the restructuring operation involved a full recapitalisation of Tercas, executed through the intervention of BPB, which contributed to the capital increase by raising capital on the market. On the other hand, point 34 of the 2013 Banking Communication provides that after the submission of the capital raising plan the Member State must determine the residual capital shortfall that has to be covered by State aid,. However, as is acknowledged in the submission by BPB and Tercas, the recapitalisation by BPB was conditional on the negative equity first being covered by the FITD. |
| --- | --- |

(208)

In the comments it submitted the FITD claims that the restructuring operation involved a full recapitalisation of Tercas, executed through the intervention of BPB, which contributed to the capital increase by raising capital on the market. On the other hand, point 34 of the 2013 Banking Communication provides that after the submission of the capital raising plan the Member State must determine the residual capital shortfall that has to be covered by State aid,. However, as is acknowledged in the submission by BPB and Tercas, the recapitalisation by BPB was conditional on the negative equity first being covered by the FITD.

| (209) | BPB and Tercas claim further that the measures were limited to the minimum necessary in order to achieve the objective, i.e. the long-term profitability of Tercas. They give the following reasons: (1) the FITD's contribution meets the ‘least cost’ criterion in the FITD's constitution; (2) it was the only feasible option, in view of the deterioration of Tercas and the need to find a purchaser; and (3) the FITD contributed only partly to resolving the negative equity and restoring minimum capital ratios: specifically, it contributed EUR 265 million, against the EUR 495 million required. |
| --- | --- |

(209)

BPB and Tercas claim further that the measures were limited to the minimum necessary in order to achieve the objective, i.e. the long-term profitability of Tercas. They give the following reasons: (1) the FITD's contribution meets the ‘least cost’ criterion in the FITD's constitution; (2) it was the only feasible option, in view of the deterioration of Tercas and the need to find a purchaser; and (3) the FITD contributed only partly to resolving the negative equity and restoring minimum capital ratios: specifically, it contributed EUR 265 million, against the EUR 495 million required.

| (210) | In that respect, the Commission points out that the least-cost criterion in the FITD's constitution is irrelevant to an assessment of the compatibility of the measures. For compatibility, the only inquiry that is relevant here asks whether the State aid provided is sufficient to restore the long-term viability of the financial institution in question and whether it is limited to the minimum necessary, with distortion of competition being sufficiently limited. The claim that the aid granted was less than the amount needed to meet capital requirements does not prove that aid was limited to the minimum necessary. |
| --- | --- |

(210)

In that respect, the Commission points out that the least-cost criterion in the FITD's constitution is irrelevant to an assessment of the compatibility of the measures. For compatibility, the only inquiry that is relevant here asks whether the State aid provided is sufficient to restore the long-term viability of the financial institution in question and whether it is limited to the minimum necessary, with distortion of competition being sufficiently limited. The claim that the aid granted was less than the amount needed to meet capital requirements does not prove that aid was limited to the minimum necessary.

| (211) | As remarked in recital 194, it is not clear to the Commission from the information provided that the aid was indeed sufficient to restore viability. Moreover, the aid was clearly not limited to the minimum, as there was no bail-in of subordinated debt. |
| --- | --- |

(211)

As remarked in recital 194, it is not clear to the Commission from the information provided that the aid was indeed sufficient to restore viability. Moreover, the aid was clearly not limited to the minimum, as there was no bail-in of subordinated debt.

| (212) | It should be added that if the FITD had acted in line with the approach set out in the 2013 Banking Communication, the cost to the FITD could have been further reduced by writing down entirely the subordinated debt of EUR 169 million (EUR 88 million for Tercas — Cassa di Risparmio della Provincia di Teramo SpA and EUR 81 million for Caripe), thereby significantly reducing the burden on the Member State. Such a write-down would have been legally possible in case of liquidation (108). |
| --- | --- |

(212)

It should be added that if the FITD had acted in line with the approach set out in the 2013 Banking Communication, the cost to the FITD could have been further reduced by writing down entirely the subordinated debt of EUR 169 million (EUR 88 million for Tercas — Cassa di Risparmio della Provincia di Teramo SpA and EUR 81 million for Caripe), thereby significantly reducing the burden on the Member State. Such a write-down would have been legally possible in case of liquidation (108).

108

8.3.3.   Measures to limit distortion of competition

Measures to limit distortion of competition

| (213) | Finally, Section 4 of the Restructuring Communication requires that the restructuring of a financial institution should include measures to limit distortion of competition. Such measures should be tailor-made to address the distortions on the markets where the beneficiary bank operates post restructuring. |
| --- | --- |

(213)

Finally, Section 4 of the Restructuring Communication requires that the restructuring of a financial institution should include measures to limit distortion of competition. Such measures should be tailor-made to address the distortions on the markets where the beneficiary bank operates post restructuring.

| (214) | Point 34 of the Restructuring Communication provides that one of the most appropriate limitations of distortion of competition is adequate remuneration of public capital, as it limits the amount of aid. |
| --- | --- |

(214)

Point 34 of the Restructuring Communication provides that one of the most appropriate limitations of distortion of competition is adequate remuneration of public capital, as it limits the amount of aid.

| (215) | In all three measures there is a complete absence of any element of remuneration of the FITD's contribution, or any premium for the guarantee, or any acquisition of rights (i.e. ordinary shares) or participation in any future revenue. Nor is there any claw-back mechanism allowing recovery of part of the aid from Tercas after it returns to viability. |
| --- | --- |

(215)

In all three measures there is a complete absence of any element of remuneration of the FITD's contribution, or any premium for the guarantee, or any acquisition of rights (i.e. ordinary shares) or participation in any future revenue. Nor is there any claw-back mechanism allowing recovery of part of the aid from Tercas after it returns to viability.

| (216) | The FITD contends that when steps are taken to cover negative equity in order to allow a failing undertaking to be purchased by other parties, it is quite normal that there should be no return. The Commission observes that the measures constituted grants of assistance whose immediate effect was that Tercas did not exit the market as it would have done in the absence of such support. They must therefore be considered a major distortion of competition. Accordingly, as stated in recital 189, the Commission considers such measures compatible with the internal market only if the aid is granted to facilitate resolution or to support an orderly wind-down. |
| --- | --- |

(216)

The FITD contends that when steps are taken to cover negative equity in order to allow a failing undertaking to be purchased by other parties, it is quite normal that there should be no return. The Commission observes that the measures constituted grants of assistance whose immediate effect was that Tercas did not exit the market as it would have done in the absence of such support. They must therefore be considered a major distortion of competition. Accordingly, as stated in recital 189, the Commission considers such measures compatible with the internal market only if the aid is granted to facilitate resolution or to support an orderly wind-down.

| (217) | The FITD asserts that the Commission has previously accepted a low level of remuneration, or even the absence of remuneration, for example in the cases of Banco de Valencia (BVA) (109), Banco Português de Negócios (BNP) (110) or Banco CAM (111). |
| --- | --- |

(217)

The FITD asserts that the Commission has previously accepted a low level of remuneration, or even the absence of remuneration, for example in the cases of Banco de Valencia (BVA) (109), Banco Português de Negócios (BNP) (110) or Banco CAM (111).

109

110

111

| (218) | The Commission points out that all those decisions — in so far as the aid authorised was not aid to facilitate resolution or to support an orderly wind-down (recital 189) — were taken before the 2013 Banking Communication became applicable. |
| --- | --- |

(218)

The Commission points out that all those decisions — in so far as the aid authorised was not aid to facilitate resolution or to support an orderly wind-down (recital 189) — were taken before the 2013 Banking Communication became applicable.

| (219) | On the substance, the Commission observes that in all three cases invoked by the interested parties particularly deep restructuring measures were implemented in line with the requirements of the Restructuring Communication. In all three cases this led to the disappearance from the market of the bank and its brand. In addition, the reduction in the scale of business was particularly significant in each of those cases (in CAM, a reduction of about 50 % in number of branches and about 35 % in staff; in BVA, a reduction of about 90 % in number of branches and about 50 % in staff; and in BPN, a reduction of 65 % in the balance sheet and closure of all lines of business but retail). |
| --- | --- |

(219)

On the substance, the Commission observes that in all three cases invoked by the interested parties particularly deep restructuring measures were implemented in line with the requirements of the Restructuring Communication. In all three cases this led to the disappearance from the market of the bank and its brand. In addition, the reduction in the scale of business was particularly significant in each of those cases (in CAM, a reduction of about 50 % in number of branches and about 35 % in staff; in BVA, a reduction of about 90 % in number of branches and about 50 % in staff; and in BPN, a reduction of 65 % in the balance sheet and closure of all lines of business but retail).

| (220) | The Commission points out that in Tercas's case, by contrast, branches and staff are to be reduced by roughly [...] % each, while all business lines will continue to operate. The brand name of Tercas continues to exist, and the business continues to operate in its former business area. |
| --- | --- |

(220)

The Commission points out that in Tercas's case, by contrast, branches and staff are to be reduced by roughly [...] % each, while all business lines will continue to operate. The brand name of Tercas continues to exist, and the business continues to operate in its former business area.

| (221) | On that basis, the Commission concludes that, contrary to the claims of the FITD, BPB and Tercas, the reorganisation to be implemented by Tercas does not go as far as in the examples they have cited, and does not warrant a complete absence of remuneration for the measures. |
| --- | --- |

(221)

On that basis, the Commission concludes that, contrary to the claims of the FITD, BPB and Tercas, the reorganisation to be implemented by Tercas does not go as far as in the examples they have cited, and does not warrant a complete absence of remuneration for the measures.

| (222) | The FITD further asserts that the impact of the operation on the market is of itself limited on account of the limited size and geographical scope of the activities of Tercas, which operates mainly in the Abruzzo region. |
| --- | --- |

(222)

The FITD further asserts that the impact of the operation on the market is of itself limited on account of the limited size and geographical scope of the activities of Tercas, which operates mainly in the Abruzzo region.

| (223) | However, according to statistics available from the Banca d'Italia at the end of 2014, there are 12 banks active in the Abruzzo region, including at least one large European financial institution. Given that Tercas operates in the financial sector, with 163 branches in the Abruzzo region in 2011, and competes with a number of other European financial institutions with branches in the same region, any advantage conferred on it would have the potential to distort competition. |
| --- | --- |

(223)

However, according to statistics available from the Banca d'Italia at the end of 2014, there are 12 banks active in the Abruzzo region, including at least one large European financial institution. Given that Tercas operates in the financial sector, with 163 branches in the Abruzzo region in 2011, and competes with a number of other European financial institutions with branches in the same region, any advantage conferred on it would have the potential to distort competition.

| (224) | Given the lack of remuneration for the FITD measures, and the relatively moderate reduction in the business of Tercas, coupled with the continuation of the Tercas brand, the Commission considers that there are insufficient safeguards to limit potential distortion of competition. |
| --- | --- |

(224)

Given the lack of remuneration for the FITD measures, and the relatively moderate reduction in the business of Tercas, coupled with the continuation of the Tercas brand, the Commission considers that there are insufficient safeguards to limit potential distortion of competition.

8.4.   Conclusion on compatibility

Conclusion on compatibility

| (225) | In summary, the Commission cannot identify any grounds for finding that the three measures are compatible with the internal market. |
| --- | --- |

(225)

In summary, the Commission cannot identify any grounds for finding that the three measures are compatible with the internal market.

| (226) | In particular, the documents submitted demonstrate that the measures do not provide for the burden-sharing sought in accordance with the 2013 Banking Communication and do not meet the combined requirements of the Restructuring Communication for the compatibility of restructuring aid, i.e. the restoration of long-term viability, the limitation of the aid to the minimum necessary, and measures to limit distortion of competition. |
| --- | --- |

(226)

In particular, the documents submitted demonstrate that the measures do not provide for the burden-sharing sought in accordance with the 2013 Banking Communication and do not meet the combined requirements of the Restructuring Communication for the compatibility of restructuring aid, i.e. the restoration of long-term viability, the limitation of the aid to the minimum necessary, and measures to limit distortion of competition.

9.   RECOVERY

RECOVERY

| (227) | According to the Treaty and the settled case-law of the Court of Justice, the Commission is competent to decide that the Member State concerned must abolish or alter aid when it has found that it is incompatible with the internal market (112). The Court has also consistently held that the aim of obliging the State concerned to abolish aid found by the Commission to be incompatible with the internal market is to restore the previous situation (113). |
| --- | --- |

(227)

According to the Treaty and the settled case-law of the Court of Justice, the Commission is competent to decide that the Member State concerned must abolish or alter aid when it has found that it is incompatible with the internal market (112). The Court has also consistently held that the aim of obliging the State concerned to abolish aid found by the Commission to be incompatible with the internal market is to restore the previous situation (113).

112

113

| (228) | The Court has established that that objective is achieved once the recipient has repaid the amounts granted by way of unlawful aid, thus forfeiting the advantage which it had enjoyed over its competitors on the market, and the situation prior to the payment of the aid is restored (114). |
| --- | --- |

(228)

The Court has established that that objective is achieved once the recipient has repaid the amounts granted by way of unlawful aid, thus forfeiting the advantage which it had enjoyed over its competitors on the market, and the situation prior to the payment of the aid is restored (114).

114

| (229) | In line with the case-law, Article 16(1) of Council Regulation (EU) 2015/1589 (115) provides that ‘where negative decisions are taken in cases of unlawful aid, the Commission shall decide that the Member State concerned shall take all necessary measures to recover the aid from the beneficiary ... The Commission shall not require recovery of the aid if this would be contrary to a general principle of Union law.’ |
| --- | --- |

(229)

In line with the case-law, Article 16(1) of Council Regulation (EU) 2015/1589 (115) provides that ‘where negative decisions are taken in cases of unlawful aid, the Commission shall decide that the Member State concerned shall take all necessary measures to recover the aid from the beneficiary ... The Commission shall not require recovery of the aid if this would be contrary to a general principle of Union law.’

115

| (230) | Neither Italy nor any of the third parties has formally requested that recovery should not be ordered on the grounds that it would be contrary to a general principle of Union law. Nevertheless, in the light of the exchanges it has had with Italy and the third parties, the Commission believes that it would be appropriate to assess whether in the case at issue a recovery order would be contrary to any general principle of Union law. |
| --- | --- |

(230)

Neither Italy nor any of the third parties has formally requested that recovery should not be ordered on the grounds that it would be contrary to a general principle of Union law. Nevertheless, in the light of the exchanges it has had with Italy and the third parties, the Commission believes that it would be appropriate to assess whether in the case at issue a recovery order would be contrary to any general principle of Union law.

| (231) | In the light of the reference to action by deposit guarantee schemes in point 63 of the 2013 Banking Communication, and the Commission's practice in previous decisions (116), no bank or Member State could in June 2014 have had an expectation that measures taken by guarantee schemes might not be considered State aid. Moreover, a recipient of unlawful aid cannot have a legitimate expectation that the aid is lawful before the Commission has taken a final decision pursuant to Article 108(3) of the Treaty. |
| --- | --- |

(231)

In the light of the reference to action by deposit guarantee schemes in point 63 of the 2013 Banking Communication, and the Commission's practice in previous decisions (116), no bank or Member State could in June 2014 have had an expectation that measures taken by guarantee schemes might not be considered State aid. Moreover, a recipient of unlawful aid cannot have a legitimate expectation that the aid is lawful before the Commission has taken a final decision pursuant to Article 108(3) of the Treaty.

116

| (232) | In principle the Commission assesses the compatibility of an aid measure on the basis of the criteria applicable at the date on which it takes its decision. The compatibility criteria set forth in the 2013 Banking Communication applied with effect from 1 August 2013, and hence were applicable more than 11 months before the measures were taken. There could be no problem of legal certainty on grounds of the novelty of the 2013 Banking Communication. |
| --- | --- |

(232)

In principle the Commission assesses the compatibility of an aid measure on the basis of the criteria applicable at the date on which it takes its decision. The compatibility criteria set forth in the 2013 Banking Communication applied with effect from 1 August 2013, and hence were applicable more than 11 months before the measures were taken. There could be no problem of legal certainty on grounds of the novelty of the 2013 Banking Communication.

| (233) | Recovery is the normal consequence of a negative decision in a case of unlawful aid, and as such it cannot be considered a disproportionate result. |
| --- | --- |

(233)

Recovery is the normal consequence of a negative decision in a case of unlawful aid, and as such it cannot be considered a disproportionate result.

| (234) | The case-law of the Union courts has strictly circumscribed the scope of the cases in which it is absolute impossible for a Member State to comply with a recovery order. In particular, the financial difficulties which would be faced by an aid beneficiary if the aid were to be recovered do not render recovery impossible. The Commission concludes that in the case at issue it is not possible to invoke absolute impossibility to recover the aid. |
| --- | --- |

(234)

The case-law of the Union courts has strictly circumscribed the scope of the cases in which it is absolute impossible for a Member State to comply with a recovery order. In particular, the financial difficulties which would be faced by an aid beneficiary if the aid were to be recovered do not render recovery impossible. The Commission concludes that in the case at issue it is not possible to invoke absolute impossibility to recover the aid.

| (235) | Thus, given that the measures in question were implemented in violation of Article 108(3) of the Treaty, and are to be considered unlawful and incompatible aid, and given that recovery would not be contrary to a general principle of Union law, they must be recovered in order to re-establish the situation that existed on the market beforehand. The period in respect of which aid is to be recovered is the period from when the beneficiary first enjoyed the advantage, that is to say when the aid was put at the beneficiary's disposal, until the date of effective recovery, and the sums to be recovered should bear interest until the date of effective recovery. In the case at issue the date on which the aid was put at the disposal of the company is the date of the payment of the contribution, for measure 1, and the date of provision of the guarantee, for measures 2 and 3. |
| --- | --- |

(235)

Thus, given that the measures in question were implemented in violation of Article 108(3) of the Treaty, and are to be considered unlawful and incompatible aid, and given that recovery would not be contrary to a general principle of Union law, they must be recovered in order to re-establish the situation that existed on the market beforehand. The period in respect of which aid is to be recovered is the period from when the beneficiary first enjoyed the advantage, that is to say when the aid was put at the beneficiary's disposal, until the date of effective recovery, and the sums to be recovered should bear interest until the date of effective recovery. In the case at issue the date on which the aid was put at the disposal of the company is the date of the payment of the contribution, for measure 1, and the date of provision of the guarantee, for measures 2 and 3.

10.   CONCLUSION

CONCLUSION

| (236) | The Commission finds that Italy has unlawfully implemented measure 1, which is a non-repayable contribution of EUR 265 million, measure 2, which is a guarantee for EUR 35 million of credit exposures to [...] with an aid element of EUR 0,14 million, and measure 3, which is a further non-repayable contribution of EUR 30 million, in total EUR 295,14 million in State aid, granted on 7 July 2014 in breach of Article 108(3) of the Treaty on the Functioning of the European Union. As a consequence, the illegal and incompatible aid should be recovered from the beneficiary, Tercas, together with the recovery interest, |
| --- | --- |

(236)

The Commission finds that Italy has unlawfully implemented measure 1, which is a non-repayable contribution of EUR 265 million, measure 2, which is a guarantee for EUR 35 million of credit exposures to [...] with an aid element of EUR 0,14 million, and measure 3, which is a further non-repayable contribution of EUR 30 million, in total EUR 295,14 million in State aid, granted on 7 July 2014 in breach of Article 108(3) of the Treaty on the Functioning of the European Union. As a consequence, the illegal and incompatible aid should be recovered from the beneficiary, Tercas, together with the recovery interest,

HAS ADOPTED THIS DECISION:

Article 1

The State aid implemented through measure 1, which is a non-repayable contribution of EUR 265 million, measure 2, which is a guarantee for EUR 35 million of credit exposures to [...] with an aid element of EUR 0,14 million, and measure 3, which is a further non-repayable contribution of EUR 30 million, in total EUR 295,14 million, unlawfully granted to Tercas by Italy on 7 July 2014 in breach of Article 108(3) of the Treaty on the Functioning of the European Union, is incompatible with the internal market.

Article 2

1.   Italy shall recover the aid referred to in Article 1 from the beneficiary.

2.   The sums to be recovered shall bear interest from the date on which they were put at the disposal of the beneficiary until their actual recovery.

3.   The interest shall be calculated on a compound basis in accordance with Chapter V of Commission Regulation (EC) No 794/2004 (117) and Commission Regulation (EC) No 271/2008 (118) amending Regulation (EC) No 794/2004.

Article 3

1.   Recovery of the aid referred to in Article 1 shall be immediate and effective.

2.   Italy shall ensure that this decision is implemented within four months following the date of notification of this Decision.

Article 4

1.   Within two months following notification of this Decision, Italy shall submit the following information to the Commission:

| (a) | the total amount (principal and interest) to be recovered from the beneficiary; |
| --- | --- |

(a)

the total amount (principal and interest) to be recovered from the beneficiary;

| (b) | a detailed description of the measures already taken and planned to comply with this Decision; |
| --- | --- |

(b)

a detailed description of the measures already taken and planned to comply with this Decision;

| (c) | documents demonstrating that the beneficiary has been ordered to repay the aid. |
| --- | --- |

(c)

documents demonstrating that the beneficiary has been ordered to repay the aid.

2.   Italy shall keep the Commission informed of the progress of the national measures taken to implement this Decision until recovery of the aid referred to in Article 1 has been completed. It shall immediately submit, on simple request by the Commission, information on the measures already taken and planned to comply with this Decision. It shall also provide detailed information concerning the amounts of aid and recovery interest already recovered from the beneficiary.

Article 5

This Decision is addressed to the Italian Republic.

Done at Brussels, 23 December 2015.

For the Commission

Margrethe VESTAGER

Member of the Commission

---

(1)  
  OJ C 136, 24.4.2015, p. 17.

1

(2)  See footnote 1.

2

(3)  The Banca d'Italia conducted an inspection of Tercas between 5 December 2011 and 23 March 2012. It identified numerous irregularities and widespread anomalies concerning (1) the management and governance of the bank, (2) the internal audit function, (3) the credit process, and (4) the disclosure of information to the governing bodies and the supervisory body.

3

(4)  On grounds of serious administrative irregularities and serious violations of legislation.

4

(5)  See recital 38.

5

(6)  The figures given in this recital refer only to Tercas — Cassa di Risparmio della Provincia di Teramo SpA, and not to the whole Tercas group.

6

(7)  Minutes of shareholders' meeting, repertorio n. 125.149, raccolta n. 28.024 del 29 luglio 2014
  , notary Vicenzo Galeota.

7

repertorio n. 125.149, raccolta n. 28.024 del 29 luglio 2014

(8)  See footnote 6.

8

(9)  Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994 on deposit-guarantee schemes (OJ L 135, 31.5.1994, p. 5).

9

(10)  Article 3(1) of the Directive.

10

(11)  
  ‘Le banche italiane aderiscono a uno dei sistemi di garanzia dei depositanti istituiti e riconosciuti in Italia. Le banche di credito cooperative aderiscono al sistema di garanzia dei depositanti costituito nel loro ambito’.

11

(12)  The FITD presents itself as a mandatory consortium (consorzio obbligatorio) on its website.

12

consorzio obbligatorio

(13)  Mutual banks cannot become members of the FITD. They must be members of the Fondo di Garanzia dei Depositanti del Credito Cooperativo, the deposit guarantee scheme established within the mutual bank network.

13

(14)  See Article 25 of the FITD's constitution, and Articles 9 to 14 of the Annex to it.

14

(15)  See Articles 3 to 15 of the FITD's constitution (Statuto).

15

Statuto

(16)  
  Consiglio: See Article 12(3) of the FITD's constitution.

16

Consiglio

(17)  See Article 13(10) of the FITD's constitution. The following are currently represented by one member each: Unicredit, Intesa Sanpaolo and Monte dei Paschi di Siena are represented by two members each. Credem, Credito Valtellinese, BNL, Deutsche Bank, Cariparma, Veneto Banca, CheBanca, BPM, Banco Desio e della Brianza, UBI, Banca di Credito Popolare Torre del Greco, Cassa di Risparmio di Rimini, Banca Popolare Pugliese, Unipol Banca, Banco Popolare, Banca Popolare dell'Emilia Romagna and Banca del Piemonte.

17

(18)  
  Comitato di gestione: see Articles 16 to 18 of the FITD's constitution.

18

Comitato di gestione

(19)  Article 17(1)(a) of the FITD's constitution.

19

(20)  Article 14(1)(e) of the FITD's constitution.

20

(21)  Article 1(627) and (628) of the 2014 Stability Act (Act No 147/2013): ‘627. For purposes of the economic and financial reorganisation of banks in special administration, support measures taken by the FITD shall not form part of the revenue of those banks. 628. Paragraph 627 shall take effect only upon authorisation by the European Commission.’ (627. Ai fini del riassetto economico e finanziario dei soggetti in amministrazione straordinaria, gli interventi di sostegno disposti dal Fondo interbancario di tutela dei depositi non concorrono alla formazione del reddito dei medesimi soggetti. 628. L'efficacia delle disposizioni del comma 627 è subordinata all'autorizzazione della Commissione europea.)

21

(*1)  Confidential information.

*1

(22)  The Italian public authority that submitted comments to the Commission is the Italian Minister for Economic Affairs and Finance.

22

(23)  
  Austria v Commission (Austrian Green Electricity Act), Case T-251/11, EU:T:2014:1060.

23

Austria

Commission (Austrian Green Electricity Act)

(24)  Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes (OJ L 173, 12.6.2014, p. 149).

24

(25)  Communication from the Commission on the application, from 1 August 2013, of State aid rules to support measures in favour of banks in the context of the financial crisis (‘Banking Communication’) (OJ C 216, 30.7.2013, p. 1).

25

(26)  
  France v Commission, Case C-482/99, EU:C:2002:294.

26

France v Commission

(27)  Commission Decision 2000/600/EC of 10 November 1999 conditionally approving the aid granted by Italy to the public banks Banco di Sicilia and Sicilcassa (OJ L 256, 10.10.2000, p. 21).

27

(28)  The Banca d'Italia submitted its comments as a third party, and accordingly they are not presented together with the comments of Italy in this section. However, since the Banca d'Italia is a public institution, and its conduct is consequently conduct on the part the Member State, so that it does not fall outside of the scope of Article 107 of the Treaty on the basis that it is a constitutionally independent body, references to ‘Italy’ in the section of this Decision entitled ‘Assessment of the measures’ include the Banca d'Italia.

28

(29)  Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63).

29

(30)  
  Doux Élevage SNC and Another, Case C-677/11, EU:C:2013:348, in particular paragraph 41.

30

Doux Élevage SNC and Another

(31)  Commission Decision of 1 August 2011 in case SA.33001 (11/N) — Denmark — Part B — Amendment to the Danish winding-up scheme for credit institutions (OJ C 271, 14.9.2011, p. 1).

31

(32)  Commission Decision of 18 February 2014 in case SA.37425 (2013/N) — Poland — Credit unions orderly liquidation scheme (OJ C 210, 4.7.2014, p. 1).

32

(33)  Commission Decision of 30 May 2012 in case SA.34255 (12/N) — Spain — Restructuring of CAM and Banco CAM (OJ C 173, 19.6.2013, p. 1).

33

(34)  Fondo de Restructuración Ordenada Bancaria

34

(35)  Case C-379/98, EU:C:2001:160, in particular paragraphs 61 et seq.

35

(36)  See footnote 30.

36

(37)  See footnote 23.

37

(38)  Emphasis added.

38

(39)  
  Banche di credito cooperativo.

39

Banche di credito cooperativo

(40)  Commission decision of 31 July 2008 in case NN 36/08 — Denmark — Roskilde bank A/S (OJ C 238, 17.9.2008, p. 5).

40

(41)  
  EARL Salvat père & fils v Commission, Case T-136/05, EU:T:2007:295, paragraph 154.

41

EARL Salvat père & fils

Commission

(42)  Opinion of Advocate General Wathelet in Doux Élevage.

42

Doux Élevage

(43)  See footnote 27.

43

(44)  
  Pearle and Others, Case C-345/02, EU:C:2004:448.

44

Pearle and Others

(45)  
  Banca di Girgenti, Banca di Credito di Trieste SpA — Kreditna Banka (BCT) and Cassa di Risparmi e Depositi di Prato.

45

Banca di Girgenti, Banca di Credito di Trieste SpA — Kreditna Banka (BCT)

Cassa di Risparmi e Depositi di Prato

(46)  Commission decision of 3 August 2014 in case SA.39250 (2014/N) — Portugal — Resolution of Banco Espírito Santo SA (OJ C 393, 7.11.2014, p. 1), recitals 75-77.

46

(47)  
  Land Burgenland and Others v Commission, Joined Cases C-214/12 P, C-215/12 P and C-223/12 P, EU:C:2013:682, paragraph 60.

47

Land Burgenland and Others

Commission

(48)  Minutes of the FITD's Executive Committee meeting of 30 May 2014, p. 4; Report of the FITD Director-General of 28 May 2014, document No 7/2014, p. 5.

48

(49)  See Report of the FIDT Director-General of 28 May 2014, document No 7/2014, p. 5.

49

(50)  See communication from Tercas to the FITD, 1 April 2015

50

(51)  [...].

51

(52)  [...].

52

(53)  [...]

53

(54)  BPB refers to the Commission's position in BP Chemicals v Commission, Case T-11/95, EU:T:1998:199, according to which the ‘formulation of a restructuring plan is not a static exercise’ (paragraph 105 of the judgment). Likewise, BPB submits that some recent Commission decisions confirm that the failure to submit a restructuring plan promptly does not prevent a decision finding that a given measure is compatible with the internal market. See Commission decision of 13 February 2014 in case SA.36663 (2014/NN) — Spain — Support measure for SGR (OJ C 120, 23.4.2014, p. 1), and Commission Decision (EU) 2015/1092 of 23 July 2014 on the State aid SA.34824 (2012/C), SA.36007 (2013/NN), SA.36658 (2014/NN), SA.37156 (2014/NN), SA.34534 (2012/NN) implemented by Greece for National Bank of Greece Group related to: Recapitalisation and restructuring of National Bank of Greece S.A., Resolution of First Business Bank S.A. through a transfer order to National Bank of Greece S.A., Resolution of Probank S.A. through a transfer order to National Bank of Greece S.A., Resolution of Cooperative Bank of Lesvos-Limnos, Cooperative Bank of Achaia, and Cooperative Bank of Lamia (OJ L 183, 10.7.2015, p. 29).

54

BP Chemicals

Commission

(55)  See the application from the special administrator seeking intervention on the part of the FITD, 25 October 2013, p. 3; the ‘lack of alternative solutions’ to the transaction proposed by BPB was also acknowledged in the minutes of the FITD's Executive Committee meeting of 28 October 2013, p. 4.

55

(56)  See footnote 31.

56

(57)  Commission Decision of 27 March 2012 in case SA.26909 (2011/C) — Portugal — Banco Português de Negócios (BPN), paragraphs 247 and 248; Commission Decision of 18 February 2014 — Poland — Credit unions orderly liquidation scheme, cited above, paragraph 65; Commission Decision of 30 May 2012
  — Spain — Restructuring of CAM and Banco CAM, cited above, paragraph 113, see also paragraphs 119 and 120.

57

Banco Português de Negócios (BPN)

Poland — Credit unions orderly liquidation scheme

— Spain — Restructuring of CAM and Banco CAM

(58)  
  Italy v Commission, Case 173/73, EU:C:1974:71, paragraph 16; Compagnie Commerciale de l'Ouest v Receveur principal des douanes de La Pallice-Port, Joined Cases C-78/90 to C-83/90, EU:C:1992:118, paragraph 35; Essent Netwerk Noord and Others, Case C-206/06, EU:C:2008:413, paragraphs 58-74; Elliniki Nafpigokataskevastiki and Others v Commission, Case T-384/08 EU:T:2011:650, paragraph 87.

58

Italy

Commission

Compagnie Commerciale de l'Ouest

Receveur principal des douanes de La Pallice-Port

Essent Netwerk Noord and Others

Elliniki Nafpigokataskevastiki and Others

Commission

(59)  
  France v Commission, Case T-139/09, EU:T:2012:496, paragraphs 63 and 64.

59

France

Commission

(60)  
  France v Ladbroke Racing and Commission, Case C-83/98 P, EU:C:2000:248, paragraph 50: ‘even though the sums involved ... are not permanently held by the Treasury, the fact that they constantly remain under public control, and therefore available to the competent national authorities, is sufficient for them to be categorised as State aid’.

60

France

Ladbroke Racing and Commission

(61)  See, inter alia, recitals 1 and 16 to Directive 94/19/EC.

61

(62)  See Article 3 and recitals 1, 2, 3, 11, 12, 15, 16, 20, 21, 24 and 25 to Directive 94/19/EC.

62

(63)  See, inter alia, recitals 3, 4 and 16 to Directive 2014/49/EU.

63

(64)  See Article 11(3) and (6) of Directive 2014/49/EU.

64

(65)  
  ‘La Repubblica ... tutela il risparmio in tutte le sue forme’.

65

(66)  See Air France v Commission, Case T-358/94, EU:T:1996:194, paragraphs 59 to 62, where, the General Court held that the conduct of the French Caisse des Dépôts et Consignations was necessarily attributable to the State on the ground that it was a public-sector body, and added that that conclusion was not undermined by arguments to the effect that the body enjoyed autonomy from the other authorities of the State.

66

Air France

Commission

(67)  According to the internet site of the Banca d'Italia, ‘The law assigns the Bank of Italy responsibility for safeguarding the stability of the national financial system’ (L'ordinamento giuridico affida alla Banca d'Italia la responsabilità per la salvaguardia della stabilità del sistema finanziario nazionale) https://www.bancaditalia.it/compiti/stabilita-finanziaria/. The Banca d'Italia is a member of the European Systemic Risk Board, the Financial Stability Board and the Financial Stability Committee of the Eurosystem/European System of Central Banks.

67

(68)  According to the internet site of the Banca d'Italia (section on ‘Supervision of the banking and financial system’) ‘The Bank of Italy is also responsible for the protection of the customers of banks and financial intermediaries, a fundamental part of banking and financial supervision that runs alongside and in tandem with its other supervisory tasks’ (Alla Banca d'Italia sono affidati rilevanti compiti in materia di tutela dei clienti degli intermediari bancari e finanziari che rappresenta un elemento costitutivo della supervisione bancaria e finanziaria, affiancandosi ed integrandosi con gli altri obiettivi dell'azione di vigilanza).

68

(69)  Article 1 of the FITD's constitution.

69

(70)  Article 29(1).

70

(71)  
  ‘The Banca d'Italia, having regard to the protection of depositors and the stability of the banking system ... shall coordinate the activity of the guarantee schemes with the rules governing banking crises and with its own supervisory activity’ (La Banca d'Italia, avendo riguardo alla tutela dei risparmiatori e alla stabilità del Sistema bancario ... coordina l'attività dei sistemi di garanzia con la disciplina delle crisi bancarie e con l'attività di vigilanza).

71

(72)  
  ‘The Banca d'Italia, having regard to the protection of depositors and the stability of the banking system ... shall recognise the guarantee schemes, approving their constitutions, provided that the schemes do not have characteristics which could lead to an unbalanced distribution of insolvency risks in the banking system’ (La Banca d'Italia, avendo riguardo alla tutela dei risparmiatori e alla stabilità del Sistema bancario ... riconosce i sistemi di garanzia, approvandone gli statuti, a condizione che i sistemi stessi non presentino caratteristiche tali da comportare una ripartizione squilibrata dei rischi di insolvenza sul sistema bancario).

72

(73)  
  ‘The Banca d'Italia, having regard to the protection of depositors and the stability of the banking system ... shall make rules implementing issue provisions to implement the rules set out in this Section’ (La Banca d'Italia, avendo riguardo alla tutela dei risparmiatori e alla stabilità del Sistema bancario ... emana disposizioni attuative delle norme contenute nella presente sezione).

73

(74)  Article 29(1) of the FITD's constitution.

74

(75)  Article 4 of the FITD's constitution

75

(76)  Banking Act, Article 71(3).

76

(77)  Banking Act, Article 72(4): ‘The Banca d'Italia, through instructions given to the special administrators and to the members of the supervisory committee, can impose specific safeguards and limitations on the management of the bank. The special administrators and the members of the supervisory committee shall be personally responsible for failure to comply with the instructions given by the Banca d'Italia’ (La Banca d'Italia, con istruzioni impartite ai commissari e ai membri del comitato di sorveglianza, può stabilire speciali cautele e limitazioni nella gestione della banca. I componenti gli organi straordinari sono personalmente responsabili dell'inosservanza delle prescrizioni della Banca d'Italia).

77

(78)  See recitals 47, 56 and 69.

78

(79)  Article 13(6) and Article 16(1)(d) of the FITD's constitution.

79

(80)  See recitals 46, 58 and 71.

80

(81)  See for example the comment of Irene Mecatti on Articles 96 to 96-quater of the Banking Act, in M. Porzio, V. Santoro, F. Belli, G. Losappio and M. Rispoli Farina, Testo unico bancario, Commentario, Giuffrè Editore, 2010: ‘any intervention by a deposit guarantee scheme must be authorised in advance by the Banca d'Italia (Article 96-ter(1)(d))’ (ogni intervento dei spd deve essere preventivamente autorizzato della BI (art. 96-ter, co. 1, lett. d)); the emphasis is the author's.

81

quater

Testo unico bancario, Commentario

in advance

ter

preventivamente

(82)  See the letters of the Banca d'Italia of 4 November 2013 and 7 July 2014 authorising the FITD to grant the support measures at issue (Annex 8 and 9 to Italy's reply of 14 November 2014 to the Commission's request for information of 10 October 2014).

82

(83)  Report attached to the minutes of the FITD Board meeting of 30 May 2014, p. 1 (Annex 3.9 to Italy's reply of 14 November 2014 to the Commission request for information of 10 October 2014): ‘The evolution of these factors has led to detailed negotiations with the BPB and with the special administrator, in coordination with the Banca d'Italia, with the aim of identifying mechanisms for the Fund's intervention that maximise the effectiveness of the support measures as part of a broader plan for the return of Tercas to long-term viability, on the basis of recapitalisation by BPB’ (L'evolversi di tali fattori ha portato ad un articolato negoziato con la BPB e con il Commissario straordinario, in coordinamento con la Banca d'Italia, per l'individuazione di modalità attuative dell'intervento del Fondo volte a massimizzare l'efficacia dell'azione di sostegno nel quadro del più ampio piano di risanamento della Tercas, imperniato su un'operazione di ricapitalizzazione da parte della BPB).

83

(84)  Report attached to the minutes of the FITD Executive Committee meeting of 30 May 2014, p. 4 (Annex 3.9 to Italy's reply of 14 November 2014 to the Commission request for information of 10 October 2014): ‘The Banca d'Italia ... invited the Fund to look for a balanced agreement with BPB to cover the negative equity’ (La Banca d'Italia ... ha invitato il Fondo a ricercare un'intesa equilibrata con BPB per la copertura del deficit patrimoniale).

84

(85)  Although it is legally possible to withdraw from the FITD, banks have a legal obligation to be members of a deposit guarantee scheme. In addition, as mentioned in recital 33, membership of the FITD is mandatory for Italian non-mutual banks for the following reasons: (1) given that there is no other deposit guarantee scheme available to commercial banks in Italy, membership in the FITD is de facto mandatory; (2) the constitution of the FITD provides for all Italian non-mutual banks to be members.

85

(86)  Banking Act, Article 96.

86

(87)  Article 8 of the FITD's constitution.

87

(88)  Decisions to intervene are decided by the Board or by the Executive Committee, by the majorities indicated in recital 36.

88

(89)  See paragraph 38 of the judgment in Doux Élevage.

89

Doux Élevage

(90)  Comité interprofessionnel de la dinde française.

90

(91)  See decision in case SA.33001 (2011/N) — Denmark — Part B — Amendment to the Danish winding up scheme for credit institutions, recitals 43 to 49; decision in case SA.34255 (2012/N) — Spain — Restructuring of CAM and Banco CAM, recitals 76 to 87; decision in case SA.37425 (2013/N) — Poland — Credit unions orderly liquidation scheme, recitals 44 to 53; decision in case NN 36/2008 — Denmark — Roskilde bank A/S, recitals 28 to 31; decision in case NN 61/2009 — Spain — Rescue and restructuring of Caja Castilla-La Mancha, recitals 97 to 106.

91

(92)  See Commission v EDF, Case C-124/10 P, EU:C:2012:318, paragraphs 80 and 81.

92

Commission

EDF

(93)  See recitals 80 to 97.

93

(94)  Together, the four large banks — which have guaranteed representation on the Board and two votes each — require only five more representatives to have a majority (13 votes).

94

(95)  See Land Burgenland and Others v Commission, Joined Cases C-214/12 P. C-215/12 P and C-223/12 P, EU:C:2013:682, paragraph 52.

95

Land Burgenland and Others

Commission

(96)  Commission Notice on the application of Articles 87 and 88 of the EC Treaty to State aid in the form of guarantees (OJ C 155, 20.6.2008, p. 10).

96

(97)  A credit default swap (CDS) is a particular type of swap designed to transfer the credit exposure of financial products between two or more parties. The buyer of the CDS makes a series of payments to the seller and, in exchange, receives a payoff if the underlying debtor defaults.

97

(98)  Average values for three-year CDSs from ENI, ENEL, Telecom Italia and Atlantia are taken at 1 July 2014

98

(99)  Commission 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 (‘the Restructuring Communication’).

99

(100)  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 (‘the Recapitalisation Communication’) (OJ C 10, 15.1.2009, p. 2); the Restructuring Communication; Communication from the Commission on the application, from 1 January 2012, of State aid rules to support measures in favour of banks in the context of the financial crisis (‘the 2011 Prolongation Communication’) (OJ C 356, 6.12.2011, p. 7); and the 2013 Banking Communication.

100

(101)  See Commission Decision of 6 September 2013 in State aid case SA.37314 — Rescue aid in favour of Probanka (OJ C 314, 29.10.2013, p. 1), and Commission Decision of 6 September 2013 in State aid case SA.37315 — Rescue aid in favour of Factor Banka (OJ C 314, 29.10.2013, p. 2).

101

(102)  Communication from the Commission on the treatment of impaired assets in the Community banking sector (OJ C 72, 26.3.2009, p. 1).

102

(103)  Decision in case SA.39250 (2014/N) — Portugal —Resolution of Banco Espírito Santo, S.A.; Commission Decision of 16 April 2015 in case SA.41503 (2015/N) — Greece — Resolution of Panellinia Bank through a transfer order to Piraeus bank (OJ C 325, 2.10.2015, p. 1); Commission Decision of 2 July 2015 in case SA.41924 (2015/N) — Italy — Resolution (via liquidation) of Banca Romagna Cooperativa (OJ C 369, 6.11.2015, p. 1).

103

(104)  See footnote 103.

104

(105)  Commission decision of 18 December 2013 in case SA.35709 (2013/N) — Slovenia — Restructuring of Nova Kreditna Banka Maribor dd (NKBM) (OJ C 120, 23.4.2014, p. 1); Commission Decision 2014/535/EU of 18 December 2013 on State aid SA.33229 (2012/C) — (ex 2011/N) — Restructuring of NLB — Slovenia which Slovenia is planning to implement for Nova Ljubljanska banka (OJ L 246, 21.8.2014, p. 28); Commission decision of 18 December 2013 in case SA.37690 (13/N) — Slovenia — Rescue aid in favour of Abanka dd (OJ C 37, 7.2.2014, p. 1); Commission decision of 18 December 2013 in case SA.37642 (13/N) — Slovenia — Orderly winding down of Probanka d.d. (OJ C 69, 7.3.2014, p. 1); and Commission decision of 18 December 2013 in case SA.37643 (2013/N) — Slovenia — Orderly winding down of Factor Banka (OJ C 69, 7.3.2014, p. 1).

105

(106)  Decision in case SA.39250 (2014/N) — Portugal —Resolution of Banco Espírito Santo, S.A.

106

(107)  The situation in the case of Tercas is not comparable with the Eurobank decision, where the Commission accepted that some results would be disproportionate in a case in which the State fully underwrote a recapitalisation measure without ultimately having to provide any capital, as all of the new capital was subscribed by private sources. Commission Decision 2014/885/EU of 29 April 2014 on the State aid SA.34825 (2012/C), SA.34825 (2014/NN), SA.36006 (2013/NN), SA.34488 (2012/C) (ex 2012/NN), SA.31155 (2013/C) (2013/NN) (ex 2010/N) implemented by Greece for the Eurobank Group related to: Recapitalisation and Restructuring of Eurobank Ergasias S.A.; Restructuring aid to Proton bank through creation and capitalisation of Nea Proton and additional recapitalisation of New Proton Bank by the Hellenic Financial Stability Fund; Resolution of Hellenic Postbank through the creation of a bridge bank (OJ L 357, 12.12.2014, p. 112).

107

Eurobank

(108)  See footnote 103.

108

(109)  Commission decision of 28 November 2012 in case SA.34053 (12/N) — Spain — Recapitalisation and restructuring of Banco de Valencia S.A. (OJ C 75, 14.3.2013, p. 1).

109

(110)  Commission Decision 2012/660/EU of 27 March 2012 on the measures SA. 26909 (2011/C) implemented by Portugal for the restructuring of Banco Português de Negócios (BPN) (OJ L 301, 30.10.2012, p. 1).

110

(111)  Commission decision of 29 June 2010 in case NN 61/09 — Spain — Rescue and restructuring of Caja Castilla-La Mancha (OJ C 289, 26.10.2010, p. 1).

111

(112)  See Commission v Germany, Case 70/72, EU:C:1973:87, paragraph 13.

112

Commission

Germany

(113)  See Spain v Commission, Joined Cases C-278/92, C-279/92 and C-280/92, EU:C:1994:325, paragraph 75.

113

Spain

Commission

(114)  See Belgium v Commission, Case C-75/97, EU:C:1999:311, paragraphs 64 and 65.

114

Belgium

Commission

(115)  Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (OJ L 248, 24.9.2015, p. 9).

115

(116)  See decision in case SA.33001 (2011/N) — Denmark — Part B — Amendment to the Danish winding up scheme for credit institutions, recitals 43 to 49; decision in case SA.34255 (2012/N) — Spain — Restructuring of CAM and Banco CAM, recitals 76 to 87; and decision in case SA.37425 (2013/N) — Poland — Credit unions orderly liquidation scheme, recitals 44 to 53.

116

(117)  Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EU) 2015/1589 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (OJ L 140, 30.4.2004, p. 1).

117

(118)  Commission Regulation (EC) No 271/2008 of 30 January 2008 amending Regulation (EC) No 794/2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article 93 of the EC Treaty (OJ L 82, 25.3.2008, p. 1).

118

---

| 28.7.2016 | EN | Official Journal of the European Union | L 203/35 |
| --- | --- | --- | --- |

28.7.2016

EN

Official Journal of the European Union

L 203/35

---

COMMISSION IMPLEMENTING DECISION (EU) 2016/1209

of 12 July 2016

replacing the Annex to Commission Implementing Decision 2013/115/EU on the SIRENE Manual and other implementing measures for the second generation Schengen Information System (SIS II)

(notified under document C(2016) 4283)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EC) No 1987/2006 of the European Parliament and of the Council of 20 December 2006 on the establishment, operation and use of the second generation Schengen Information System (SIS II) (1), and in particular Article 8(4), Article 9(1), Article 20(3), point (a) of Article 22, Article 36(4) and Article 37(7) thereof,

Having regard to Council Decision 2007/533/JHA of 12 June 2007 on the establishment, operation and use of the second generation Schengen Information System (SIS II) (2), and in particular Article 8(4), Article 9(1), Article 20(4), point (a) of Article 22, Article 51(4) and Article 52(7) thereof,

Whereas:

| (1) | The second generation Schengen Information System (SIS II) entered into operation on 9 April 2013. It contains sufficient information allowing the identification of a person or an object and the necessary action to be taken. In addition, for SIS II to function effectively, Member States exchange supplementary information related to the alerts. This exchange of supplementary information is carried out by the SIRENE Bureaux. |
| --- | --- |

(1)

The second generation Schengen Information System (SIS II) entered into operation on 9 April 2013. It contains sufficient information allowing the identification of a person or an object and the necessary action to be taken. In addition, for SIS II to function effectively, Member States exchange supplementary information related to the alerts. This exchange of supplementary information is carried out by the SIRENE Bureaux.

| (2) | To facilitate the work of the SIRENE Bureaux and of users of SIS II involved in SIRENE operations in their daily work, a SIRENE Manual was adopted in 2008 through a former first pillar legal instrument, Commission Decision 2008/333/EC (3), as well as a former third pillar instrument, Commission Decision 2008/334/JHA (4). Those Decisions were replaced by Commission Implementing Decision 2013/115/EU (5) in order to better reflect the operational needs of users and staff involved in SIRENE operations, to improve consistency of working procedures and to ensure that technical rules correspond to the state of the art. |
| --- | --- |

(2)

To facilitate the work of the SIRENE Bureaux and of users of SIS II involved in SIRENE operations in their daily work, a SIRENE Manual was adopted in 2008 through a former first pillar legal instrument, Commission Decision 2008/333/EC (3), as well as a former third pillar instrument, Commission Decision 2008/334/JHA (4). Those Decisions were replaced by Commission Implementing Decision 2013/115/EU (5) in order to better reflect the operational needs of users and staff involved in SIRENE operations, to improve consistency of working procedures and to ensure that technical rules correspond to the state of the art.

| (3) | The overall revision and update of the SIRENE Manual took place in the beginning of 2015 with the adoption of Commission Implementing Decision (EU) 2015/219 (6). Certain measures provided for in Implementing Decision (EU) 2015/219 were intended to accelerate the information exchange on subjects of discreet and specific checks involved in terrorism and serious crime. Due to the urgency to adopt such measures in the light of the increasing threat of terrorism, in particular following the attack in Paris on 7 January 2015 Implementing Decision (EU) 2015/219 had to be adopted without the complete Croatian linguistic version. This deficiency needs to be remedied by re-adopting the rules contained in Implementing Decision (EU) 2015/219 in all official languages of the institutions of the Union. |
| --- | --- |

(3)

The overall revision and update of the SIRENE Manual took place in the beginning of 2015 with the adoption of Commission Implementing Decision (EU) 2015/219 (6). Certain measures provided for in Implementing Decision (EU) 2015/219 were intended to accelerate the information exchange on subjects of discreet and specific checks involved in terrorism and serious crime. Due to the urgency to adopt such measures in the light of the increasing threat of terrorism, in particular following the attack in Paris on 7 January 2015 Implementing Decision (EU) 2015/219 had to be adopted without the complete Croatian linguistic version. This deficiency needs to be remedied by re-adopting the rules contained in Implementing Decision (EU) 2015/219 in all official languages of the institutions of the Union.

| (4) | In order to facilitate the information exchange on terrorist suspects and persons involved in serious crime it is necessary to waive the alert compatibility rules with regard to alerts on discreet and specific check without prejudice to the priority rules on alerts. Member States should ensure that their end-users carry out the action related the alerts having priority. |
| --- | --- |

(4)

In order to facilitate the information exchange on terrorist suspects and persons involved in serious crime it is necessary to waive the alert compatibility rules with regard to alerts on discreet and specific check without prejudice to the priority rules on alerts. Member States should ensure that their end-users carry out the action related the alerts having priority.

| (5) | Given that Regulation (EC) No 1987/2006 builds upon the Schengen acquis, Denmark, in accordance with Article 5 of the Protocol on the position of Denmark annexed to the Treaty on European Union and the Treaty establishing the European Community, notified by letter of 15 June 2007 the transposition of this acquis into its national law. Denmark participates in Decision 2007/533/JHA. It is therefore bound to implement this Decision. |
| --- | --- |

(5)

Given that Regulation (EC) No 1987/2006 builds upon the Schengen acquis, Denmark, in accordance with Article 5 of the Protocol on the position of Denmark annexed to the Treaty on European Union and the Treaty establishing the European Community, notified by letter of 15 June 2007 the transposition of this acquis into its national law. Denmark participates in Decision 2007/533/JHA. It is therefore bound to implement this Decision.

| (6) | The United Kingdom is taking part in this Decision to the extent that it does not concern the exchange of supplementary information in relation to Articles 24 and 25 of Regulation (EC) No 1987/2006, in accordance with Article 5(1) of Protocol No 19 on the Schengen acquis integrated into the framework of the European Union, annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union, and Article 8(2) of Council Decision 2000/365/EC (7). |
| --- | --- |

(6)

The United Kingdom is taking part in this Decision to the extent that it does not concern the exchange of supplementary information in relation to Articles 24 and 25 of Regulation (EC) No 1987/2006, in accordance with Article 5(1) of Protocol No 19 on the Schengen acquis integrated into the framework of the European Union, annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union, and Article 8(2) of Council Decision 2000/365/EC (7).

| (7) | Ireland is taking part in this Decision to the extent that it does not concern the exchange of supplementary information in relation to Articles 24 and 25 of Regulation (EC) No 1987/2006, in accordance with Article 5(1) of Protocol No 19 on the Schengen acquis integrated into the framework of the European Union annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union, and Article 6(2) of Council Decision 2002/192/EC (8). |
| --- | --- |

(7)

Ireland is taking part in this Decision to the extent that it does not concern the exchange of supplementary information in relation to Articles 24 and 25 of Regulation (EC) No 1987/2006, in accordance with Article 5(1) of Protocol No 19 on the Schengen acquis integrated into the framework of the European Union annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union, and Article 6(2) of Council Decision 2002/192/EC (8).

| (8) | This Decision constitutes an act building upon, or otherwise relating to, the Schengen acquis within, respectively, the meaning of Article 3(2) of the 2003 Act of Accession, Article 4(2) of the 2005 Act of Accession and Article 4(2) of the 2011 Act of Accession. |
| --- | --- |

(8)

This Decision constitutes an act building upon, or otherwise relating to, the Schengen acquis within, respectively, the meaning of Article 3(2) of the 2003 Act of Accession, Article 4(2) of the 2005 Act of Accession and Article 4(2) of the 2011 Act of Accession.

| (9) | As regards Iceland and Norway, this Decision constitutes a development of the provisions of the Schengen acquis within the meaning of the Agreement concluded by the Council of the European Union and the Republic of Iceland and the Kingdom of Norway concerning the latters' association with the implementation, application and development of the Schengen acquis (9), which fall within the area referred to in Article 1, point G of Council Decision 1999/437/EC (10). |
| --- | --- |

(9)

As regards Iceland and Norway, this Decision constitutes a development of the provisions of the Schengen acquis within the meaning of the Agreement concluded by the Council of the European Union and the Republic of Iceland and the Kingdom of Norway concerning the latters' association with the implementation, application and development of the Schengen acquis (9), which fall within the area referred to in Article 1, point G of Council Decision 1999/437/EC (10).

| (10) | As regards Switzerland, this Decision constitutes a development of the provisions of the Schengen acquis within the meaning of the Agreement signed between the European Union, the European Community and the Swiss Confederation on the Swiss Confederation's association with the implementation, application and development of the Schengen acquis (11), which fall within the area referred to in Article 1, point G of Decision 1999/437/EC read in conjunction with Article 3 of Council Decision 2008/146/EC (12) and with Article 3 of Council Decision 2008/149/JHA (13). |
| --- | --- |

(10)

As regards Switzerland, this Decision constitutes a development of the provisions of the Schengen acquis within the meaning of the Agreement signed between the European Union, the European Community and the Swiss Confederation on the Swiss Confederation's association with the implementation, application and development of the Schengen acquis (11), which fall within the area referred to in Article 1, point G of Decision 1999/437/EC read in conjunction with Article 3 of Council Decision 2008/146/EC (12) and with Article 3 of Council Decision 2008/149/JHA (13).

| (11) | As regards Liechtenstein, this Decision constitutes a development of the provisions of the Schengen acquis within the meaning of the Protocol between the European Union, the European Community, the Swiss Confederation and the Principality of Liechtenstein on the accession of the Principality of Liechtenstein to the Agreement between the European Union, the European Community and the Swiss Confederation on the Swiss Confederation's association with the implementation, application and development of the Schengen acquis (14), which fall within the area referred to in Article 1, point G, of Decision 1999/437/EC read in conjunction with Article 3 of Council Decision 2011/349/EU (15) and Article 3 of Council Decision 2011/350/EU (16). |
| --- | --- |

(11)

As regards Liechtenstein, this Decision constitutes a development of the provisions of the Schengen acquis within the meaning of the Protocol between the European Union, the European Community, the Swiss Confederation and the Principality of Liechtenstein on the accession of the Principality of Liechtenstein to the Agreement between the European Union, the European Community and the Swiss Confederation on the Swiss Confederation's association with the implementation, application and development of the Schengen acquis (14), which fall within the area referred to in Article 1, point G, of Decision 1999/437/EC read in conjunction with Article 3 of Council Decision 2011/349/EU (15) and Article 3 of Council Decision 2011/350/EU (16).

| (12) | The measures provided for in this Decision are in accordance with the opinion of the Committee set up by Article 51 of Regulation (EC) No 1987/2006 and Article 67 of Decision 2007/533/JHA, |
| --- | --- |

(12)

The measures provided for in this Decision are in accordance with the opinion of the Committee set up by Article 51 of Regulation (EC) No 1987/2006 and Article 67 of Decision 2007/533/JHA,

HAS ADOPTED THIS DECISION:

Article 1

The Annex to Implementing Decision 2013/115/EU is replaced by the text in the Annex to this Decision.

Article 2

This Decision is addressed to the Member States.

Done at Brussels, 12 July 2016.

For the Commission

Dimitris AVRAMOPOULOS

Member of the Commission

---

(1)  
  OJ L 381, 28.12.2006, p. 4.

1

(2)  
  OJ L 205, 7.8.2007, p. 63.

2

(3)  Commission Decision 2008/333/EC of 4 March 2008 adopting the SIRENE Manual and other implementing measures for the second generation Schengen Information System (SIS II) (OJ L 123, 8.5.2008, p. 1).

3

(4)  Commission Decision 2008/334/JHA of 4 March 2008 adopting the SIRENE Manual and other implementing measures for the second generation Schengen Information System (SIS II) (OJ L 123, 8.5.2008, p. 39).

4

(5)  Commission Implementing Decision 2013/115/EU of 26 February 2013 on the Sirene Manual and other implementing measures for the second generation Schengen Information System (SIS II) (OJ L 71, 14.3.2013, p. 1).

5

(6)  Commission Implementing Decision (EU) 2015/219 of 29 January 2015 replacing the Annex to Implementing Decision 2013/115/EU on the Sirene Manual and other implementing measures for the second generation Schengen Information System (SIS II) (OJ L 44, 18.2.2015, p. 75).

6

(7)  Council Decision 2000/365/EC of 29 May 2000 concerning the request of the United Kingdom of Great Britain and Northern Ireland to take part in some of the provisions of the Schengen acquis (OJ L 131, 1.6.2000, p. 43).

7

acquis

(8)  Council Decision 2002/192/EC of 28 February 2002 concerning Ireland's request to take part in some of the provisions of the Schengen acquis (OJ L 64, 7.3.2002, p. 20).

8

acquis

(9)  
  OJ L 176, 10.7.1999, p. 36.

9

(10)  Council Decision 1999/437/EC of 17 May 1999 on certain arrangements for the application of the Agreement concluded by the Council of the European Union and the Republic of Iceland and the Kingdom of Norway concerning the association of those two States with the implementation, application and development of the Schengen acquis (OJ L 176, 10.7.1999, p. 31).

10

acquis

(11)  
  OJ L 53, 27.2.2008, p. 52.

11

(12)  Council Decision 2008/146/EC of 28 January 2008 on the conclusion, on behalf of the European Community, of the Agreement between the European Union, the European Community and the Swiss Confederation on the Swiss Confederation's association with the implementation, application and development of the Schengen acquis (OJ L 53, 27.2.2008, p. 1).

12

acquis

(13)  Council Decision 2008/149/JHA of 28 January 2008 on the conclusion on behalf of the European Union of the Agreement between the European Union, the European Community and the Swiss Confederation on the Swiss Confederation's association with the implementation, application and development of the Schengen acquis (OJ L 53, 27.2.2008, p. 50).

13

acquis

(14)  
  OJ L 160, 18.6.2011, p. 21.

14

(15)  Council Decision 2011/349/EU of 7 March 2011 on the conclusion on behalf of the European Union of the Protocol between the European Union, the European Community, the Swiss Confederation and the Principality of Liechtenstein on the accession of the Principality of Liechtenstein to the Agreement between the European Union, the European Community and the Swiss Confederation on the Swiss Confederation's association with the implementation, application and development of the Schengen acquis, relating in particular to judicial cooperation in criminal matters and police cooperation (OJ L 160, 18.6.2011, p. 1).

15

acquis,

(16)  Council Decision 2011/350/EU of 7 March 2011 on the conclusion, on behalf of the European Union, of the Protocol between the European Union, the European Community, the Swiss Confederation and the Principality of Liechtenstein on the accession of the Principality of Liechtenstein to the Agreement between the European Union, the European Community and the Swiss Confederation on the Swiss Confederation's association with the implementation, application and development of the Schengen acquis, relating to the abolition of checks at internal borders and movement of persons (OJ L 160, 18.6.2011, p. 19).

16

acquis

---

ANNEX

‘ANNEX

The SIRENE manual and other implementing measures for the second generation Schengen Information System (SIS II)

TABLE OF CONTENTS

| INTRODUCTION | 42 |
| --- | --- |

| 1. | THE SIRENE BUREAUX AND SUPPLEMENTARY INFORMATION | 44 |
| --- | --- | --- |

1.

| 1.1. | The SIRENE Bureau | 44 |
| --- | --- | --- |

1.1.

| 1.2. | SIRENE Manual | 45 |
| --- | --- | --- |

1.2.

| 1.3. | Appendices to this SIRENE Manual | 45 |
| --- | --- | --- |

1.3.

| 1.4. | Catalogue of recommendations for the correct application of the Schengen acquis and best practices (Schengen Information System) | 45 |
| --- | --- | --- |

1.4.

| 1.5. | Role of the SIRENE Bureaux in police cooperation in the European Union | 45 |
| --- | --- | --- |

1.5.

| 1.5.1. | Transfer of SIS II data and supplementary information to third countries or international organisations | 45 |
| --- | --- | --- |

1.5.1.

| 1.6. | Relations between SIRENE Bureaux and Europol | 46 |
| --- | --- | --- |

1.6.

| 1.7. | Relations between SIRENE Bureaux and Eurojust | 46 |
| --- | --- | --- |

1.7.

| 1.8. | Relations between SIRENE Bureaux and Interpol | 46 |
| --- | --- | --- |

1.8.

| 1.8.1. | Priority of SIS II alerts over Interpol alerts | 46 |
| --- | --- | --- |

1.8.1.

| 1.8.2. | Choice of communication channel | 46 |
| --- | --- | --- |

1.8.2.

| 1.8.3. | Use and distribution of Interpol diffusions in Schengen States | 46 |
| --- | --- | --- |

1.8.3.

| 1.8.4. | Hit and deletion of an alert | 47 |
| --- | --- | --- |

1.8.4.

| 1.8.5. | Improvement of cooperation between the SIRENE Bureaux and the Interpol NCBs | 47 |
| --- | --- | --- |

1.8.5.

| 1.9. | Standards | 47 |
| --- | --- | --- |

1.9.

| 1.9.1. | Availability | 47 |
| --- | --- | --- |

1.9.1.

| 1.9.2. | Continuity | 47 |
| --- | --- | --- |

1.9.2.

| 1.9.3. | Confidentiality | 47 |
| --- | --- | --- |

1.9.3.

| 1.9.4. | Accessibility | 47 |
| --- | --- | --- |

1.9.4.

| 1.10. | Communications | 47 |
| --- | --- | --- |

1.10.

| 1.10.1. | Language of communication | 47 |
| --- | --- | --- |

1.10.1.

| 1.10.2. | Data exchange between SIRENE Bureaux | 47 |
| --- | --- | --- |

1.10.2.

| 1.10.3. | Network, messages and mailboxes | 48 |
| --- | --- | --- |

1.10.3.

| 1.10.4. | Communication in exceptional circumstances | 48 |
| --- | --- | --- |

1.10.4.

| 1.11. | SIRENE Address Book (SAB) | 48 |
| --- | --- | --- |

1.11.

| 1.12. | SIRENE workflow system | 49 |
| --- | --- | --- |

1.12.

| 1.13. | Time limits for response | 49 |
| --- | --- | --- |

1.13.

| 1.13.1. | Indication of urgency in SIRENE forms including urgent reporting of a hit | 49 |
| --- | --- | --- |

1.13.1.

| 1.14. | Transliteration/transcription rules | 49 |
| --- | --- | --- |

1.14.

| 1.15. | Data quality | 49 |
| --- | --- | --- |

1.15.

| 1.16. | Archiving | 50 |
| --- | --- | --- |

1.16.

| 1.17. | Staff | 50 |
| --- | --- | --- |

1.17.

| 1.17.1. | Heads of SIRENE Bureaux | 50 |
| --- | --- | --- |

1.17.1.

| 1.17.2. | SIRENE Contact Person (SIRCoP) | 50 |
| --- | --- | --- |

1.17.2.

| 1.17.3. | Knowledge | 51 |
| --- | --- | --- |

1.17.3.

| 1.17.4. | Training | 51 |
| --- | --- | --- |

1.17.4.

| 1.17.5. | Exchange of staff | 52 |
| --- | --- | --- |

1.17.5.

| 2. | GENERAL PROCEDURES | 52 |
| --- | --- | --- |

2.

| 2.1. | Definitions | 52 |
| --- | --- | --- |

2.1.

| 2.2. | Multiple Alerts (Article 34(6) of the SIS II Regulation and 49(6) of the SIS II Decision) | 52 |
| --- | --- | --- |

2.2.

| 2.2.1. | Compatibility of alerts | 53 |
| --- | --- | --- |

2.2.1.

| 2.2.2. | Order of priority of alerts | 54 |
| --- | --- | --- |

2.2.2.

| 2.2.3. | Checking for incompatibility and entering multiple alerts | 55 |
| --- | --- | --- |

2.2.3.

| 2.2.4. | Special situation of the United Kingdom and Ireland | 56 |
| --- | --- | --- |

2.2.4.

| 2.3. | The exchange of information after a hit | 57 |
| --- | --- | --- |

2.3.

| 2.4. | When the procedures following a hit cannot be followed (Article 48 of the SIS II Decision and Article 33 of the SIS II Regulation) | 57 |
| --- | --- | --- |

2.4.

| 2.5. | Processing of data for purpose other than that for which it was entered in the SIS II (Article 46(5) of the SIS II Decision) | 58 |
| --- | --- | --- |

2.5.

| 2.6. | Flagging | 58 |
| --- | --- | --- |

2.6.

| 2.6.1. | Introduction | 58 |
| --- | --- | --- |

2.6.1.

| 2.6.2. | Consulting the Member States with a view to adding a flag | 59 |
| --- | --- | --- |

2.6.2.

| 2.6.3. | A request for deletion of a flag | 59 |
| --- | --- | --- |

2.6.3.

| 2.7. | Data found to be legally or factually inaccurate (Article 34 of the SIS II Regulation and Article 49 of the SIS II Decision) | 59 |
| --- | --- | --- |

2.7.

| 2.8. | The right to access and rectify data (Articles 41 of the SIS II Regulation and 58 of the SIS II Decision) | 60 |
| --- | --- | --- |

2.8.

| 2.8.1. | Requests for access to or rectification of data | 60 |
| --- | --- | --- |

2.8.1.

| 2.8.2. | Exchange of information on requests for access to alerts issued by other Member States | 60 |
| --- | --- | --- |

2.8.2.

| 2.8.3. | Exchange of information on requests to rectify or delete data entered by other Member States | 60 |
| --- | --- | --- |

2.8.3.

| 2.9. | Deleting when the conditions for maintaining the alert cease to be met | 60 |
| --- | --- | --- |

2.9.

| 2.10. | Entering proper names | 61 |
| --- | --- | --- |

2.10.

| 2.11. | Different categories of identity | 61 |
| --- | --- | --- |

2.11.

| 2.11.1. | Misused identity (Article 36 of the SIS II Regulation and 51 of the SIS II Decision) | 61 |
| --- | --- | --- |

2.11.1.

| 2.11.2. | Entering an alias | 62 |
| --- | --- | --- |

2.11.2.

| 2.11.3. | Further information to establish a person's identity | 62 |
| --- | --- | --- |

2.11.3.

| 2.12. | Exchange of information in case of interlinked alerts | 63 |
| --- | --- | --- |

2.12.

| 2.12.1. | Operational rules | 63 |
| --- | --- | --- |

2.12.1.

| 2.13. | Format and quality of biometric data in SIS II | 63 |
| --- | --- | --- |

2.13.

| 2.13.1. | Further use of the data exchanged, including archiving | 63 |
| --- | --- | --- |

2.13.1.

| 2.13.2. | Exchanging fingerprints and photographs | 64 |
| --- | --- | --- |

2.13.2.

| 2.13.3. | Technical requirements | 64 |
| --- | --- | --- |

2.13.3.

| 2.13.4. | Format and quality of biometric data | 64 |
| --- | --- | --- |

2.13.4.

| 2.14. | Special types of search | 64 |
| --- | --- | --- |

2.14.

| 2.14.1. | Geographically targeted search | 64 |
| --- | --- | --- |

2.14.1.

| 2.14.2. | Search with participation of special police units for targeted search (FAST) | 65 |
| --- | --- | --- |

2.14.2.

| 3. | ALERTS FOR ARREST FOR SURRENDER OR EXTRADITION PURPOSES (ARTICLE 26 OF THE SIS II DECISION) | 65 |
| --- | --- | --- |

3.

| 3.1. | Entering an alert | 65 |
| --- | --- | --- |

3.1.

| 3.2. | Multiple alerts | 65 |
| --- | --- | --- |

3.2.

| 3.3. | Misused identity | 66 |
| --- | --- | --- |

3.3.

| 3.4. | Entering an alias | 66 |
| --- | --- | --- |

3.4.

| 3.5. | Supplementary information to be sent to Member States | 66 |
| --- | --- | --- |

3.5.

| 3.5.1. | Supplementary information to be sent with regard to provisional arrest | 66 |
| --- | --- | --- |

3.5.1.

| 3.6. | Adding a flag | 67 |
| --- | --- | --- |

3.6.

| 3.6.1. | Systematic request for a flag to be added to alerts on persons wanted for arrest for extradition purposes where Decision 2002/584/JHA (1) does not apply | 67 |
| --- | --- | --- |

3.6.1.

| 3.7. | Action by SIRENE Bureaux upon receipt of an alert for arrest | 67 |
| --- | --- | --- |

3.7.

| 3.8. | The exchange of information after a hit | 68 |
| --- | --- | --- |

3.8.

| 3.9. | Supplementary information exchange about surrender or extradition | 68 |
| --- | --- | --- |

3.9.

| 3.10. | Supplementary information exchange about transit through another Member State | 68 |
| --- | --- | --- |

3.10.

| 3.11. | Deletion of alerts upon surrender or extradition | 68 |
| --- | --- | --- |

3.11.

| 4. | ALERTS FOR REFUSAL OF ENTRY OR STAY (ARTICLE 24 OF THE SIS II REGULATION) | 69 |
| --- | --- | --- |

4.

| 4.1. | Entering an alert | 69 |
| --- | --- | --- |

4.1.

| 4.2. | Multiple alerts | 70 |
| --- | --- | --- |

4.2.

| 4.3. | Misused identity | 70 |
| --- | --- | --- |

4.3.

| 4.4. | Entering an alias | 70 |
| --- | --- | --- |

4.4.

| 4.5. | Exchange of information when issuing residence permits or visas | 70 |
| --- | --- | --- |

4.5.

| 4.5.1. | Special procedures as provided for in Article 25 of the Schengen Convention | 70 |
| --- | --- | --- |

4.5.1.

| 4.5.2. | Special procedures as provided for in Article 5(4)(a) and (c) of the Schengen Borders Code | 71 |
| --- | --- | --- |

4.5.2.

| 4.6. | Common rules concerning procedures referred to in Section 4.5 | 72 |
| --- | --- | --- |

4.6.

| 4.7. | Exchange of information following a hit and when refusing entry or expelling from the Schengen area | 72 |
| --- | --- | --- |

4.7.

| 4.8. | Exchange of information following a hit on a third-country national who is a beneficiary of the right of free movement | 73 |
| --- | --- | --- |

4.8.

| 4.9. | Exchange of information if, in the absence of a hit, a Member State discovers that there is an alert for refusal of entry for a third-country national who is a beneficiary of the right of free movement | 74 |
| --- | --- | --- |

4.9.

| 4.10. | Deletion alerts for refusal of entry or stay | 74 |
| --- | --- | --- |

4.10.

| 5. | ALERTS ON MISSING PERSONS (ARTICLE 32 OF THE SIS II DECISION) | 75 |
| --- | --- | --- |

5.

| 5.1. | Multiple alerts | 75 |
| --- | --- | --- |

5.1.

| 5.2. | Misused identity | 75 |
| --- | --- | --- |

5.2.

| 5.3. | Entering an alias | 75 |
| --- | --- | --- |

5.3.

| 5.4. | Adding a flag | 75 |
| --- | --- | --- |

5.4.

| 5.5. | Provision of descriptive detail on missing minors and other persons assessed as being at risk | 75 |
| --- | --- | --- |

5.5.

| 5.6. | The exchange of information after a hit | 76 |
| --- | --- | --- |

5.6.

| 5.7. | Deletion of alerts on missing persons | 76 |
| --- | --- | --- |

5.7.

| 5.7.1. | Minors | 77 |
| --- | --- | --- |

5.7.1.

| 5.7.2. | Adults where no protective measures are requested | 77 |
| --- | --- | --- |

5.7.2.

| 5.7.3. | Adults, protective measures requested | 77 |
| --- | --- | --- |

5.7.3.

| 6. | ALERTS FOR PERSONS SOUGHT FOR A JUDICIAL PROCEDURE (ARTICLE 34 OF THE SIS II DECISION) | 77 |
| --- | --- | --- |

6.

| 6.1. | Multiple alerts | 77 |
| --- | --- | --- |

6.1.

| 6.2. | Misused identity | 77 |
| --- | --- | --- |

6.2.

| 6.3. | Entering an alias | 77 |
| --- | --- | --- |

6.3.

| 6.4. | The exchange of information after a hit | 77 |
| --- | --- | --- |

6.4.

| 6.5. | Deletion of alerts on persons sought for a judicial procedure | 78 |
| --- | --- | --- |

6.5.

| 7. | ALERTS FOR DISCREET AND SPECIFIC CHECKS (ARTICLE 36 OF THE SIS II DECISION) | 78 |
| --- | --- | --- |

7.

| 7.1. | Multiple alerts | 78 |
| --- | --- | --- |

7.1.

| 7.2. | Misused identity | 78 |
| --- | --- | --- |

7.2.

| 7.3. | Entering an alias | 78 |
| --- | --- | --- |

7.3.

| 7.4. | Informing other Member States when issuing alerts | 78 |
| --- | --- | --- |

7.4.

| 7.5. | Adding a flag | 79 |
| --- | --- | --- |

7.5.

| 7.6. | The exchange of information after a hit | 79 |
| --- | --- | --- |

7.6.

| 7.7. | Deletion of alerts on discreet and specific check | 79 |
| --- | --- | --- |

7.7.

| 7.8. | Automatic Number Plate Recognition systems (ANPR) | 79 |
| --- | --- | --- |

7.8.

| 8. | ALERTS ON OBJECTS FOR SEIZURE OR USE AS EVIDENCE (ARTICLE 38 OF THE SIS II DECISION) | 79 |
| --- | --- | --- |

8.

| 8.1. | Multiple alerts | 79 |
| --- | --- | --- |

8.1.

| 8.2. | Vehicle alerts | 80 |
| --- | --- | --- |

8.2.

| 8.2.1. | Checking for multiple alerts on a vehicle | 80 |
| --- | --- | --- |

8.2.1.

| 8.2.2. | VIN-twins | 80 |
| --- | --- | --- |

8.2.2.

| 8.3. | The exchange of information after a hit | 81 |
| --- | --- | --- |

8.3.

| 8.4. | Deletion of alerts on objects for seizure or use as evidence in criminal proceedings | 81 |
| --- | --- | --- |

8.4.

| 9. | AUTOMATIC NUMBER PLATE RECOGNITION SYSTEMS (ANPR) | 82 |
| --- | --- | --- |

9.

| 10. | STATISTICS | 83 |
| --- | --- | --- |

10.

INTRODUCTION

The Schengen area

On 14 June 1985, the Governments of the Kingdom of Belgium, the Federal Republic of Germany, the French Republic, the Grand Duchy of Luxembourg and the Kingdom of the Netherlands signed an agreement at Schengen, a small town in Luxembourg, with a view to enabling “(...) all nationals of the Member States to cross internal borders freely (...)” and to enable the “free circulation of goods and services”.

The five founding countries signed the Convention implementing the Schengen Agreement (2) on 19 June 1990, and were later joined by the Italian Republic on 27 November 1990, the Kingdom of Spain and the Portuguese Republic on 25 June 1991, the Hellenic Republic on 6 November 1992, the Republic of Austria on 28 April 1995 and by the Kingdom of Denmark, the Kingdom of Sweden and the Republic of Finland on 19 December 1996.

Subsequently, as of 26 March 1995, the Schengen acquis was fully applied in Belgium, Germany, France, Luxembourg, Netherlands, Spain and Portugal (3). As of 31 of March 1998, in Austria and Italy (4); as of 26 of March 2000 in Greece (5) and finally, as of 25 March 2001, the Schengen acquis was applicable in full in Norway, Iceland, Sweden, Denmark and Finland (6).

The United Kingdom (UK) and Ireland only take part in some of the provisions of the Schengen acquis, in accordance with Decision 2000/365/EC and Decision 2002/192/EC respectively.

In the case of the UK, the provisions in which the United Kingdom wished to take part (with exception of SIS) are applicable as of the 1 January 2005
   (7).

The Schengen acquis was incorporated into the legal framework of the European Union by means of protocols attached to the Treaty of Amsterdam (8) in 1999. A Council Decision was adopted on 12 May 1999, determining the legal basis for each of the provisions or decisions which constitute the Schengen acquis, in conformity with the relevant provisions of the Treaty establishing the European Community and the Treaty on European Union.

From 1 May 2004, the Schengen acquis as integrated into the framework of the European Union by the Protocol annexed to the Treaty on European Union and to the Treaty establishing the European Community (hereinafter referred to as the Schengen Protocol), and the acts building upon it or otherwise related to it are binding on the Czech Republic, the Republic of Estonia, the Republic of Latvia, the Republic of Lithuania, Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic. These Member States became full members of the Schengen area on 21 December 2007.

Cyprus is a signatory to the Convention implementing the Schengen Agreement but enjoys a derogation under its Act of Accession of 2003.

The Republic of Bulgaria and Romania acceded to the European Union on 1 January 2007; as from that date the Schengen acquis and the acts building upon it or otherwise related to it are binding upon them, with the derogation provided by their Act of Accession of 2005.

Croatia acceded to the European Union on 1 July 2013. It applies the Schengen acquis with the derogation provided by its Act of Accession of 2011.

Some of the provisions of the Schengen acquis apply upon accession of new Member States to the EU. Other provisions shall only apply in these Member States pursuant to a Council decision to that effect. Finally, the Council takes a decision on the lifting of border checks, after verification that the necessary conditions for the application of all parts of the acquis concerned have been met in the Member State in question, in accordance with the applicable Schengen evaluation procedures and after consultation of the European Parliament.

Certain other European countries joined the Schengen area. The Kingdom of Norway and the Republic of Iceland concluded an Association Agreement with the Member States on 18 May 1999
   (9) in order to be associated to the Schengen Convention.

In 2004, the Swiss Confederation signed an agreement with the European Union and the European Community concerning its association with the implementation, application and development of the Schengen acquis
   (10), based upon which it became a member of the Schengen area on 12 December 2008.

On the basis of the Protocol between the European Union, the European Community, the Swiss Confederation and the Principality of Liechtenstein on the accession of the Principality of Liechtenstein to the Agreement between the European Union, the European Community and the Swiss Confederation on the Swiss Confederation's association with the implementation, application and development of the Schengen acquis
   (11), signed in 2008, the Principality of Liechtenstein became a member of the Schengen area on 19 December 2011.

The second generation Schengen Information System (SIS II)

SIS II, set up pursuant to Regulation (EC) No 1987/2006 (SIS II Regulation) and Decision 2007/533/JHA (SIS II Decision) on the establishment, operation and use of the Second Generation Information System (SIS II) (together: the SIS II legal instruments) as well as Regulation (EC) No 1986/2006 of the European Parliament and of the Council (12) constitute a common information system allowing the competent authorities in the Member States to cooperate by exchanging information and is an essential tool for the application of the provisions of the Schengen acquis as integrated into the framework of the European Union. These instruments as of 9 April 2013 when in application, repealed Title IV of the Convention implementing the Schengen Agreement. SIS II replaces the first generation Schengen Information System that began operating in 1995 and was extended in 2005 and 2007.

The purpose of SIS II as laid down in Article 1 of the SIS II legal instruments is “(...) to ensure a high level of security within an area of freedom, security and justice of the European Union including the maintenance of public security and public policy and the safeguarding of security in the territories of the Member States, and to apply the provisions of Title IV of Part Three of the (EC) Treaty (hereinafter referred to as the EC Treaty) relating to the movement of persons in their territories, using information communicated via this system”.

In accordance with the SIS II legal instruments, by means of an automated consultation procedure, SIS II shall provide access to alerts on persons and objects to the following authorities:

| (a) | authorities responsible for border controls, in accordance with Regulation (EC) No 562/2006 of the European Parliament and of the Council (13); |
| --- | --- |

(a)

authorities responsible for border controls, in accordance with Regulation (EC) No 562/2006 of the European Parliament and of the Council (13);

| (b) | authorities carrying out and coordinating other police and customs checks within the country; |
| --- | --- |

(b)

authorities carrying out and coordinating other police and customs checks within the country;

| (c) | national judicial authorities and their coordination authorities; |
| --- | --- |

(c)

national judicial authorities and their coordination authorities;

| (d) | authorities responsible for issuing visas, the central authorities responsible for examining visa applications, authorities responsible for issuing residence permits and for the administration of legislation on third-country nationals in the context of the application of the Union law relating to the movement of persons; |
| --- | --- |

(d)

authorities responsible for issuing visas, the central authorities responsible for examining visa applications, authorities responsible for issuing residence permits and for the administration of legislation on third-country nationals in the context of the application of the Union law relating to the movement of persons;

| (e) | authorities responsible for issuing vehicle registration certificates (in accordance with Regulation (EC) No 1986/2006). |
| --- | --- |

(e)

authorities responsible for issuing vehicle registration certificates (in accordance with Regulation (EC) No 1986/2006).

In accordance with the SIS II Decision, Europol and Eurojust also have access to certain categories of alerts.

SIS II is made up of the following components:

| 1. | a central system (the Central SIS II) composed of:






  (a) | a technical support function (CS-SIS) containing a database (the SIS II database); |
| --- | --- | --- |

1.

a central system (the Central SIS II) composed of:

(a)

a technical support function (CS-SIS) containing a database (the SIS II database);

| (b) | a uniform national interface (NI-SIS); |
| --- | --- |

(b)

a uniform national interface (NI-SIS);

| 2. | a national system (N.SIS II) in each of the Member States, consisting of the national data systems which communicate with the Central SIS II. An N.SIS II may contain a data file (a national copy), containing a complete or partial copy of the SIS II database; |
| --- | --- |

2.

a national system (N.SIS II) in each of the Member States, consisting of the national data systems which communicate with the Central SIS II. An N.SIS II may contain a data file (a national copy), containing a complete or partial copy of the SIS II database;

| 3. | a communication infrastructure between the CS-SIS and the NI-SIS that provides an encrypted virtual network dedicated to SIS II data and the exchange of data between SIRENE Bureaux as defined below. |
| --- | --- |

3.

a communication infrastructure between the CS-SIS and the NI-SIS that provides an encrypted virtual network dedicated to SIS II data and the exchange of data between SIRENE Bureaux as defined below.

1.   THE SIRENE BUREAUX AND SUPPLEMENTARY INFORMATION

1.1.   The SIRENE Bureau

SIS II only contains the indispensable information (i.e. alert data) allowing the identification of a person or an object and the necessary action to be taken. In addition, according to the SIS II legal instruments, Member States shall exchange supplementary information related to the alert which is required for implementing certain provisions foreseen under the SIS II legal instruments, and for SIS II to function properly, either on a bilateral or multilateral basis.

This structure, built to deal with the exchange of supplementary information, has been given the name “SIRENE”, which is an acronym of the definition of the structure in English: Supplementary Information Request at the National Entries.

A national “SIRENE Bureau” shall be set up by each of the Member States in accordance with common Article 7(2) of the SIS II legal instruments. It shall serve as a single contact point for the Member States, fully operational on 24/7 basis, for the purpose of exchanging supplementary information in connection with the entry of alerts and for allowing the appropriate action to be taken in cases where persons and objects have been entered in SIS II and are found as a result of a hit. The SIRENE Bureaux' main tasks include (14) ensuring the exchange of all supplementary information is in accordance with the requirements of this SIRENE Manual, as provided in common Article 8 of the SIS II legal instruments for the following purposes:

| (a) | to allow Member States to consult or inform each other whilst entering an alert (e.g. when entering alerts for arrest); |
| --- | --- |

(a)

to allow Member States to consult or inform each other whilst entering an alert (e.g. when entering alerts for arrest);

| (b) | following a hit to allow the appropriate action to be taken (e.g. matching an alert); |
| --- | --- |

(b)

following a hit to allow the appropriate action to be taken (e.g. matching an alert);

| (c) | when the required action cannot be taken (e.g. adding a flag); |
| --- | --- |

(c)

when the required action cannot be taken (e.g. adding a flag);

| (d) | when dealing with the quality of SIS II data (e.g. when data has been unlawfully entered or is factually inaccurate), including the validation of outgoing alerts and the verification of incoming alerts, if it is provided for by national law; |
| --- | --- |

(d)

when dealing with the quality of SIS II data (e.g. when data has been unlawfully entered or is factually inaccurate), including the validation of outgoing alerts and the verification of incoming alerts, if it is provided for by national law;

| (e) | when dealing with the compatibility and priority of alerts (e.g. when checking for multiple alerts); |
| --- | --- |

(e)

when dealing with the compatibility and priority of alerts (e.g. when checking for multiple alerts);

| (f) | when dealing with data subjects' rights, in particular the right of access to data. |
| --- | --- |

(f)

when dealing with data subjects' rights, in particular the right of access to data.

Member States are encouraged to organise all national bodies responsible for international police cooperation, including SIRENE Bureaux, in a structured way so as to prevent conflicts of competence and duplication of work.

1.2.   SIRENE Manual

The SIRENE Manual is a set of instructions which describes in detail the rules and procedures governing the bilateral or multilateral exchange of supplementary information.

1.3.   Appendices to this SIRENE Manual

Since certain rules of a technical nature have a direct impact on the work of users in the Member States, including the SIRENE Bureaux, it is appropriate to include such rules in the SIRENE Manual. Therefore Appendices to this Manual set out, inter alia, rules on transliteration, code tables, forms for communication of supplementary information and other technical implementing measures for data processing.

1.4.   Catalogue of recommendations for the correct application of the Schengen acquis and best practices (Schengen Information System)

The catalogue serves to provide legally non-binding recommendations and best practices for Member States in the light of experience. It also serves as a reference tool for evaluation of the correct implementation of the SIS II legal instruments. Accordingly, it should, as far as possible, be followed.

1.5.   Role of the SIRENE Bureaux in police cooperation in the European Union

The exchange of supplementary information shall not prejudice the tasks entrusted to the SIRENE Bureaux in the area of international police cooperation by national law implementing other legal instruments of the European Union.

Additional tasks may be entrusted to the SIRENE Bureaux, in particular, by the national law implementing Framework Decision 2006/960/JHA, Articles 39 and 46 of the Schengen Convention, in as far as they are not replaced by Framework Decision 2006/960/JHA, Articles 40 or 41 of the Schengen Convention or if the information falls within the scope of mutual legal assistance.

If a SIRENE Bureau receives, from another SIRENE Bureau, a request falling outside its competence under national law it should immediately forward it to the competent authority and inform the requesting SIRENE Bureau about this action. If necessary, it should provide support to the requesting SIRENE Bureau to facilitate communication.

1.5.1.   Transfer of SIS II data and supplementary information to third countries or international organisations

According to Article 39 of the SIS II Regulation and 54 of the SIS II Decision, data processed in SIS II in application of these two legal instruments shall not be transferred or made available to third countries or to international organisations. This prohibition shall apply to the transfer of supplementary information to third countries or international organisations. Article 55 of the SIS II Decision foresees derogation from this general rule regarding the exchange of data on stolen, misappropriated, lost or invalidated passports with Interpol, subject to the conditions laid down in this article.

1.6.   Relations between SIRENE Bureaux and Europol

Europol has the right to access and to directly search data entered in SIS II according to Articles 26, 36 and 38 of the SIS II Decision. Europol may request further information from the Member States concerned in accordance with the provisions of the Europol Decision (15). In accordance with national law, it is strongly recommended that cooperation with the National Europol Unit (ENU) should be established in order to ensure that the SIRENE Bureau is informed of any exchange of supplementary information between Europol and the ENU concerning alerts in SIS II. In exceptional cases where communication at national level concerning SIS II alerts is done by the ENU, all parties to the communication, especially the SIRENE Bureau, should be made aware of this fact to avoid confusion.

1.7.   Relations between SIRENE Bureaux and Eurojust

The national members of Eurojust and their assistants have the right to access and to directly search data entered in SIS II according to Articles 26, 32, 34 and 38 of the SIS II Decision. In accordance with national law, cooperation with them should be established in order to ensure the smooth exchange of information in case of a hit. In particular, the SIRENE Bureau should be the contact point for national members of Eurojust and their assistants for supplementary information related to alerts in SIS II.

1.8.   Relations between SIRENE Bureaux and Interpol (16)

The role of the SIS II is neither to replace nor to replicate the role of Interpol. Although tasks may overlap, the governing principles for action and cooperation between the Member States under Schengen differ substantially from those under Interpol. It is therefore necessary to establish rules for cooperation between the SIRENE Bureaux and the NCBs (National Central Bureaux) at the national level.

The following principles shall apply:

1.8.1.   Priority of SIS II alerts over Interpol alerts

In case of alerts issued by Member States, SIS II alerts and the exchange of all information on these alerts shall always have priority over alerts and information exchanged via Interpol. This is of particular importance if the alerts conflict.

1.8.2.   Choice of communication channel

The principle of Schengen alerts taking precedence over Interpol alerts issued by Member States shall be respected and it shall be ensured that the NCBs of Member States comply with this. Once the SIS II alert is created, all communication related to the alert and the purpose for its creation and execution of action to be taken shall be provided by SIRENE Bureaux. If a Member State wants to change channels of communication, the other parties have to be consulted in advance. Such a change of channel is possible only in specific cases.

1.8.3.   Use and distribution of Interpol diffusions in Schengen States

Given the priority of SIS II alerts over Interpol alerts, the use of Interpol alerts shall be restricted to exceptional cases (i.e. where there is no provision, either in the SIS II legal instruments or in technical terms, to enter the alert in the SIS II, or where not all the necessary information is available to form a SIS II alert). Parallel alerts in the SIS II and via Interpol within the Schengen area should be avoided. Alerts which are distributed via Interpol channels and which also cover the Schengen area or parts thereof shall bear the following indication: “except for the Schengen States”.

1.8.4.   Hit and deletion of an alert

In order to ensure the SIRENE Bureau's role as a coordinator of the verification of the quality of the information entered in the SIS II Member States shall ensure that the SIRENE Bureaux and the NCBs inform each other of hits and deletion of alerts.

1.8.5.   Improvement of cooperation between the SIRENE Bureaux and the Interpol NCBs

In accordance with national law, each Member State shall take all appropriate measures to provide for the effective exchange of information at the national level between its SIRENE Bureau and the NCBs.

1.9.   Standards

The standards that underpin the cooperation via SIRENE Bureaux are the following:

1.9.1.   Availability

Each SIRENE Bureau shall be fully operational 24 hours a day, seven days a week in order to be able to react within the time-limit as required in Section 1.13. Provision of technical and legal analysis, support and solutions shall also be available 24 hours a day, seven days a week.

1.9.2.   Continuity

Each SIRENE Bureau shall build an internal structure which guarantees the continuity of management, staff and technical infrastructure.

1.9.3.   Confidentiality

Pursuant to common Article 11 of the SIS II legal instruments, relevant national rules of professional secrecy or other equivalent obligations of confidentiality shall apply to all SIRENE staff. This obligation shall also apply after staff members leave office or employment.

1.9.4.   Accessibility

In order to fulfil the requirement to provide supplementary information, the SIRENE staff shall have direct or indirect access to all relevant national information and expert advice.

1.10.   Communications

1.10.1.   Language of communication

In order to achieve the utmost efficiency in bilateral communication between SIRENE Bureaux, a language familiar to both parties shall be used.

1.10.2.   Data exchange between SIRENE Bureaux

The technical specifications concerning the exchange of information between SIRENE Bureaux are laid down in the document: “Data exchange between SIRENE Bureaux (DEBS)”. These instructions shall be respected.

1.10.3.   Network, messages and mailboxes

SIRENE Bureaux shall use an encrypted virtual network exclusively dedicated to SIS II data and the exchange of supplementary information between SIRENE Bureaux, as referred to in common Articles 4(1)(c) and 8(1) of the SIS II legal instruments. Only if this channel is not available, another adequately secured and appropriate means of communication may be used. The ability to choose the channel means that it shall be determined on a case-by-case basis, according to technical possibilities and the security and quality requirements that the communications have to meet.

Written messages shall be divided into two categories: free text and standard forms. Appendix 3 describes the forms exchanged between SIRENE Bureaux and set out guidance on the expected content of the fields, including whether they are mandatory or not.

There shall be four different mailboxes within the above-mentioned network for free text messages and SIRENE forms.

| Mailbox | Mailbox Address | Purpose |
| --- | --- | --- |
| Operational | oper@xx.sirenemail2.eu | Used for the exchange of forms and attachments between SIRENE Bureaux |
| Technical | tech@xx.sirenemail2.eu | Used for e-mail exchange between the technical support staff of the SIRENE Bureaux |
| Head of SIRENE | director@xx.sirenemail2.eu | Used for e-mail exchange with the Heads of the SIRENE Bureaux |
| E-mail | message@xx.sirenemail2.eu | Used for free text message exchange between SIRENE Bureaux |

Mailbox

Mailbox Address

Purpose

Operational

oper@xx.sirenemail2.eu

Used for the exchange of forms and attachments between SIRENE Bureaux

Technical

tech@xx.sirenemail2.eu

Used for e-mail exchange between the technical support staff of the SIRENE Bureaux

Head of SIRENE

director@xx.sirenemail2.eu

Used for e-mail exchange with the Heads of the SIRENE Bureaux

E-mail

message@xx.sirenemail2.eu

Used for free text message exchange between SIRENE Bureaux

For testing purposes a second domain exists (17) (testxx.sirenemail2.eu) within which any of the mailboxes in the table above may be replicated for test purposes without interfering the live message exchange and workflow environment.

The detailed rules on SIRENE mailboxes and transmission of SIRENE forms described in DEBS shall apply.

The SIRENE workflow system (see Section 1.12) shall monitor the operational and e-mail mailboxes (“oper” and “message”) to detect incoming forms, related emails and attachments. Urgent messages shall only be sent to the operational mailbox.

1.10.4.   Communication in exceptional circumstances

Where normal communication channels are not available and it is necessary to send standard forms by fax, for example, the procedure described in DEBS shall apply.

1.11.   SIRENE Address Book (SAB)

The contact details of the SIRENE Bureaux and relevant information for mutual communication and cooperation are collected and provided in the SIRENE Address Book (SAB). The Commission will update the SAB. The updated SAB shall be issued by the Commission at least twice per year. Each SIRENE Bureau shall ensure that:

| (a) | information from the SAB is not disclosed to third parties; |
| --- | --- |

(a)

information from the SAB is not disclosed to third parties;

| (b) | the SAB is known and used by the SIRENE staff; |
| --- | --- |

(b)

the SAB is known and used by the SIRENE staff;

| (c) | any update of the information listed in the SAB is provided without delay to the Commission; |
| --- | --- |

(c)

any update of the information listed in the SAB is provided without delay to the Commission;

1.12.   SIRENE workflow system

The effective management of the SIRENE Bureaux' workload can be best achieved through each SIRENE Bureau having a computerised management system (workflow system), which allows a great deal of automation in the management of the daily workflow.

The SIRENE Bureau may have a back-up computer and database system for its workflow at a secondary site in case of a serious emergency at the SIRENE Bureau. This should include sufficient back-up power and communication supply.

Appropriate IT support should be provided for SIRENE workflow to ensure its high availability.

1.13.   Time limits for response

The SIRENE Bureau shall answer all requests for information on alerts and hit procedures, made by the other Member States via their SIRENE Bureaux, as soon as possible. In any event a response shall be given within 12 hours (see also Section 1.13.1 on indication of urgency in SIRENE forms).

Priorities in daily work shall be based on the category of alert and the importance of the case.

1.13.1.   Indication of urgency in SIRENE forms including urgent reporting of a hit

SIRENE forms to be dealt with by the requested SIRENE Bureau with highest priority may be marked “URGENT”, in field 311 (“Important Notice”), followed by the reason for urgency. The reason for urgency shall be explained in the appropriate fields of the SIRENE forms. Telephone communication or notification may also be used where an urgent response is required.

Where the circumstances of a hit on an alert dictate, such as a case of genuine urgency or significant importance, the SIRENE Bureau of the Member State that matched the alert shall, where appropriate, inform the SIRENE Bureau of the issuing Member State of the hit by telephone after sending a G form.

1.14.   Transliteration/transcription rules

The transliteration and transcription definitions and rules are set out in Appendix 1. They shall be respected in the communication between SIRENE Bureaux (see also Section 2.10 on entering proper names).

1.15.   Data quality

Pursuant to Article 7(2) of the SIS II legal instruments, SIRENE Bureaux shall coordinate the verification of the quality of the information entered in the SIS II. SIRENE Bureaux should have the necessary national competence to perform this role. Therefore, an adequate form of national data quality audit should be provided for, including a review of the rate of alerts/hits and of data content.

In order to allow each SIRENE Bureau to perform its role of data quality verification coordinator, the necessary IT support and appropriate rights within the systems should be available.

National standards for training users on data quality principles and practice should be established in cooperation with the national SIRENE Bureau. Member States may call upon the staff of the SIRENE Bureaux to be involved in the training of all authorities entering alerts, stressing data quality and maximisation of the use of SIS II.

1.16.   Archiving

| (a) | Each Member State shall establish conditions for storing information. |
| --- | --- |

(a)

Each Member State shall establish conditions for storing information.

| (b) | The SIRENE Bureau of the issuing Member State shall keep all information on its own alerts available to the other Member States, including a reference to the decision giving rise to the alert. |
| --- | --- |

(b)

The SIRENE Bureau of the issuing Member State shall keep all information on its own alerts available to the other Member States, including a reference to the decision giving rise to the alert.

| (c) | The archives of each SIRENE Bureau shall allow swift access to the relevant information to meet the very short deadlines for transmitting information. |
| --- | --- |

(c)

The archives of each SIRENE Bureau shall allow swift access to the relevant information to meet the very short deadlines for transmitting information.

| (d) | In accordance with Article 12(4) of the SIS II legal instruments personal data, held in files by the SIRENE Bureau as a result of exchanging information, shall be kept only for such time as may be required to achieve the purposes for which they were supplied. As a rule, this information shall be deleted immediately after the related alert has been deleted from SIS II, and in any event at the latest one year thereafter. However, data relating to a particular alert which a Member State has entered or to an alert in connection with which action has been taken on its territory may be stored for longer in accordance with national law. |
| --- | --- |

(d)

In accordance with Article 12(4) of the SIS II legal instruments personal data, held in files by the SIRENE Bureau as a result of exchanging information, shall be kept only for such time as may be required to achieve the purposes for which they were supplied. As a rule, this information shall be deleted immediately after the related alert has been deleted from SIS II, and in any event at the latest one year thereafter. However, data relating to a particular alert which a Member State has entered or to an alert in connection with which action has been taken on its territory may be stored for longer in accordance with national law.

| (e) | Supplementary information sent by other Member States shall be stored according to national data protection laws in the recipient Member State. Common Article 12 of the SIS II legal instruments, Directive 95/46/EC of the European Parliament and of the Council (18) and Council Framework Decision 2008/977/JHA (19) also apply. |
| --- | --- |

(e)

Supplementary information sent by other Member States shall be stored according to national data protection laws in the recipient Member State. Common Article 12 of the SIS II legal instruments, Directive 95/46/EC of the European Parliament and of the Council (18) and Council Framework Decision 2008/977/JHA (19) also apply.

| (f) | Information on misused identity shall be deleted after the deletion of the relevant alert. |
| --- | --- |

(f)

Information on misused identity shall be deleted after the deletion of the relevant alert.

| (g) | Access to archives shall be recorded, controlled and restricted to designated staff. |
| --- | --- |

(g)

Access to archives shall be recorded, controlled and restricted to designated staff.

1.17.   Staff

A high level of experienced staff leads to a workforce able to function on their own initiative and thereby able to handle cases efficiently. Therefore a low turnover of personnel is desirable, which requires the unambiguous support of management to create a devolved working environment. Member States are encouraged to take appropriate measures to avoid loss of qualification and experience caused by staff turnover.

1.17.1.   Heads of SIRENE Bureaux

The Heads of SIRENE Bureaux should meet at least twice a year to assess the quality of the cooperation between their services, to discuss necessary technical or organisational measures in the event of any difficulties and to clarify procedures where required. The meeting of the Heads of SIRENE Bureaux is organised by the Member State holding the Presidency of the Council of the European Union.

1.17.2.   SIRENE Contact Person (SIRCoP)

In cases where standard procedures may be insufficient, the SIRENE Contact Person (SIRCoP) may deal with files on which progress is complex, problematic or sensitive and a degree of quality assurance and/or longer term contact with another SIRENE Bureau may be required in order to resolve the issue. The SIRCoP is not intended for urgent cases where the 24/7 front desk services shall in principle be used.

The SIRCoP may formulate proposals to enhance quality and describe options to resolve such issues in the longer term.

As a general rule SIRCoP are contactable by another SIRCoP only during office hours.

An annual assessment shall be carried out within the framework of the annual statistical reporting as it is set out in Appendix 5 based upon the following indicators:

| (a) | number of SIRCoP interventions per Member State; |
| --- | --- |

(a)

number of SIRCoP interventions per Member State;

| (b) | reason for contact; |
| --- | --- |

(b)

reason for contact;

| (c) | result of the interventions based on information available during the reporting period. |
| --- | --- |

(c)

result of the interventions based on information available during the reporting period.

1.17.3.   Knowledge

SIRENE Bureau staff shall have linguistic skills covering as wide a range of languages as possible and on-duty staff shall be able to communicate with all SIRENE Bureaux.

They shall have the necessary knowledge on:

| — | national, European and international legal aspects, |
| --- | --- |

—

national, European and international legal aspects,

| — | their national law enforcement authorities, and |
| --- | --- |

—

their national law enforcement authorities, and

| — | national and European judiciary and immigration administration systems. |
| --- | --- |

—

national and European judiciary and immigration administration systems.

They need to have the authority to deal independently with any incoming case.

Operators on duty outside office hours shall have the same competence, knowledge and authority and it should be possible for them to refer to experts available on-call.

Legal expertise to cover both normal and exceptional cases should be available in the SIRENE Bureau. Depending on the case, this may be provided by any personnel with the necessary legal background or experts from judicial authorities.

1.17.4.   Training

National level

At the national level, sufficient training shall ensure that staff meet the required standards laid down in this Manual. Before being authorised to process data stored in the SIS II, staff shall in particular receive appropriate training about data security and data protection rules and shall be informed of any relevant criminal offences and penalties.

European level

Common training courses shall be organised at least once a year, to enhance cooperation between SIRENE Bureaux by allowing staff to meet colleagues from other SIRENE Bureaux, share information on national working methods and create a consistent and equivalent level of knowledge. It will furthermore make staff aware of the importance of their work and the need for mutual solidarity in view of the common security of Member States.

The delivery of training should be in compliance with the SIRENE Trainers Manual.

Article 3 of Regulation (EU) No 1077/2011 of the European Parliament and of the Council (20) sets out that the European Agency for the operational management of large-scale IT systems in the area of freedom, security and justice (the Agency) shall perform tasks relating to training on the technical use of SIS II, in particular for SIRENE staff.

1.17.5.   Exchange of staff

As far as possible, SIRENE Bureaux should also foresee setting up staff exchanges with other SIRENE Bureaux at least once a year. These exchanges are intended to help improve staff knowledge of working methods, to show how other SIRENE Bureaux are organised and to establish personal contacts with colleagues in other Member States.

2.   GENERAL PROCEDURES

The procedures described below are applicable to all categories of alerts. The procedures specific to each category of alert can be found in the relevant parts of this Manual.

2.1.   Definitions

“Issuing Member State”: Member State which entered the alert in SIS II;

“Executing Member State”: Member State which takes the required actions following a hit;

“Providing SIRENE Bureau”: SIRENE Bureau of a Member State which has fingerprints or pictures of the person for whom an alert was entered by another Member State.

“Hit”: a hit occurs in SIS II when:

| (a) | a search is conducted by a user, |
| --- | --- |

(a)

a search is conducted by a user,

| (b) | the search reveals a foreign alert in SIS II, |
| --- | --- |

(b)

the search reveals a foreign alert in SIS II,

| (c) | data concerning the alert in SIS II matches the search data, and |
| --- | --- |

(c)

data concerning the alert in SIS II matches the search data, and

| (d) | further actions are requested as a result of the hit. |
| --- | --- |

(d)

further actions are requested as a result of the hit.

“Flag”: a suspension of validity at the national level that may be added to alerts for arrest, alerts on missing persons and alerts for checks, where a Member State considers that to give effect to an alert is incompatible with its national law, its international obligations or essential national interests. When the alert is flagged, the requested action on the basis of the alert shall not be taken on the territory of this Member State.

2.2.   Multiple Alerts (Article 34(6) of the SIS II Regulation and 49(6) of the SIS II Decision)

Only one alert per Member State may be entered in SIS II for any one person or object.

Therefore, wherever possible and necessary, second and subsequent alerts on the same person or object shall be kept available at national level so that they can be introduced when the first alert expires or is deleted.

Several alerts may be entered by different Member States for the same subjects. It is essential that this does not cause confusion to users, and that it is clear to them what measures must be taken when seeking to enter an alert and which procedure shall be followed when a hit occurs. Procedures shall therefore be established for detecting multiple alerts, as shall a priority mechanism for entering them in SIS II.

This calls for:

| — | checks before entering an alert, in order to determine whether the subject is already in SIS II, |
| --- | --- |

—

checks before entering an alert, in order to determine whether the subject is already in SIS II,

| — | consultation with the other Member States, when the entry of an alert causes multiple alerts that are incompatible. |
| --- | --- |

—

consultation with the other Member States, when the entry of an alert causes multiple alerts that are incompatible.

2.2.1.   Compatibility of alerts

Several Member States may enter an alert on the same person or object if the alerts are compatible.

Member States may derogate from the rules on compatibility when issuing an alert for discreet or specific check, in particular in case of alerts issued for national security purposes. This derogation shall be without prejudice to the order of priority of alerts and the consultation procedure as it is set out in Section 2.2.2.

Table of compatibility of alerts on persons

| Order of importance | Alert for arrest | Alert for refusal of entry | Alert on missing person (protection) | Alert for specific check — immediate action | Alert for specific check | Alert for discreet check — immediate action | Alert for discreet check | Alert on missing person (whereabouts) | Alert for judicial procedure |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Alert for arrest | yes | yes | yes | no | no | no | no | yes | yes |
| Alert for refusal of entry | yes | yes | no | no | no | no | no | no | no |
| Alert on missing person (protection) | yes | no | yes | no | no | no | no | yes | yes |
| Alert for specific check — immediate action | no | no | no | yes | yes | no | no | no | no |
| Alert for specific check | no | no | no | yes | yes | no | no | no | no |
| Alert for discreet check — immediate action | no | no | no | no | no | yes | yes | no | no |
| Alert for discreet check | no | no | no | no | no | yes | yes | no | no |
| Alert on missing person (whereabouts) | yes | no | yes | no | no | no | no | yes | yes |
| Alert for judicial procedure | yes | no | yes | no | no | no | no | yes | yes |

Order of importance

Alert for arrest

Alert for refusal of entry

Alert on missing person (protection)

Alert for specific check — immediate action

Alert for specific check

Alert for discreet check — immediate action

Alert for discreet check

Alert on missing person (whereabouts)

Alert for judicial procedure

Alert for arrest

yes

yes

yes

no

no

no

no

yes

yes

Alert for refusal of entry

yes

yes

no

no

no

no

no

no

no

Alert on missing person (protection)

yes

no

yes

no

no

no

no

yes

yes

Alert for specific check — immediate action

no

no

no

yes

yes

no

no

no

no

Alert for specific check

no

no

no

yes

yes

no

no

no

no

Alert for discreet check — immediate action

no

no

no

no

no

yes

yes

no

no

Alert for discreet check

no

no

no

no

no

yes

yes

no

no

Alert on missing person (whereabouts)

yes

no

yes

no

no

no

no

yes

yes

Alert for judicial procedure

yes

no

yes

no

no

no

no

yes

yes

Table of compatibility for alerts on objects

| Order of importance | Alert for use as evidence | Document invalidated for travel purposes | Alert for seizure | Alert for specific check — immediate action | Alert for specific check | Alert for discreet check — immediate action | Alert for discreet check |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Alert for use as evidence | yes | yes | yes | no | no | no | no |
| Document invalidated for travel purposes | yes | yes | yes | no | no | no | no |
| Alert for seizure | yes | yes | yes | no | no | no | no |
| Alert for specific check — immediate action | no | no | no | yes | yes | no | no |
| Alert for specific check | no | no | no | yes | yes | no | no |
| Alert for discreet check — immediate action | no | no | no | no | no | yes | yes |
| Alert for discreet check | no | no | no | no | no | yes | yes |

Order of importance

Alert for use as evidence

Document invalidated for travel purposes

Alert for seizure

Alert for specific check — immediate action

Alert for specific check

Alert for discreet check — immediate action

Alert for discreet check

Alert for use as evidence

yes

yes

yes

no

no

no

no

Document invalidated for travel purposes

yes

yes

yes

no

no

no

no

Alert for seizure

yes

yes

yes

no

no

no

no

Alert for specific check — immediate action

no

no

no

yes

yes

no

no

Alert for specific check

no

no

no

yes

yes

no

no

Alert for discreet check — immediate action

no

no

no

no

no

yes

yes

Alert for discreet check

no

no

no

no

no

yes

yes

2.2.2.   Order of priority of alerts

In case of incompatible alerts the order of priority for alerts on persons shall be as follows:

| — | arrest with a view to surrender or extradition (Article 26 of Decision), |
| --- | --- |

—

arrest with a view to surrender or extradition (Article 26 of Decision),

| — | refusing entry or stay in the Schengen territory (Article 24 of Regulation), |
| --- | --- |

—

refusing entry or stay in the Schengen territory (Article 24 of Regulation),

| — | placing under protection (Article 32 of Decision), |
| --- | --- |

—

placing under protection (Article 32 of Decision),

| — | specific check — immediate action (Article 36 of Decision), |
| --- | --- |

—

specific check — immediate action (Article 36 of Decision),

| — | specific check (Article 36 of Decision), |
| --- | --- |

—

specific check (Article 36 of Decision),

| — | discreet check — immediate action (Article 36 of Decision), |
| --- | --- |

—

discreet check — immediate action (Article 36 of Decision),

| — | discreet check (Article 36 of Decision), |
| --- | --- |

—

discreet check (Article 36 of Decision),

| — | communicating whereabouts (Articles 32 and 34 of the Decision). |
| --- | --- |

—

communicating whereabouts (Articles 32 and 34 of the Decision).

The order of priority for alerts on objects shall be as follows:

| — | use as evidence (Article 38 of Decision), |
| --- | --- |

—

use as evidence (Article 38 of Decision),

| — | seizure of document invalidated for travel purposes (Article 38 of Decision), |
| --- | --- |

—

seizure of document invalidated for travel purposes (Article 38 of Decision),

| — | seizure (Article 38 of Decision), |
| --- | --- |

—

seizure (Article 38 of Decision),

| — | specific check — immediate action (Article 36 of Decision), |
| --- | --- |

—

specific check — immediate action (Article 36 of Decision),

| — | specific check (Article 36 of Decision), |
| --- | --- |

—

specific check (Article 36 of Decision),

| — | discreet check — immediate action (Article 36 of Decision), |
| --- | --- |

—

discreet check — immediate action (Article 36 of Decision),

| — | discreet check (Article 36 of Decision), |
| --- | --- |

—

discreet check (Article 36 of Decision),

Departures from this order of priority may be made after consultation between the Member States if essential national interests are at stake.

2.2.3.   Checking for incompatibility and entering multiple alerts

In order to avoid incompatible multiple alerts, it is important to distinguish accurately between persons or objects that have similar characteristics. Consultation and cooperation between the SIRENE Bureaux is therefore essential, and each Member State shall establish appropriate technical procedures to detect such cases before an entry is made.

The SIRENE Bureau shall ensure that only one alert exists in SIS II in accordance with national procedure if a request for an alert conflicts with an alert entered by the same Member State.

The following procedure shall apply in order to verify if multiple alerts exist on the same person or same object:

| (a) | The mandatory identity description elements shall be compared when establishing the existence of multiple alerts:






  (i) | on a person:






  — | surname, |
| --- | --- | --- | --- |

(a)

The mandatory identity description elements shall be compared when establishing the existence of multiple alerts:

(i)

on a person:

—

surname,

| — | forename, |
| --- | --- |

—

forename,

| — | date of birth, |
| --- | --- |

—

date of birth,

| — | sex; |
| --- | --- |

—

sex;

| (ii) | on a vehicle:






  — | the VIN, |
| --- | --- | --- |

(ii)

on a vehicle:

—

the VIN,

| — | the registration number and country of registration, |
| --- | --- |

—

the registration number and country of registration,

| — | the make, |
| --- | --- |

—

the make,

| — | the type; |
| --- | --- |

—

the type;

| (iii) | on an aircraft:






  — | category of aircraft, |
| --- | --- | --- |

(iii)

on an aircraft:

—

category of aircraft,

| — | ICAO registration number; |
| --- | --- |

—

ICAO registration number;

| (iv) | on a boat:






  — | category of boat, |
| --- | --- | --- |

(iv)

on a boat:

—

category of boat,

| — | number of hulls, |
| --- | --- |

—

number of hulls,

| — | boat external identification number (not mandatory but may be used); |
| --- | --- |

—

boat external identification number (not mandatory but may be used);

| (v) | on a container:






  — | BIC number (21). |
| --- | --- | --- |

(v)

on a container:

—

BIC number (21).

| (b) | When entering a new alert on a vehicle or other object with a VIN or registration number see procedures in Section 8.2.1. |
| --- | --- |

(b)

When entering a new alert on a vehicle or other object with a VIN or registration number see procedures in Section 8.2.1.

| (c) | For other objects, the most appropriate fields for identifying multiple alerts are the mandatory fields, all of which are to be used for automatic comparison by the system. |
| --- | --- |

(c)

For other objects, the most appropriate fields for identifying multiple alerts are the mandatory fields, all of which are to be used for automatic comparison by the system.

The procedures described in Section 8.2.1 (checking for multiple alerts on a vehicle) shall be used to distinguish between other categories of objects in SIS II when it becomes apparent that two similar objects have the same serial number.

If the outcome of the check is that the details relate to two different persons or objects, the SIRENE Bureau shall approve the request for entering the new alert (22).

If the check for multiple alerts reveals that the details are identical and relate to the same person or object, the SIRENE Bureau of the Member State which intends to enter a new alert shall consult the SIRENE Bureau of the issuing Member State if the alerts are incompatible.

The following procedure shall apply to verify the compatibility of alerts:

| (a) | prior to entering an alert it is mandatory to carry out a check to ensure that there are no incompatible alerts; |
| --- | --- |

(a)

prior to entering an alert it is mandatory to carry out a check to ensure that there are no incompatible alerts;

| (b) | if another alert exists which is compatible, the SIRENE Bureaux do not need to consult one another. However, if there is a need to clarify whether the alert relates to the same person the SIRENE Bureau shall consult the SIRENE Bureau of the issuing Member State using the L form; |
| --- | --- |

(b)

if another alert exists which is compatible, the SIRENE Bureaux do not need to consult one another. However, if there is a need to clarify whether the alert relates to the same person the SIRENE Bureau shall consult the SIRENE Bureau of the issuing Member State using the L form;

| (c) | if the alerts are incompatible, the SIRENE Bureaux shall consult one another using an E form so that ultimately only one alert is entered; |
| --- | --- |

(c)

if the alerts are incompatible, the SIRENE Bureaux shall consult one another using an E form so that ultimately only one alert is entered;

| (d) | alerts for arrest shall be entered immediately without awaiting the result of any consultation with other Member States; |
| --- | --- |

(d)

alerts for arrest shall be entered immediately without awaiting the result of any consultation with other Member States;

| (e) | if an alert that is incompatible with existing alerts is given priority as the outcome of consultation, the Member States that entered the other alerts shall delete them when the new alert is entered. Any disputes shall be settled by Member States via the SIRENE Bureaux. |
| --- | --- |

(e)

if an alert that is incompatible with existing alerts is given priority as the outcome of consultation, the Member States that entered the other alerts shall delete them when the new alert is entered. Any disputes shall be settled by Member States via the SIRENE Bureaux.

| (f) | Member States who were not able to enter an alert may subscribe to be notified by the CS-SIS about the deletion of the alert; |
| --- | --- |

(f)

Member States who were not able to enter an alert may subscribe to be notified by the CS-SIS about the deletion of the alert;

| (g) | the SIRENE Bureau of the Member State that was not able to enter the alert may request that the SIRENE Bureau of the Member State that entered the alert informs it of a hit on this alert. |
| --- | --- |

(g)

the SIRENE Bureau of the Member State that was not able to enter the alert may request that the SIRENE Bureau of the Member State that entered the alert informs it of a hit on this alert.

2.2.4.   Special situation of the United Kingdom and Ireland

The United Kingdom and Ireland do not take part in the SIS II Regulation therefore they cannot access the alerts on refusal of entry or stay (Articles 24 and 26 of the SIS II Regulation). They shall, nevertheless, be bound by the rules on compatibility of alerts as set out in Section 2.2 and in particular they shall apply the procedure referred in Section 2.2.3.

The following procedure shall apply:

| (a) | Should the United Kingdom or Ireland enter an alert which is potentially incompatible with an existing alert on refusal of entry or stay in accordance with Section 2.2.1 the Central SIS II notifies these two Member States on the potential incompatibility by communicating only the Schengen ID of the existing alert. |
| --- | --- |

(a)

Should the United Kingdom or Ireland enter an alert which is potentially incompatible with an existing alert on refusal of entry or stay in accordance with Section 2.2.1 the Central SIS II notifies these two Member States on the potential incompatibility by communicating only the Schengen ID of the existing alert.

| (b) | Should an alert inserted by the United Kingdom or Ireland be notified of a potential incompatibility with an alert on refusal of entry or stay entered by another Member State, the SIRENE Bureau of the United Kingdom or Ireland shall initiate a consultation with the issuing Member State by using free text message and shall delete the potentially incompatible alert during the consultation. |
| --- | --- |

(b)

Should an alert inserted by the United Kingdom or Ireland be notified of a potential incompatibility with an alert on refusal of entry or stay entered by another Member State, the SIRENE Bureau of the United Kingdom or Ireland shall initiate a consultation with the issuing Member State by using free text message and shall delete the potentially incompatible alert during the consultation.

| (c) | Depending on the outcome of the consultation the United Kingdom or Ireland can reinsert an alert which has been shown to be compatible. |
| --- | --- |

(c)

Depending on the outcome of the consultation the United Kingdom or Ireland can reinsert an alert which has been shown to be compatible.

2.3.   The exchange of information after a hit

If the user requires supplementary information after a hit, the SIRENE Bureau shall contact the SIRENE Bureau of the issuing Member State without delay and request the necessary information. Where appropriate, the SIRENE Bureaux shall act as intermediaries between the national authorities and shall provide and exchange supplementary information pertinent to the alert in question.

Unless stated otherwise, the issuing Member State shall be informed of the hit and its outcome (see also Section 1.13.1 on indication of urgency)

The following procedure shall apply:

| (a) | Without prejudice to Section 2.4 of this Manual, one hit on an individual or an object for which an alert has been entered, shall in principle be communicated to the SIRENE Bureau of the issuing Member State using one G form. |
| --- | --- |

(a)

Without prejudice to Section 2.4 of this Manual, one hit on an individual or an object for which an alert has been entered, shall in principle be communicated to the SIRENE Bureau of the issuing Member State using one G form.

| (b) | When notifying the issuing Member State of a hit, the applicable article of the SIS II legal instruments shall be indicated in field 090 of the G form, including additional information if necessary (e.g. MINOR).
  The G form shall provide as much information as possible on the hit, including on the action taken in field 088. Provision of supplementary information may be requested from the issuing Member State in field 089. |
| --- | --- |

(b)

When notifying the issuing Member State of a hit, the applicable article of the SIS II legal instruments shall be indicated in field 090 of the G form, including additional information if necessary (e.g. MINOR).

The G form shall provide as much information as possible on the hit, including on the action taken in field 088. Provision of supplementary information may be requested from the issuing Member State in field 089.

| (c) | If the SIRENE Bureau of the executing Member State intends to provide further information after a G form has been sent, it shall use an M form. |
| --- | --- |

(c)

If the SIRENE Bureau of the executing Member State intends to provide further information after a G form has been sent, it shall use an M form.

| (d) | If necessary, the SIRENE Bureau of the issuing Member State shall then send any relevant, specific information and indicate any particular measures that it requests the SIRENE Bureau of the executing Member State to take. |
| --- | --- |

(d)

If necessary, the SIRENE Bureau of the issuing Member State shall then send any relevant, specific information and indicate any particular measures that it requests the SIRENE Bureau of the executing Member State to take.

For the reporting procedure on hits achieved via Automatic Number Plate Recognition (ANPR) systems see Section 9.

2.4.   When the procedures following a hit cannot be followed (Article 48 of the SIS II Decision and Article 33 of the SIS II Regulation)

In accordance with Article 48 of the SIS II Decision and Article 33 of the SIS II Regulation, the following procedure shall apply:

| (a) | the Member State, which is on the basis of all available information definitely unable to follow the procedure, shall inform the issuing Member State via its SIRENE Bureau that it is not able to perform the requested action, and give the reasons in field 083 of an H form; |
| --- | --- |

(a)

the Member State, which is on the basis of all available information definitely unable to follow the procedure, shall inform the issuing Member State via its SIRENE Bureau that it is not able to perform the requested action, and give the reasons in field 083 of an H form;

| (b) | the Member States concerned may agree on the action to be taken in line with their own national laws and the SIS II legal instruments. |
| --- | --- |

(b)

the Member States concerned may agree on the action to be taken in line with their own national laws and the SIS II legal instruments.

2.5.   Processing of data for purpose other than that for which it was entered in the SIS II (Article 46(5) of the SIS II Decision)

The data contained in SIS II may only be processed for the purposes laid down for each category of alert.

However, if prior authorisation has been obtained from the issuing Member State, the data may be processed for a purpose other than that for which they were entered, in order to prevent an imminent serious threat to public policy and security, for serious reasons of national security or for the purposes of preventing a serious criminal offence.

If a Member State intends to process data in SIS II for a purpose other than that for which they were entered, the exchange of information shall take place according to the following rules:

| (a) | through its SIRENE Bureau, the Member State that intends to use data for a different purpose shall explain to the Member State that entered the alert the grounds for having the data processed for another purpose, by using an I form; |
| --- | --- |

(a)

through its SIRENE Bureau, the Member State that intends to use data for a different purpose shall explain to the Member State that entered the alert the grounds for having the data processed for another purpose, by using an I form;

| (b) | as soon as possible, the issuing Member State shall study whether this request can be met and inform the other Member State by using an M form, through its SIRENE Bureau, of its decision; |
| --- | --- |

(b)

as soon as possible, the issuing Member State shall study whether this request can be met and inform the other Member State by using an M form, through its SIRENE Bureau, of its decision;

| (c) | if need be, the Member State that entered the alert may grant authorisation subject to certain conditions on how the data are to be used This authorisation shall be sent by using an M form. |
| --- | --- |

(c)

if need be, the Member State that entered the alert may grant authorisation subject to certain conditions on how the data are to be used This authorisation shall be sent by using an M form.

Once the Member State that entered the alert has agreed, the other Member State shall only use the data for the purpose for which it obtained authorisation. It shall take account of any conditions set by the issuing Member State.

2.6.   Flagging

2.6.1.   Introduction

| (a) | Article 24 of the SIS II Decision provides for the following cases where a Member State may require a flag:






  (i) | Where a Member State considers that to give effect to an alert entered in accordance with Articles 26, 32 or 36 of the SIS II Decision is incompatible with its national law, its international obligations or essential national interests, it may subsequently require that a flag be added to the alert to the effect that the action to be taken on the basis of the alert will not be taken in its territory. The flag shall be added by the SIRENE Bureau of the issuing Member State. |
| --- | --- | --- |

(a)

Article 24 of the SIS II Decision provides for the following cases where a Member State may require a flag:

(i)

Where a Member State considers that to give effect to an alert entered in accordance with Articles 26, 32 or 36 of the SIS II Decision is incompatible with its national law, its international obligations or essential national interests, it may subsequently require that a flag be added to the alert to the effect that the action to be taken on the basis of the alert will not be taken in its territory. The flag shall be added by the SIRENE Bureau of the issuing Member State.

| (ii) | In order to enable Member States to require that a flag be added to an alert issued in accordance with Article 26, all Member States shall be notified automatically about any new alert of that category by the exchange of supplementary information. |
| --- | --- |

(ii)

In order to enable Member States to require that a flag be added to an alert issued in accordance with Article 26, all Member States shall be notified automatically about any new alert of that category by the exchange of supplementary information.

| (iii) | If in particularly urgent and serious cases, a Member State issuing an alert requests the execution of the action, the Member State executing the alert shall examine whether it is able to allow the flag added at its behest to be withdrawn. If the Member State executing the alert is able to do so, it shall take the necessary steps to ensure that the action to be taken can be carried out immediately. |
| --- | --- |

(iii)

If in particularly urgent and serious cases, a Member State issuing an alert requests the execution of the action, the Member State executing the alert shall examine whether it is able to allow the flag added at its behest to be withdrawn. If the Member State executing the alert is able to do so, it shall take the necessary steps to ensure that the action to be taken can be carried out immediately.

| (b) | An alternative procedure exists only for alerts for arrest (see Section 3.6). |
| --- | --- |

(b)

An alternative procedure exists only for alerts for arrest (see Section 3.6).

| (c) | When a flag is added to alerts for missing persons and alerts for discreet or specific checks the alert does not appear on the screen when the user consults the system. |
| --- | --- |

(c)

When a flag is added to alerts for missing persons and alerts for discreet or specific checks the alert does not appear on the screen when the user consults the system.

| (d) | Without prejudice to Section 3.6.1 a Member State shall not request a flag solely on the basis that a given Member State is the issuing Member State. Flags shall only be requested on a case-by-case basis. |
| --- | --- |

(d)

Without prejudice to Section 3.6.1 a Member State shall not request a flag solely on the basis that a given Member State is the issuing Member State. Flags shall only be requested on a case-by-case basis.

2.6.2.   Consulting the Member States with a view to adding a flag

A flag shall be added only at the request or agreement of another Member State.

The following procedure shall apply:

| (a) | if a Member State requests a flag to be added, it shall request the flag from the issuing Member State using an F form, explaining the reason for the flag. Field 071 shall be used for this purpose, explaining in field 080 the reason for the flag. For other supplementary information concerning the alert field 083 shall be used. |
| --- | --- |

(a)

if a Member State requests a flag to be added, it shall request the flag from the issuing Member State using an F form, explaining the reason for the flag. Field 071 shall be used for this purpose, explaining in field 080 the reason for the flag. For other supplementary information concerning the alert field 083 shall be used.

| (b) | the Member State that entered the alert shall add the requested flag immediately; |
| --- | --- |

(b)

the Member State that entered the alert shall add the requested flag immediately;

| (c) | once information has been exchanged, based on the information provided for in the consultation process by the Member State requesting the flag, the alert may need to be amended or deleted or the request may be withdrawn, leaving the alert unchanged. |
| --- | --- |

(c)

once information has been exchanged, based on the information provided for in the consultation process by the Member State requesting the flag, the alert may need to be amended or deleted or the request may be withdrawn, leaving the alert unchanged.

2.6.3.   A request for deletion of a flag

Member States shall request the deletion of the previously requested flag as soon as the reason for the flag is no longer valid. This may be the case, in particular, if national legislation has changed or if further information exchange about the case reveals that the circumstances referred to in Article 24(1) or 25 of the SIS II Decision no longer exist.

The following procedure shall apply:

| (a) | The SIRENE Bureau which previously requested the flag to be added shall request the SIRENE Bureau of the issuing Member State to delete the flag, using an F form. Field 075 shall be used for this purpose (23). For more details concerning national law field 080 shall be used and, where appropriate, for inserting supplementary information explaining the reason for the deletion of the flag and for other supplementary information concerning the alert field 083 shall be used. |
| --- | --- |

(a)

The SIRENE Bureau which previously requested the flag to be added shall request the SIRENE Bureau of the issuing Member State to delete the flag, using an F form. Field 075 shall be used for this purpose (23). For more details concerning national law field 080 shall be used and, where appropriate, for inserting supplementary information explaining the reason for the deletion of the flag and for other supplementary information concerning the alert field 083 shall be used.

| (b) | The SIRENE Bureau of the issuing Member State shall delete the flag immediately. |
| --- | --- |

(b)

The SIRENE Bureau of the issuing Member State shall delete the flag immediately.

2.7.   Data found to be legally or factually inaccurate (Article 34 of the SIS II Regulation and Article 49 of the SIS II Decision)

If data is found to be factually incorrect or has been unlawfully stored in the SIS II, then the exchange of supplementary information shall take place in line with the rules set out in Article 34(2) of the SIS II Regulation and 49(2) of the SIS II Decision, which provide that only the Member State that issued the alert may modify, add to, correct, update or delete data.

The Member State which found that data contains an error or that it has been unlawfully stored shall inform the issuing Member State via its SIRENE Bureau at the earliest opportunity and not later than 10 calendar days after the evidence suggesting the error has come to its attention. The exchange of information should be carried out using a J form.

| (a) | following the result of consultations, the issuing Member State may have to delete or correct the data, in accordance with its national procedures for correcting the item in question; |
| --- | --- |

(a)

following the result of consultations, the issuing Member State may have to delete or correct the data, in accordance with its national procedures for correcting the item in question;

| (b) | if there is no agreement within two months, the SIRENE Bureau of the Member State that discovered the error or that the data has been unlawfully stored shall advise the authority responsible within its own country to refer the matter to the European Data Protection Supervisor, who shall, jointly with the national supervisory authorities concerned, act as mediator. |
| --- | --- |

(b)

if there is no agreement within two months, the SIRENE Bureau of the Member State that discovered the error or that the data has been unlawfully stored shall advise the authority responsible within its own country to refer the matter to the European Data Protection Supervisor, who shall, jointly with the national supervisory authorities concerned, act as mediator.

2.8.   The right to access and rectify data (Articles 41 of the SIS II Regulation and 58 of the SIS II Decision)

2.8.1.   Requests for access to or rectification of data

Without prejudice to national law, when the national authorities need to be informed of a request to access or rectify data, then the exchange of information will take place according to the following rules:

| (a) | Each SIRENE Bureau applies its national law on the right to access personal data. Depending on the circumstances of the case and in accordance with the applicable law, the SIRENE Bureaux shall either forward any requests they receive for access to or for rectification of data to the competent national authorities, or they shall adjudicate upon these requests within the limits of their remit. |
| --- | --- |

(a)

Each SIRENE Bureau applies its national law on the right to access personal data. Depending on the circumstances of the case and in accordance with the applicable law, the SIRENE Bureaux shall either forward any requests they receive for access to or for rectification of data to the competent national authorities, or they shall adjudicate upon these requests within the limits of their remit.

| (b) | If the competent national authorities so require, the SIRENE Bureaux of the Member States concerned shall, in accordance with their national law, forward them information on exercising the right to access data. |
| --- | --- |

(b)

If the competent national authorities so require, the SIRENE Bureaux of the Member States concerned shall, in accordance with their national law, forward them information on exercising the right to access data.

2.8.2.   Exchange of information on requests for access to alerts issued by other Member States

Information on requests for access to alerts entered in SIS II by another Member State shall be exchanged via the national SIRENE Bureaux using a K form for persons or an M form for objects.

The following procedure shall apply:

| (a) | the request for access shall be forwarded to the SIRENE Bureau of the issuing Member State as soon as possible, so that it can take a position on the question; |
| --- | --- |

(a)

the request for access shall be forwarded to the SIRENE Bureau of the issuing Member State as soon as possible, so that it can take a position on the question;

| (b) | the SIRENE Bureau of the issuing Member State shall inform the SIRENE Bureau of the Member State that received the request of access of its position; |
| --- | --- |

(b)

the SIRENE Bureau of the issuing Member State shall inform the SIRENE Bureau of the Member State that received the request of access of its position;

| (c) | the response by the SIRENE Bureau of the issuing Member State shall take into account any deadlines for processing the request set by the SIRENE Bureau of the Member State that received the request for access; |
| --- | --- |

(c)

the response by the SIRENE Bureau of the issuing Member State shall take into account any deadlines for processing the request set by the SIRENE Bureau of the Member State that received the request for access;

| (d) | the SIRENE Bureau of the Member State receiving an enquiry from an individual for access, correction or deletion shall take all the necessary measures to ensure a timely response. |
| --- | --- |

(d)

the SIRENE Bureau of the Member State receiving an enquiry from an individual for access, correction or deletion shall take all the necessary measures to ensure a timely response.

If the SIRENE Bureau of the issuing Member State sends its position to the SIRENE Bureau of the Member State that received the request for access, the SIRENE Bureau, according to national law and within the limits of its competence, shall either adjudicate upon the request or shall ensure that the position is forwarded to the authority responsible for adjudication of the request as soon as possible.

2.8.3.   Exchange of information on requests to rectify or delete data entered by other Member States

When a person requests to have his or her data rectified or deleted, this may only be done by the Member State that entered the alert. If the person addresses a Member State other than the one that entered the alert, the SIRENE Bureau of the requested Member State shall inform the SIRENE Bureau of the issuing Member State by means of a K form and the procedure described in 2.8.2 shall apply.

2.9.   Deleting when the conditions for maintaining the alert cease to be met

Alerts entered in SIS II shall be kept only for the time required to meet the purposes for which they were entered.

As soon as the conditions for maintaining the alert are no longer fulfilled, the issuing Member State shall delete the alert without delay. When the alert has an expiry date, the deletion will occur automatically in the CS-SIS. In case of a hit, the particular procedures described in Sections 3.11, 4.10, 5.7, 6.5, 7.7 and 8.4 apply.

The CS-SIS deletion message shall be processed automatically by the N.SIS II.

Member States have the possibility to subscribe to an automatic notification of the deletion of an alert.

2.10.   Entering proper names

Within the constraints imposed by national systems for entry of data and availability of data, proper names (forenames and surnames) shall be entered in SIS II in a format (script and spelling) in the format used on official travel documents in accordance with the ICAO standards for travel documents, which are also used in the transliteration and transcription functionalities of Central SIS II. In the exchange of supplementary information, SIRENE Bureaux shall use the proper names as they are entered in SIS II. Both users and SIRENE Bureaux within the issuing Member States shall use, as a general rule, Latin characters for entering data in SIS II, without prejudice to transliteration and transcription rules laid down in Appendix 1.

Where it is necessary to exchange supplementary information on a person who is not subject of an alert but may be related to it (e.g. a person who may be accompanying a missing minor) then the presentation and spelling of the name shall follow the rules set out in Appendix 1 and be provided in Latin characters and original format, if the Member State providing the information has the capacity to also input any special characters in the original format.

2.11.   Different categories of identity

Confirmed identity

A confirmed identity means that the identity has been confirmed on the basis of genuine ID documents, by passport or by statement from competent authorities.

Not confirmed identity

A not confirmed identity means that there is not sufficient proof of the identity.

Misused identity

A misused identity (surname, forename, date of birth) occurs if a person, entered in SIS II, uses the identity of another real person. This can happen, for example, when a document is used to the detriment of the real owner.

Alias

Alias means an assumed identity used by a person known under other identities.

2.11.1.   Misused identity (Article 36 of the SIS II Regulation and 51 of the SIS II Decision)

Due to the complexity of misused identity cases, on becoming aware that a person for whom an alert exists in SIS II is misusing someone else's identity, the issuing Member State shall check whether it is necessary to maintain the misused identity in the SIS II alert.

Subject to the person's explicit consent, and as soon as it has been established that a person's identity has been misused, additional data shall be added to the alert in SIS II in order to avoid the negative consequences of misidentification. The person whose identity has been misused may, according to national procedures, provide the competent authority with the information specified in Article 36(3) of the SIS II Regulation and Article 51(3) of the SIS II Decision. Any person whose identity has been misused has the right to withdraw his/her consent for the information to be processed.

The issuing Member State is responsible for inserting the remark “misused identity” in the alert and for entering additional data of the victim of misused identity such as photos, fingerprints and information on any valid ID document(s).

When a Member State discovers that an alert on a person entered by another Member State relates to a case of misused identity, and it has been established that the person's identity is misused it shall inform the SIRENE Bureau of the issuing Member State using a Q form, in order that the misused identity extension can be used in the SIS II alert.

Taking into account the purpose for entering data of this nature, where the photographs and fingerprints of the person whose identity has been misused are available, they shall be added to the alert. For there to be a case of misused identity an innocent person's details must match an existing identity in an alert. The Q form must contain the identity details, including alias number, from the alert so that the issuing Member State may ascertain to which identity in the alert the form refers. The mandatory fields for completion of a Q form in such cases are set out in Appendix 3.

The data of the person whose identity has been misused shall only be available for the purpose of establishing the identity of the person being checked and shall in no way be used for any other purpose. Information on misused identity, including any fingerprints and photographs, shall be deleted at the same time as the alert or earlier if the person concerned so requests.

2.11.2.   Entering an alias

In order to avoid incompatible alerts of any category due to an alias to be entered, to avoid problems for innocent victims and to ensure sufficient data quality, Member States shall as far as possible inform each other about aliases and exchange all relevant information about the real identity of the sought subject.

The Member State that entered the alert shall be responsible for adding any aliases. If another Member State discovers an alias, it shall inform the issuing Member State using an M form.

2.11.3.   Further information to establish a person's identity

The SIRENE Bureau of the issuing Member State may also, if the data in SIS II is insufficient, provide further information after consultation, on its own initiative or at the request of another Member State, to help clarify a person's identity. An L Form (and attachments) shall be used for this purpose. This information shall, in particular, cover the following:

| — | the origin of the passport or identity document in the possession of the person sought, |
| --- | --- |

—

the origin of the passport or identity document in the possession of the person sought,

| — | the passport or identity document's reference number, date of issue, place and authority as well as the expiry date, |
| --- | --- |

—

the passport or identity document's reference number, date of issue, place and authority as well as the expiry date,

| — | description of the person sought, |
| --- | --- |

—

description of the person sought,

| — | surname and forename of the mother and father of the person sought, |
| --- | --- |

—

surname and forename of the mother and father of the person sought,

| — | other possible spellings of the surname and forenames of the person sought, |
| --- | --- |

—

other possible spellings of the surname and forenames of the person sought,

| — | photographs and fingerprints if available, |
| --- | --- |

—

photographs and fingerprints if available,

| — | last known address. |
| --- | --- |

—

last known address.

As far as possible, this information shall be available in the SIRENE Bureaux, or immediately and permanently accessible to them for speedy transmission.

The common objective shall be to minimise the risk of wrongly stopping a person whose identity details are similar to those of the person on whom an alert has been issued.

2.12.   Exchange of information in case of interlinked alerts

Each link allows for the establishment of a relationship between at least two alerts.

A Member State may create a link between alerts that it enters in SIS II and only this Member State may modify and delete the link. Links shall only be visible to users when they have correct user access rights which permit at least two alerts in the link to be visible to them. Member States shall ensure that only authorised access to links is possible.

2.12.1.   Operational rules

Links between alerts do not require special procedures for the exchange of supplementary information. Nevertheless the following principles shall be observed:

In case there is a hit on each of two or more interlinked alerts, the SIRENE Bureau of the executing Member State shall send a G form for each of them indicating in field 086 that other G forms on the linked alerts will be forwarded.

No forms shall be sent on alerts which, although linked to an alert on which there was a hit, were not respectively the object of the hit. However, if there is a linked alert for surrender/extradition or for a missing person (for their own protection or in order to prevent threats) the communication of this discovery shall be carried out using an M form if appropriate and the information is available.

2.13.   Format and quality of biometric data in SIS II

In accordance with Article 23(2) of the SIS II Decision, photographs and fingerprints of the person shall be added to the alert when available.

SIRENE Bureaux shall be able to exchange fingerprints and pictures for the purpose of completing the alert and/or to support the execution of the requested action to be taken. When a Member State has a picture or fingerprints of a person for whom an alert has been issued by another Member State, it may send the pictures and fingerprints as an attachment in order to allow the issuing Member State to complete the alert.

This exchange takes place without prejudice to exchanges in the framework of police cooperation in application of Council Framework Decision 2006/960/JHA.

2.13.1.   Further use of the data exchanged, including archiving

Limitations on the use of data provided for alerts in SIS II are set out in the SIS II legal instruments. Any further use of pictures and fingerprints exchanged, including archiving, shall comply with the relevant provisions of the SIS II legal instruments, applicable national provisions on data protection, in accordance with Directive 95/46/EC and Framework Decision 2008/977/JHA.

Any storage of fingerprints at the national level shall fully respect the data protection rules of SIS II. Member State shall keep fingerprint data downloaded from CS-SIS separately from national fingerprint databases and such data shall be deleted at the same time as corresponding alerts and supplementary information.

2.13.2.   Exchanging fingerprints and photographs

The following procedure shall apply:

| (a) | the providing SIRENE Bureau shall send an L form through the usual electronic path and shall mention in field 083 of an L form that the fingerprints and pictures are being sent to complete an alert in SIS II; |
| --- | --- |

(a)

the providing SIRENE Bureau shall send an L form through the usual electronic path and shall mention in field 083 of an L form that the fingerprints and pictures are being sent to complete an alert in SIS II;

| (b) | the SIRENE Bureau of the issuing Member State shall add the fingerprints or pictures to the alert in SIS II or shall send them to the competent authority to complete the alert. |
| --- | --- |

(b)

the SIRENE Bureau of the issuing Member State shall add the fingerprints or pictures to the alert in SIS II or shall send them to the competent authority to complete the alert.

2.13.3.   Technical requirements

Fingerprints and pictures shall be collected and transmitted in accordance with the standards to be defined in the implementing rules for entering biometric data in SIS II.

Every SIRENE Bureau shall fulfil those technical standards.

2.13.4.   Format and quality of biometric data

All biometric data entered in the system shall be subject of a specific quality check to ensure a minimum quality standard common to all SIS II users.

Before entry, checks shall be carried out at the national level to ensure that:

| (a) | fingerprint data is compliant with the ANSI/NIST — ITL 1-2000 specified format, as implemented for the purposes of Interpol and adapted for SIS II; |
| --- | --- |

(a)

fingerprint data is compliant with the ANSI/NIST — ITL 1-2000 specified format, as implemented for the purposes of Interpol and adapted for SIS II;

| (b) | photographs, that shall only be used to confirm the identity of a person who has been located as a result of an alphanumeric search made in SIS II, are compliant with the following requirements: full frontal face pictures aspect rate shall be, as far as possible, 3:4 or 4:5. When available, a resolution of at least 480 × 600 pixels with 24 bits of colour depth shall be used. If the image has to be acquired through a scanner, the image size shall be, as far as possible, less than about 200 Kbytes. |
| --- | --- |

(b)

photographs, that shall only be used to confirm the identity of a person who has been located as a result of an alphanumeric search made in SIS II, are compliant with the following requirements: full frontal face pictures aspect rate shall be, as far as possible, 3:4 or 4:5. When available, a resolution of at least 480 × 600 pixels with 24 bits of colour depth shall be used. If the image has to be acquired through a scanner, the image size shall be, as far as possible, less than about 200 Kbytes.

2.14.   Special types of search

2.14.1.   Geographically targeted search

A geographically targeted search is a search carried out in a situation where a Member State has firm evidence of the whereabouts of a person or object, subject of an alert, within a restricted geographical area.

Geographically targeted searches in the Schengen area shall take place on the basis of an alert in SIS II. In circumstances where the whereabouts of a person or object are known, field 311 (Important Notice) may be completed indicating a geographical search and selecting the appropriate countries. Additionally, if the whereabouts are known when issuing an alert for arrest, field 061 of an A Form shall include the information on whereabouts of the wanted person. In all other cases, including for communicating the whereabouts of objects, an M form (field 083) shall be used. An alert for the wanted person shall be entered in SIS II to ensure that a request for action to be taken is immediately enforceable (Article 9(3) of Framework Decision 2002/584/JHA).

When the subject of a geographical search is located at a place other than that indicated in the geographical search the SIRENE Bureau of the issuing Member State shall indicate this fact, using an M form, to the Member State(s) involved in the geographical search in order for any related work to be stopped.

2.14.2.   Search with participation of special police units for targeted search (FAST)

The services provided by special units that conduct targeted searches (Fugitive, Active Search Teams, FAST) should also be used in suitable cases by SIRENE Bureaux in the requested Member States. The alert in SIS II should not be replaced by international cooperation of the above-mentioned police units. Such cooperation should not overlap the SIRENE Bureau's role as a focal point for searches using SIS II.

Cooperation, as appropriate, should be established to ensure that the SIRENE Bureau of the issuing Member State is informed by their national FAST about any ongoing operation relating to an alert entered in SIS II. Where appropriate this SIRENE Bureau shall provide this information to other SIRENE Bureaux. Any coordinated operation of ENFAST (European Network of Fugitive Active Search Teams) which entails the cooperation of the SIRENE Bureau shall be reported in advance to the SIRENE Bureau.

The SIRENE Bureaux shall ensure fast flow of supplementary information, including information on a hit, to the national FAST if the latter is involved in the search.

3.   ALERTS FOR ARREST FOR SURRENDER OR EXTRADITION PURPOSES (ARTICLE 26 OF THE SIS II DECISION)

3.1.   Entering an alert

Most of the alerts for arrest are accompanied by a European Arrest Warrant (EAW). However, under an alert for arrest, a provisional arrest is also possible prior to obtaining a request for extradition (ER) according to Article 16 of the European Convention on Extradition.

The EAW/ER shall be issued by a competent judicial authority carrying out this function in the issuing Member State.

When entering an alert for arrest for surrender purposes, a copy of the original EAW shall be entered in SIS II. A translation of the EAW in one or more of the official languages of the institutions of the Union may be entered.

In addition, photographs and fingerprints of the person shall be added to the alert when available.

The relevant information including EAW or ER, provided with regard to persons wanted for arrest for surrender or extradition purposes, shall be available to the SIRENE Bureau when the alert is entered. A check shall be made to ensure that the information is complete and correctly presented.

Member States shall be able to enter more than one EAW per alert for arrest. It is the responsibility of the issuing Member State to delete an EAW that loses its validity and to check if there are any other EAW attached to the alert and extend the alert if needed.

In addition to an EAW which a Member State has attached to an alert for arrest it shall also be possible to attach translations of the EAW, if necessary in separate binary files.

For scanned documents that are to be attached to alerts, as far as possible, a minimum resolution of 150 DPI shall be used.

3.2.   Multiple alerts

For general procedures see Section 2.2.

In addition, the following rules shall apply:

Several Member States may enter an alert for arrest on the same person. If two or more Member States have issued an alert for the same person, the decision on which warrant shall be executed in the event of an arrest shall be taken by the executing judicial authority in the Member State where the arrest occurs. The SIRENE Bureau of the executing Member State shall send a G form to each Member State concerned.

3.3.   Misused identity

See general procedure in Section 2.11.1.

3.4.   Entering an alias

See general procedure in Section 2.11.2.

In the case of alerts for arrest, the SIRENE Bureau shall use field 011 of an A form
   (24) (at the time of entry of the alert) or subsequently an M form, when informing the other Member States of aliases regarding an alert for arrest, if this information is available to the SIRENE Bureau.

3.5.   Supplementary information to be sent to Member States

When entering the alert, supplementary information regarding the alert shall be sent to all Member States.

The information referred to in Section 3.5.1 shall be sent to the other SIRENE Bureaux by A form, at the same time as entering the alert. Any further information required for identification purposes shall be sent after consultation and/or at the request of another Member State.

In the case where several EAWs or ERs exist for the same person, separate A forms shall be completed for each of the EAWs or ERs.

There shall be sufficient detail contained in the EAW/ER and in the A form (in particular, EAW Section (e): “description of the circumstances in which the offence(s) was (were) committed, including the time and place”, fields 042, 043, 044, 045: “description of the circumstances”) for other SIRENE Bureaux to verify the alert. Appendix 3 sets out the information required and its relation to the fields on the EAW.

When an EAW is replaced or revoked this shall be indicated in field 267 of an A form (Article 26 SIS II Decision) or in field 044 of an A form (Extradition Request/Migrated alerts) by using the following text: “This form replaces the form (reference number) referring to EAW (reference number) issued on (date)”.

3.5.1.   Supplementary information to be sent with regard to provisional arrest

3.5.1.1.   When entering an alert based on both an EAW and an Extradition Request (ER)

When entering the alert for arrest for extradition purposes, supplementary information shall be sent to all Member States using an A form. If the data in the alert and the supplementary information sent to Member States with regard to an EAW is not sufficient for extradition purposes, additional information shall be provided.

In field 239 it shall be indicated that the form relates to both an EAW and an ER.

3.5.1.2.   When issuing an alert based on ER only

When entering the alert for arrest for extradition purposes, supplementary information shall be sent to all Member States using an A form.

In field 239 it shall be indicated that the form relates to an ER.

3.6.   Adding a flag

For general rules see Section 2.6.

If at least one of the EAWs attached to the alert can be executed, the alert shall not be flagged.

If an EAW contains more than one offence and if surrender can be carried out in respect of at least one of those offences, the alert shall not be flagged.

As highlighted in Section 2.6, a flagged alert under Article 26 of the SIS II Decision shall, for the period of duration of the flag, be regarded as being entered for the purposes of communicating the whereabouts of the person for whom it was issued.

3.6.1.   Systematic request for a flag to be added to alerts on persons wanted for arrest for extradition purposes where Decision 2002/584/JHA does not apply

The following procedure shall apply:

| (a) | in the case of alerts on persons wanted for arrest for extradition purposes, where Decision 2002/584/JHA does not apply, a SIRENE Bureau may ask other SIRENE Bureau(x) to add a flag systematically to alerts entered under Article 26 of the SIS II Decision on its nationals; |
| --- | --- |

(a)

in the case of alerts on persons wanted for arrest for extradition purposes, where Decision 2002/584/JHA does not apply, a SIRENE Bureau may ask other SIRENE Bureau(x) to add a flag systematically to alerts entered under Article 26 of the SIS II Decision on its nationals;

| (b) | any SIRENE Bureau wishing to do so shall send a written request to other SIRENE Bureau(x); |
| --- | --- |

(b)

any SIRENE Bureau wishing to do so shall send a written request to other SIRENE Bureau(x);

| (c) | any SIRENE Bureaux to whom such a request is addressed shall add a flag for the Member State in question immediately after the alert is issued; |
| --- | --- |

(c)

any SIRENE Bureaux to whom such a request is addressed shall add a flag for the Member State in question immediately after the alert is issued;

| (d) | the flag shall remain until the requesting SIRENE Bureau asks for its deletion. |
| --- | --- |

(d)

the flag shall remain until the requesting SIRENE Bureau asks for its deletion.

3.7.   Action by SIRENE Bureaux upon receipt of an alert for arrest

When a SIRENE Bureau receives an A form, it shall, as soon as possible, search all available sources to try to locate the subject. If the information provided by the issuing Member State is not sufficient for acceptance by the receiving Member State, this shall not prevent the searches being carried out. The receiving Member States shall carry out searches to the extent permissible under national law.

If the alert for arrest is verified and the subject is located or arrested in a Member State, then the information contained in an A form may be forwarded by the receiving SIRENE Bureau to the competent authority of the Member State which executes the EAW or the ER. If the original EAW or ER is requested, the issuing judicial authority may transmit it directly to the executing judicial authority (unless alternative arrangements have been made by the issuing and/or executing Member State).

3.8.   The exchange of information after a hit

See general procedure in Section 2.3.

In addition, the following procedure shall apply:

| (a) | a hit on an individual for whom an alert for arrest has been issued shall always be communicated immediately to the SIRENE Bureau of the issuing Member State. Moreover, after sending a G form the SIRENE Bureau of the executing Member State shall also communicate the hit to the SIRENE Bureau of the issuing Member State where appropriate by telephone; |
| --- | --- |

(a)

a hit on an individual for whom an alert for arrest has been issued shall always be communicated immediately to the SIRENE Bureau of the issuing Member State. Moreover, after sending a G form the SIRENE Bureau of the executing Member State shall also communicate the hit to the SIRENE Bureau of the issuing Member State where appropriate by telephone;

| (b) | if necessary the SIRENE Bureau of the issuing Member State shall then send any relevant, specific information on the particular measures that shall be taken by the SIRENE Bureau of the executing Member State; |
| --- | --- |

(b)

if necessary the SIRENE Bureau of the issuing Member State shall then send any relevant, specific information on the particular measures that shall be taken by the SIRENE Bureau of the executing Member State;

| (c) | the authority competent for receiving the EAW or ER, its full communication contacts (postal address, phone and, if available, fax and e-mail), reference number (if available), competent person (if available), requested language, time limit for and form of delivery shall be provided in field 091 of a G form; |
| --- | --- |

(c)

the authority competent for receiving the EAW or ER, its full communication contacts (postal address, phone and, if available, fax and e-mail), reference number (if available), competent person (if available), requested language, time limit for and form of delivery shall be provided in field 091 of a G form;

| (d) | in addition, the SIRENE Bureau of the issuing Member State shall inform other SIRENE Bureaux of the hit, using an M form, where a clear link has been established with particular Member States from the facts of the case and further enquiries initiated; |
| --- | --- |

(d)

in addition, the SIRENE Bureau of the issuing Member State shall inform other SIRENE Bureaux of the hit, using an M form, where a clear link has been established with particular Member States from the facts of the case and further enquiries initiated;

| (e) | the SIRENE Bureaux may transmit further information on alerts under Article 26 of the SIS II Decision, and in so doing may act on behalf of judicial authorities if this information falls within the scope of mutual judicial assistance. |
| --- | --- |

(e)

the SIRENE Bureaux may transmit further information on alerts under Article 26 of the SIS II Decision, and in so doing may act on behalf of judicial authorities if this information falls within the scope of mutual judicial assistance.

3.9.   Supplementary information exchange about surrender or extradition

When the competent judicial authorities provide information to the SIRENE Bureau of the executing Member State on whether the surrender or extradition may take place of a person for whom an alert for arrest has been issued, that SIRENE Bureau shall immediately provide that information to the SIRENE Bureau of the issuing Member State by means of an M form, marked in field 083 with the words “SURRENDER” or “EXTRADITION”
   (25). The detailed arrangements of the surrender or extradition shall, where appropriate, be communicated via the SIRENE Bureaux as soon as possible.

3.10.   Supplementary information exchange about transit through another Member State

If the transit of a person is necessary, the SIRENE Bureau of the Member State through which the person is to be taken shall provide the necessary information and support, in response to a request by the SIRENE Bureau of the issuing Member State or the competent judicial authority, sent by the SIRENE Bureau, by means of an M form marked with the word “TRANSIT” written at the start of field 083.

3.11.   Deletion of alerts upon surrender or extradition

Deletion of alerts for arrest for surrender or extradition purposes shall take place once the person has been surrendered or extradited to the competent authorities of the issuing Member State but may also occur when the judicial decision on which the alert was based has been revoked by the competent judicial authority according to national law.

4.   ALERTS FOR REFUSAL OF ENTRY OR STAY (ARTICLE 24 OF THE SIS II REGULATION)

Introduction

The exchange of information on third-country nationals on whom an alert has been issued under Article 24 of the SIS II Regulation allows Member States to take decisions in the case of entry or visa application. If the individual is already on the territory of the Member State, it allows national authorities to take the appropriate action for issuing residence permits, long-stay visas or expulsion. In this section references to visas concern long-stay visas, unless otherwise clearly explained (e.g. re-entry visa).

Carrying out the information procedures laid down under Article 5(4) of the Schengen Borders Code and the consultation procedures laid down under Article 25 of the Schengen Convention, falls within the competence of the authorities responsible for border controls and issuing residence permits or visas. In principle, the SIRENE Bureaux shall be involved in these procedures only in order to transmit supplementary information directly related to the alerts (e.g. notification of a hit, clarification of identity) or to delete alerts.

However, the SIRENE Bureaux may also be involved in transmitting supplementary information necessary for the expulsion of, or for refusing entry to, a third-country national; and, may be involved in transmitting any supplementary information further generated by these actions.

Directive 2004/38/EC of the European Parliament and of the Council (26) is not applicable in Switzerland. Therefore in the case of hit on a third country national who is the beneficiary of the right of free movement, normal consultation procedures shall be undertaken between Switzerland, the issuing Member State and any other Member State which may hold relevant information on the third country national's right of free movement.

4.1.   Entering an alert

According to Article 25 of the SIS II Regulation, specific rules apply to third-country nationals who are beneficiaries of the right of free movement within the meaning of Directive 2004/38/EC. The SIRENE Bureau shall, as far as possible, be able to make available any information that was used to assess whether an alert for refusal of entry or stay was entered for a beneficiary of the right of free movement (27). In the exceptional case of entry of an alert on a third-country national enjoying the right of free movement, the SIRENE Bureau of the issuing Member State shall send an M form to all the other Member States, based on the information provided by the authority that has entered the alert (see Sections 4.6 and 4.7)

In addition, Article 26 of the SIS II Regulation provides that, subject to certain specific conditions, alerts relating to third-country nationals who are the subject of a restrictive measure intended to prevent entry into or transit through the territory of Member States, taken in accordance with Article 29 of the Treaty on European Union (28), shall also be entered. The alerts shall be entered and kept up-to-date by the competent authority of the Member State which holds the Presidency of the Council of the European Union at the time of the adoption of the measure. If that Member State does not have access to SIS II or alerts under Article 24 of the SIS II Regulation the responsibility shall be taken up by the Member State which will holds the subsequent Presidency and has access to SIS II, including access to the alerts under Article 24 of the SIS II Regulation.

Member States shall put in place the necessary procedures for entering, updating and deleting such alerts.

4.2.   Multiple alerts

See general procedure in Section 2.2.

4.3.   Misused identity

See general procedure in Section 2.11.1.

Problems may occur when a third country national who is subject of an alert for refusal of entry or stay unlawfully uses the identity of a citizen of a Member State in order to seek to gain entry. If such a situation is discovered the competent authorities in the Member States may be made aware of the correct use of the misused identity function within SIS II. Alerts for refusal of entry shall not be issued in the main identity of a citizen of a Member State.

4.4.   Entering an alias

For general rules see Section 2.11.2.

4.5.   Exchange of information when issuing residence permits or visas

The following procedure shall apply:

| (a) | without prejudice to the special procedure concerning the exchange of information, which takes place in accordance with Article 25 of the Schengen Convention; and without prejudice to Section 4.8, which concerns the exchange of information following a hit on a third-country national who is the beneficiary of the right of free movement (in which case the consultation of the SIRENE of the issuing Member State is obligatory); the executing Member State may inform the issuing Member that the alert for refusal of entry has been matched in the course of the procedure for granting a residence permit or a visa. The issuing Member State may then inform other Member States using an M form if appropriate; |
| --- | --- |

(a)

without prejudice to the special procedure concerning the exchange of information, which takes place in accordance with Article 25 of the Schengen Convention; and without prejudice to Section 4.8, which concerns the exchange of information following a hit on a third-country national who is the beneficiary of the right of free movement (in which case the consultation of the SIRENE of the issuing Member State is obligatory); the executing Member State may inform the issuing Member that the alert for refusal of entry has been matched in the course of the procedure for granting a residence permit or a visa. The issuing Member State may then inform other Member States using an M form if appropriate;

| (b) | if so requested, in accordance with national law, the SIRENE Bureaux of the Member States concerned may assist in transmitting the necessary information to the appropriate authorities responsible for granting residence permits and visas. |
| --- | --- |

(b)

if so requested, in accordance with national law, the SIRENE Bureaux of the Member States concerned may assist in transmitting the necessary information to the appropriate authorities responsible for granting residence permits and visas.

4.5.1.   Special procedures as provided for in Article 25 of the Schengen Convention

Procedure under Article 25(1) of the Schengen Convention

If a Member State that is considering granting a residence permit or visa discovers that the applicant concerned is the subject of an alert for refusal of entry or stay issued by another Member State, it shall consult the issuing Member State via the SIRENE Bureaux. The Member State considering granting a residence permit or visa shall use an N form to inform the issuing Member State about the decision to grant the residence permit or visa. If the Member State decides to grant the residence permit or visa, the alert shall be deleted. The person may, nevertheless, be put on the issuing Member State's national list of alerts for refusal of entry.

Procedure under Article 25(2) of the Schengen Convention

If a Member State that entered an alert for refusal of entry or stay finds out that the person who is the subject of the alert has been granted a residence permit or visa, it shall instigate a consultation procedure with the Member State that granted the residence permit or visa, via the SIRENE Bureaux. The Member State which granted the residence permit or visa shall use an O form to inform the issuing Member State about the decision whether or not to withdraw the residence permit or visa. If this Member State decides to maintain the residence permit or visa, the alert shall be deleted. The person can, nevertheless, be put on a Member State's national list of alerts for refusal of entry.

The consultation via SIRENE Bureaux using an O form shall also take place if the Member State that granted the residence permit or visa discovers later that there is an alert for refusal of entry or stay on that person entered in SIS II (29).

If a third Member State (i.e. neither that which granted the residence permit/visa nor that which issued the alert) discovers that there is an alert on a third-country national who holds a residence permit or visa from one of the Member States, it shall notify both the Member State which granted the permit/visa and the issuing Member State via SIRENE Bureaux using an H form.

If the procedure foreseen under Article 25 of the Schengen Convention entails deleting an alert for refusal of entry or stay, the SIRENE Bureaux shall, whilst respecting their national law, offer their support if so requested.

4.5.2.   Special procedures as provided for in Article 5(4)(a) and (c) of the Schengen Borders Code

Procedure in cases falling under Article 5(4)(a)

According to Article 5(4)(a) of the Schengen Borders Code, a third-country national who is subject to an alert for refusal of entry or stay and, at the same time, has a residence permit, long stay visa or a re-entry visa granted by one of the Member States, shall be allowed entry for transit purposes to the Member State which granted the residence permit or re-entry visa, when crossing a border in a third Member State. The entry may be refused if this Member State has issued a national alert for refusal of entry. In both cases, at the request of the competent authority, the SIRENE Bureau of the Member State that the person is seeking to enter shall send the SIRENE Bureaux of the two Member States in question a message (an H form if the transit was allowed/a G form if the entry was refused) informing them of the contradiction and requesting that they consult each other in order to either delete the alert in SIS II or to withdraw the residence permit/visa. It may also request to be informed of the result of any consultation.

If the third-country national concerned tries to enter the Member State which has entered the alert in SIS II, his/her entry may be refused by this Member State. However, at the request of the competent authority, the SIRENE Bureau of that Member State shall consult the SIRENE Bureau of the Member State that granted the residence permit or visa in order to allow the competent authority to determine whether there are sufficient reasons for withdrawing the residence permit/visa. The Member State which granted the residence permit or visa shall use an O form to inform the issuing Member State about the decision whether or not to withdraw the residence permit or visa. If this Member State decides to maintain the residence permit or visa, the alert shall be deleted. The person can, nevertheless, be put on a Member State's national list of alerts for refusal of entry.

If this person tries to enter the Member State that issued the residence permit or visa, he/she shall be allowed entry into the territory but the SIRENE Bureau of that Member State, at the request of the competent authority, shall consult the SIRENE Bureau of the issuing Member State in order to enable the competent authorities concerned to decide on withdrawal of the residence permit or visa or deletion of the alert. The Member State which granted the residence permit or visa shall use an O form to inform the issuing Member State about the decision whether or not to withdraw the residence permit or visa. If this Member State decides to maintain the validity of the residence permit or visa, the alert shall be deleted. The person can, nevertheless, be put on a Member State's national list of alerts for refusal of entry.

Procedure in cases falling under Article 5(4)(c)

According to Article 5(4)(c) a Member State may derogate from the principle that a person for whom an alert for refusal of entry was issued shall be refused entry on humanitarian grounds, on grounds of national interest or because of international obligations. At the request of the competent authority, the SIRENE Bureau of the Member State that allowed entry shall inform the SIRENE Bureau of the issuing Member State of this situation using an H form.

4.6.   Common rules concerning procedures referred to in Section 4.5

| (a) | Only one N form or O form shall be sent per consultation procedure by the SIRENE Bureau of the Member State which has granted or intends to grant or retain a residence permit or long-stay visa in order to inform the Member State which has issued or is planning to issue a refusal of entry alert about the final decision on granting, retaining or revoking the residence permit or visa. |
| --- | --- |

(a)

Only one N form or O form shall be sent per consultation procedure by the SIRENE Bureau of the Member State which has granted or intends to grant or retain a residence permit or long-stay visa in order to inform the Member State which has issued or is planning to issue a refusal of entry alert about the final decision on granting, retaining or revoking the residence permit or visa.

| (b) | The consultation procedure shall be either a procedure for the purposes of Article 25(1) of the Schengen Convention or a procedure for the purposes of Article 25(2) of the Schengen Convention. |
| --- | --- |

(b)

The consultation procedure shall be either a procedure for the purposes of Article 25(1) of the Schengen Convention or a procedure for the purposes of Article 25(2) of the Schengen Convention.

| (c) | When a M, G or H form is sent in the context of a consultation procedure, it may be marked with the keyword “consultation procedure”. (M form: field 083; G form: field 086; H form: field 083). |
| --- | --- |

(c)

When a M, G or H form is sent in the context of a consultation procedure, it may be marked with the keyword “consultation procedure”. (M form: field 083; G form: field 086; H form: field 083).

4.7.   Exchange of information following a hit and when refusing entry or expelling from the Schengen area

Without prejudice to the special procedures concerning the exchange of information, which takes place in accordance with Article 5(4)(a) and (c) of the Schengen Borders Code; and without prejudice to Section 4.8 which concerns the exchange of information following a hit on a third-country national who is the beneficiary of the right of free movement (in which case the consultation of the issuing Member State via its SIRENE Bureau is obligatory), a Member State may ask to be informed of any hits on alerts for refusal of entry or stay that it has entered.

The SIRENE Bureaux of Member States that have entered alerts for refusal of entry shall not necessarily be informed of any hits as a matter of course, but may be informed in exceptional circumstances. A G form or an H form, depending on the action taken, may in any case be sent if, for example, supplementary information is required. A G form shall always be sent when there is a hit on a person benefiting from the right of free movement.

Notwithstanding the provisions of the paragraph above, as set out in Section 10 all SIRENE Bureaux shall provide statistics on hits on all foreign alerts on their territory.

The following procedure shall apply:

| (a) | a Member State may ask to be informed of any hits on alerts for refusal of entry or stay that it has issued. Any Member State that wishes to take up this option shall ask the other Member States in writing; |
| --- | --- |

(a)

a Member State may ask to be informed of any hits on alerts for refusal of entry or stay that it has issued. Any Member State that wishes to take up this option shall ask the other Member States in writing;

| (b) | the executing Member State may take the initiative and inform the issuing Member State that the alert has been matched and that the third-country national has not been granted entry or has been expelled from the Schengen territory; |
| --- | --- |

(b)

the executing Member State may take the initiative and inform the issuing Member State that the alert has been matched and that the third-country national has not been granted entry or has been expelled from the Schengen territory;

| (c) | once an action has been taken on the basis of a hit the SIRENE Bureau of the executing Member State shall send a G form to the SIRENE Bureau of the issuing Member State; a G form shall also be sent in case of a hit, when more information is needed for the execution of the measure. |
| --- | --- |

(c)

once an action has been taken on the basis of a hit the SIRENE Bureau of the executing Member State shall send a G form to the SIRENE Bureau of the issuing Member State; a G form shall also be sent in case of a hit, when more information is needed for the execution of the measure.

| (d) | upon the receipt of the information referred to in point (c) from the issuing Member State:






  (i) | if the action is executed the executing Member State shall notify the SIRENE Bureau of the issuing Member State using an M form (not another G form for the same hit), |
| --- | --- | --- |

(d)

upon the receipt of the information referred to in point (c) from the issuing Member State:

(i)

if the action is executed the executing Member State shall notify the SIRENE Bureau of the issuing Member State using an M form (not another G form for the same hit),

| (ii) | if the action is not executed the executing Member State shall notify the SIRENE Bureau of the issuing Member State using an H form, or |
| --- | --- |

(ii)

if the action is not executed the executing Member State shall notify the SIRENE Bureau of the issuing Member State using an H form, or

| (iii) | if further consultation is required this shall take place using an M form, |
| --- | --- |

(iii)

if further consultation is required this shall take place using an M form,

| (iv) | for the final form exchange in a consultation procedure an N or O form shall be used. |
| --- | --- |

(iv)

for the final form exchange in a consultation procedure an N or O form shall be used.

| (e) | if, on its territory, a Member State discovers a third-country national for whom an alert has been issued, the SIRENE Bureau of the issuing Member State, upon request, shall forward the information required to return the person concerned. Depending on the needs of the executing Member State this information, given in an M form, shall include the following:






  — | the type and reason for the decision, |
| --- | --- | --- |

(e)

if, on its territory, a Member State discovers a third-country national for whom an alert has been issued, the SIRENE Bureau of the issuing Member State, upon request, shall forward the information required to return the person concerned. Depending on the needs of the executing Member State this information, given in an M form, shall include the following:

—

the type and reason for the decision,

| — | the authority issuing the decision, |
| --- | --- |

—

the authority issuing the decision,

| — | the date of the decision, |
| --- | --- |

—

the date of the decision,

| — | the date of service (the date on which the decision was served), |
| --- | --- |

—

the date of service (the date on which the decision was served),

| — | the date of enforcement, |
| --- | --- |

—

the date of enforcement,

| — | the date on which the decision expires or the length of validity, |
| --- | --- |

—

the date on which the decision expires or the length of validity,

| — | the information whether the person was convicted and the nature of the penalty. |
| --- | --- |

—

the information whether the person was convicted and the nature of the penalty.

If a person on whom an alert has been issued is intercepted at the border, the procedures set out in the Schengen Borders Code, and by the issuing Member State, shall be followed.

There may also be an urgent need for supplementary information to be exchanged via the SIRENE Bureaux in specific cases in order to identify an individual with certainty.

4.8.   Exchange of information following a hit on a third-country national who is a beneficiary of the right of free movement

Concerning a third-country national who is a beneficiary of the right of free movement within the meaning of Directive 2004/38/EC special rules shall apply (30).

If there is a hit on a third-country national who is beneficiary of the right of free movement within the meaning of Directive 2004/38/EC special rules shall apply (but see the introduction to Section 4 on the position of Switzerland). The following procedure shall apply:

| (a) | at the request of the competent authority, the SIRENE Bureau of the executing Member State shall immediately contact the SIRENE Bureau of the issuing Member State using a G form in order to obtain the information necessary to decide, without delay, on the action to be taken, |
| --- | --- |

(a)

at the request of the competent authority, the SIRENE Bureau of the executing Member State shall immediately contact the SIRENE Bureau of the issuing Member State using a G form in order to obtain the information necessary to decide, without delay, on the action to be taken,

| (b) | upon receipt of a request for information, the SIRENE Bureau of the issuing Member State shall immediately start gathering the required information and send it as soon as possible to the SIRENE Bureau of the executing Member State, |
| --- | --- |

(b)

upon receipt of a request for information, the SIRENE Bureau of the issuing Member State shall immediately start gathering the required information and send it as soon as possible to the SIRENE Bureau of the executing Member State,

| (c) | the SIRENE Bureau of the issuing Member State shall check with the competent authority, if this information is not yet available, whether the alert may be kept in accordance with Directive 2004/38/EC. If the competent authority decides to keep the alert, the SIRENE Bureau of the issuing Member State shall inform all the other SIRENE Bureaux thereof, by means of an M form; |
| --- | --- |

(c)

the SIRENE Bureau of the issuing Member State shall check with the competent authority, if this information is not yet available, whether the alert may be kept in accordance with Directive 2004/38/EC. If the competent authority decides to keep the alert, the SIRENE Bureau of the issuing Member State shall inform all the other SIRENE Bureaux thereof, by means of an M form;

| (d) | the executing Member State shall inform, via its SIRENE Bureau, the SIRENE Bureau of the issuing Member State whether the requested action to be taken was carried out (using an M form) or not (using an H form). (31) |
| --- | --- |

(d)

the executing Member State shall inform, via its SIRENE Bureau, the SIRENE Bureau of the issuing Member State whether the requested action to be taken was carried out (using an M form) or not (using an H form). (31)

4.9.   Exchange of information if, in the absence of a hit, a Member State discovers that there is an alert for refusal of entry for a third-country national who is a beneficiary of the right of free movement

If, in the absence a hit, a Member State discovers that there is an alert for refusal of entry for a third-country national who is a beneficiary of the right of free movement, the SIRENE Bureau of this Member State shall, at the request of the competent authority, send an M form to the SIRENE Bureau of the issuing Member State informing it about this.

The SIRENE Bureau of the issuing Member State shall check with the competent authority, if this information is not yet available, whether the alert may be kept in accordance with Directive 2004/38/EC. If the competent authority decides to keep the alert, the SIRENE Bureau of the issuing Member State shall inform all the other SIRENE Bureaux thereof, by means of an M form.

4.10.   Deletion alerts for refusal of entry or stay

Without prejudice to the special procedures provided for by Article 25 of the Schengen Convention and Article 5(4)(a) and (c) of the Schengen Borders Code the alerts for refusal of entry or stay on third country nationals shall be deleted upon:

| (a) | the expiry of the alert; |
| --- | --- |

(a)

the expiry of the alert;

| (b) | the decision to delete by the competent authority of the issuing Member State; |
| --- | --- |

(b)

the decision to delete by the competent authority of the issuing Member State;

| (c) | the expiry of the time limit on refusal of entry where the competent authority of the issuing Member State set an expiry date on its decision; or |
| --- | --- |

(c)

the expiry of the time limit on refusal of entry where the competent authority of the issuing Member State set an expiry date on its decision; or

| (d) | the acquisition of citizenship of one of the Member States. If the acquisition of citizenship comes to the attention of a SIRENE Bureau of a Member State other than the issuing one, the former shall consult the SIRENE Bureau of the issuing Member State and, if needed, send a J form, in accordance with the procedure for rectification and deletion of data found to be legally or factually inaccurate (see Section 2.7). |
| --- | --- |

(d)

the acquisition of citizenship of one of the Member States. If the acquisition of citizenship comes to the attention of a SIRENE Bureau of a Member State other than the issuing one, the former shall consult the SIRENE Bureau of the issuing Member State and, if needed, send a J form, in accordance with the procedure for rectification and deletion of data found to be legally or factually inaccurate (see Section 2.7).

5.   ALERTS ON MISSING PERSONS (ARTICLE 32 OF THE SIS II DECISION)

5.1.   Multiple alerts

See general procedure in Section 2.2.

5.2.   Misused identity

See general procedure in Section 2.11.1.

5.3.   Entering an alias

See general procedure in Section 2.11.2.

5.4.   Adding a flag

Circumstances may arise where a hit occurs on an alert on a missing person and the competent authorities within the executing Member State decide that the action requested may not be taken and/or that no further action will be taken on the alert. This decision may be taken even if the issuing Member State's competent authorities decide to retain the alert in SIS II. In such circumstances the executing Member State may request a flag after the hit has occurred. With a view to adding a flag, the general procedures as described in Section 2.6 shall be followed.

There is no alternative action to be taken for alerts for missing persons.

5.5.   Provision of descriptive detail on missing minors and other persons assessed as being at risk

SIRENE Bureaux shall have ready access to all relevant supplementary information at national level regarding missing person alerts in order for the SIRENE Bureaux to be able to play a full role in reaching a successful outcome to cases, facilitating identification of the person and providing supplementary information promptly on matters linked to the case. Relevant supplementary information may cover, in particular, national decisions on the custody of a child or vulnerable person or requests for the use of “Child Alert” mechanisms.

As not all vulnerable missing persons will cross national borders, decisions on the provision of supplementary information (on descriptive details) and its recipients shall be taken on a case-by-case basis, covering the entire range of circumstances. Following a decision at national level on the extent of forwarding required for such supplementary information, the SIRENE Bureau of the issuing Member State shall, as far as is appropriate, take one of the following measures:

| (a) | retain the information in order to be able to forward supplementary information upon the request of another Member State; |
| --- | --- |

(a)

retain the information in order to be able to forward supplementary information upon the request of another Member State;

| (b) | forward an M form to the relevant SIRENE Bureau if enquiries indicate a likely destination for the missing person; |
| --- | --- |

(b)

forward an M form to the relevant SIRENE Bureau if enquiries indicate a likely destination for the missing person;

| (c) | forward an M form to all the relevant SIRENE Bureaux, based on the disappearance circumstances for the purpose of supplying all data concerning the person in a short period of time. |
| --- | --- |

(c)

forward an M form to all the relevant SIRENE Bureaux, based on the disappearance circumstances for the purpose of supplying all data concerning the person in a short period of time.

In the case of a high-risk missing person, field 311 of the M form shall begin with the word “URGENT” and an explanation of the reason for the urgency. (When the missing minor is unaccompanied (32), the explanatory term “Unaccompanied minor” shall be indicated.) This urgency may be reinforced by a telephone call highlighting the importance of the M form and its urgent nature.

A common method for entering structured supplementary information in an agreed order on a high-risk missing person shall be used. (33) This shall be entered in field 083 of the M form.

Once information has been received by a SIRENE Bureau, it shall, in order to maximise the opportunities for locating the person in a targeted and reasoned fashion, be communicated, as far as is appropriate, to:

| (a) | relevant border posts; |
| --- | --- |

(a)

relevant border posts;

| (b) | the competent administrative and police authorities for the location and protection of persons; |
| --- | --- |

(b)

the competent administrative and police authorities for the location and protection of persons;

| (c) | the relevant consular authorities of the issuing Member State, after a hit is achieved in SIS II. |
| --- | --- |

(c)

the relevant consular authorities of the issuing Member State, after a hit is achieved in SIS II.

5.6.   The exchange of information after a hit

See general procedure in Section 2.3.

In addition the following rules shall apply:

| (a) | as far as it is possible, the SIRENE Bureaux shall communicate the necessary medical details of the missing person(s) concerned if measures have to be taken for their protection.
  The information transmitted shall be kept only as long as it is strictly necessary and shall be used exclusively for the purposes of medical treatment given to the person concerned; |
| --- | --- |

(a)

as far as it is possible, the SIRENE Bureaux shall communicate the necessary medical details of the missing person(s) concerned if measures have to be taken for their protection.

The information transmitted shall be kept only as long as it is strictly necessary and shall be used exclusively for the purposes of medical treatment given to the person concerned;

| (b) | the SIRENE Bureau of the executing Member State shall always communicate the whereabouts to the SIRENE Bureau of the issuing Member State; |
| --- | --- |

(b)

the SIRENE Bureau of the executing Member State shall always communicate the whereabouts to the SIRENE Bureau of the issuing Member State;

| (c) | in accordance with Article 33(2) of the SIS II Decision, the communication of the whereabouts of the missing person, who is of age, to the person who reported him/her missing shall be subject to the missing person's consent (34). The consent shall be in writing or at least a written record shall be available. In cases where consent is refused, this shall be in writing or recorded officially. However, the competent authorities may communicate the fact that the alert has been deleted following a hit, to the person who reported him or her missing. |
| --- | --- |

(c)

in accordance with Article 33(2) of the SIS II Decision, the communication of the whereabouts of the missing person, who is of age, to the person who reported him/her missing shall be subject to the missing person's consent (34). The consent shall be in writing or at least a written record shall be available. In cases where consent is refused, this shall be in writing or recorded officially. However, the competent authorities may communicate the fact that the alert has been deleted following a hit, to the person who reported him or her missing.

5.7.   Deletion of alerts on missing persons

If there is to be any significant delay in the deletion of the alert by the issuing Member State this delay shall be notified to the SIRENE Bureau of the executing Member State in order for a flag to be placed on the alert as described in Section 5.4 of the SIRENE Manual.

5.7.1.   Minors

An alert shall be deleted upon:

| (a) | the resolution of the case (e.g. the minor is repatriated; the competent authorities in the executing Member State take a decision on the care of the child); |
| --- | --- |

(a)

the resolution of the case (e.g. the minor is repatriated; the competent authorities in the executing Member State take a decision on the care of the child);

| (b) | the expiry of the alert; or |
| --- | --- |

(b)

the expiry of the alert; or

| (c) | the decision by the competent authority of the issuing Member State. |
| --- | --- |

(c)

the decision by the competent authority of the issuing Member State.

5.7.2.   Adults where no protective measures are requested

An alert shall be deleted upon:

| (a) | the execution of the action to be taken (whereabouts ascertained by the executing Member State); |
| --- | --- |

(a)

the execution of the action to be taken (whereabouts ascertained by the executing Member State);

| (b) | the expiry of the alert; or |
| --- | --- |

(b)

the expiry of the alert; or

| (c) | the decision by the competent authority of the issuing Member State. |
| --- | --- |

(c)

the decision by the competent authority of the issuing Member State.

5.7.3.   Adults, protective measures requested

An alert shall be deleted upon:

| (a) | carrying out of the action to be taken (person placed under protection); |
| --- | --- |

(a)

carrying out of the action to be taken (person placed under protection);

| (b) | the expiry of the alert; or |
| --- | --- |

(b)

the expiry of the alert; or

| (c) | the decision by the competent authority of the issuing Member State. |
| --- | --- |

(c)

the decision by the competent authority of the issuing Member State.

Subject to national law, where a person is in official protective care an alert may be retained until that person has been repatriated.

6.   ALERTS FOR PERSONS SOUGHT FOR A JUDICIAL PROCEDURE (ARTICLE 34 OF THE SIS II DECISION)

6.1.   Multiple alerts

See general procedure in Section 2.2.

6.2.   Misused identity

See general procedure in Section 2.11.1.

6.3.   Entering an alias

See general procedure in Section 2.11.2.

6.4.   The exchange of information after a hit

See general procedure in Section 2.3.

In addition, the following rules shall apply:

| (a) | the real place of residence or domicile shall be obtained using all measures allowed by the national law of the Member State where the person was located; |
| --- | --- |

(a)

the real place of residence or domicile shall be obtained using all measures allowed by the national law of the Member State where the person was located;

| (b) | national procedures shall be in place, as appropriate, to ensure that alerts are only kept in SIS II for the time required to meet the purposes for which they were supplied. |
| --- | --- |

(b)

national procedures shall be in place, as appropriate, to ensure that alerts are only kept in SIS II for the time required to meet the purposes for which they were supplied.

The SIRENE Bureaux may transmit further information on alerts entered under Article 34 of SIS II Decision, and in so doing may act on behalf of judicial authorities if this information falls within the scope of mutual judicial assistance.

6.5.   Deletion of alerts on persons sought for a judicial procedure

An alert shall be deleted upon:

| (a) | the communication of the whereabouts of the person to the competent authority of the issuing Member State. Where the information forwarded cannot be acted upon (e.g. incorrect address or no fixed abode) the SIRENE Bureau of the issuing Member State shall inform the SIRENE Bureau of the executing Member State in order to resolve the problem; |
| --- | --- |

(a)

the communication of the whereabouts of the person to the competent authority of the issuing Member State. Where the information forwarded cannot be acted upon (e.g. incorrect address or no fixed abode) the SIRENE Bureau of the issuing Member State shall inform the SIRENE Bureau of the executing Member State in order to resolve the problem;

| (b) | the expiry of the alert; or |
| --- | --- |

(b)

the expiry of the alert; or

| (c) | the decision by the competent authority of the issuing Member State. |
| --- | --- |

(c)

the decision by the competent authority of the issuing Member State.

Where a hit has been achieved in a Member State and the address details were forwarded to the issuing Member State and a subsequent hit in that Member State reveals the same address details the hit shall be recorded in the executing Member State but neither the address details nor a G form shall be re-sent to the issuing Member State. In such cases the executing Member State shall inform the issuing Member State on the repeated hits, and the issuing Member State shall consider the need to maintain the alert.

7.   ALERTS FOR DISCREET AND SPECIFIC CHECKS (ARTICLE 36 OF THE SIS II DECISION)

7.1.   Multiple alerts

See general procedure in Section 2.2.

7.2.   Misused identity

See general procedure in Section 2.11.1.

7.3.   Entering an alias

See general procedure in Section 2.11.2.

7.4.   Informing other Member States when issuing alerts

When issuing an alert the SIRENE Bureau of the issuing Member State shall inform all the other SIRENE Bureaux by using an M form in the following cases:

| (a) | an alert for discreet or specific check is issued with the request that hits are reported without any delay to the issuing SIRENE Bureau; in the M form it shall use the text “ARTICLE 36(2) of the SIS II Decision — immediate action” or “ARTICLE 36(3) of the SIS II Decision — immediate action”. Justification for the immediate action should also be set out in field 083 of an M form; or |
| --- | --- |

(a)

an alert for discreet or specific check is issued with the request that hits are reported without any delay to the issuing SIRENE Bureau; in the M form it shall use the text “ARTICLE 36(2) of the SIS II Decision — immediate action” or “ARTICLE 36(3) of the SIS II Decision — immediate action”. Justification for the immediate action should also be set out in field 083 of an M form; or

| (b) | an authority responsible for national security requests the issuance of an alert in accordance with Article 36(3) of the SIS II Decision; in the M form it shall use the text “ARTICLE 36(3) of the SIS II Decision”. |
| --- | --- |

(b)

an authority responsible for national security requests the issuance of an alert in accordance with Article 36(3) of the SIS II Decision; in the M form it shall use the text “ARTICLE 36(3) of the SIS II Decision”.

If the alert is issued under Article 36(3) of the SIS II Decision the M form shall contain, in field 080, the name of the authority requesting entry of the alert, first in the language of the issuing Member State and then also in English and its contact details in field 081 in a format not requiring translation.

The confidentiality of certain information shall be safeguarded in accordance with national law, including keeping contact between the SIRENE Bureaux separate from any contact between the services responsible for national security.

7.5.   Adding a flag

See general procedure in Section 2.6.

There is no alternative action to be taken for alerts for discreet or specific checks.

In addition, if the authority responsible for national security in the executing Member State decides that the alert requires a flag, it shall contact its national SIRENE Bureau and inform it that the required action to be taken cannot be carried out. The SIRENE Bureau shall then request a flag by sending an F form to the SIRENE Bureau of the issuing Member State. As with other flag requests a general reason shall be given. However, matters of a sensitive nature need not be disclosed (see also Section 7.6(b) below).

7.6.   The exchange of information after a hit

See general procedure in Section 2.3.

In addition the following rules shall apply:

| a) | When a hit occurs on an alert issued pursuant to Article 36(3) of the SIS II Decision, the SIRENE Bureau of the executing Member State shall inform the SIRENE Bureau of the issuing Member State of the results (discreet check or specific check) via the G form. At the same time the SIRENE Bureau of the executing Member State shall inform its own authority responsible for national security. |
| --- | --- |

a)

When a hit occurs on an alert issued pursuant to Article 36(3) of the SIS II Decision, the SIRENE Bureau of the executing Member State shall inform the SIRENE Bureau of the issuing Member State of the results (discreet check or specific check) via the G form. At the same time the SIRENE Bureau of the executing Member State shall inform its own authority responsible for national security.

| b) | A specific procedure is required to safeguard the confidentiality of information. Therefore, any contact between the authorities responsible for national security shall be kept separate from the contact between the SIRENE Bureaux. Consequently, the detailed reasons for requesting a flag shall be discussed directly between authorities responsible for national security and not through SIRENE Bureaux. |
| --- | --- |

b)

A specific procedure is required to safeguard the confidentiality of information. Therefore, any contact between the authorities responsible for national security shall be kept separate from the contact between the SIRENE Bureaux. Consequently, the detailed reasons for requesting a flag shall be discussed directly between authorities responsible for national security and not through SIRENE Bureaux.

| c) | When a hit occurs on an alert which requests the hit to be reported immediately a G Form should be sent without delay to the SIRENE Bureau of the issuing Member State. |
| --- | --- |

c)

When a hit occurs on an alert which requests the hit to be reported immediately a G Form should be sent without delay to the SIRENE Bureau of the issuing Member State.

7.7.   Deletion of alerts on discreet and specific check

An alert shall be deleted upon:

| (a) | the expiry of the alert; or |
| --- | --- |

(a)

the expiry of the alert; or

| (b) | a decision to delete by the competent authority of the issuing Member State. |
| --- | --- |

(b)

a decision to delete by the competent authority of the issuing Member State.

7.8.   Automatic Number Plate Recognition systems (ANPR)

See Section 9.

8.   ALERTS ON OBJECTS FOR SEIZURE OR USE AS EVIDENCE (ARTICLE 38 OF THE SIS II DECISION)

8.1.   Multiple alerts

See general procedure in Section 2.2.

8.2.   Vehicle alerts

8.2.1.   Checking for multiple alerts on a vehicle

The mandatory identity description elements for checking for multiple alerts on a vehicle include:

| (a) | the registration/number plate, and/or |
| --- | --- |

(a)

the registration/number plate, and/or

| (b) | the vehicle identification number (VIN). |
| --- | --- |

(b)

the vehicle identification number (VIN).

Both numbers may feature in SIS II.

If, when entering a new alert, it is found that the same VIN and/or registration plate number already exist in SIS II, it is assumed that the new alert will result in multiple alerts on the same vehicle. However, this method of verification is effective only where the description elements used are the same. Comparison is therefore not always possible.

The SIRENE Bureau shall draw the users' attention to the problems which may arise where only one of the numbers has been compared, VIN-twins and re-use of licence plates. A positive response does not mean automatically that there is a hit, and a negative response does not mean that there is no alert on the vehicle.

The identity description elements used for establishing whether two vehicle entries are identical are detailed in Section 2.2.3.

The consultation procedures for checking multiple and incompatible alerts to be applied by the SIRENE Bureaux for vehicles shall be the same as for persons. For general procedures see Section 2.2.

The SIRENE Bureau of the Member State issuing an alert shall maintain a record of any requests to enter a further alert which, after consultation, have been rejected by virtue of the provisions given above, until the alert is deleted.

8.2.2.   VIN-twins

VIN-twin refers to a vehicle, entered in SIS II, of the same type with the same vehicle identification number (VIN) as an original manufactured vehicle (e.g. a tractor and a motorcycle with the same VIN do not fall into this category). The following specific procedure shall apply to avoid the negative consequences of a repeated seizure of the original manufactured vehicle with the same VIN:

| (a) | Where the possibility of a VIN-twin is established, the SIRENE Bureau shall, as appropriate:






  (i) | ensure that there is no error in the SIS II alert and the alert information is as complete as possible; |
| --- | --- | --- |

(a)

Where the possibility of a VIN-twin is established, the SIRENE Bureau shall, as appropriate:

(i)

ensure that there is no error in the SIS II alert and the alert information is as complete as possible;

| (ii) | check the circumstances of the case giving rise to an alert in SIS II; |
| --- | --- |

(ii)

check the circumstances of the case giving rise to an alert in SIS II;

| (iii) | find out the history of both vehicles from their production; |
| --- | --- |

(iii)

find out the history of both vehicles from their production;

| (iv) | request a thorough check of the seized vehicle, in particular its VIN, to verify whether it is the original manufactured vehicle. |
| --- | --- |

(iv)

request a thorough check of the seized vehicle, in particular its VIN, to verify whether it is the original manufactured vehicle.

All SIRENE Bureaux involved shall closely cooperate in taking such measures.

| (b) | Where the existence of a VIN-twin is confirmed, the issuing Member State shall consider whether it is necessary to maintain the alert in SIS II. If the Member State decides to maintain the alert in SIS II the issuing Member State shall:






  (i) | add a vehicle related remark “Suspicion of clone” (35) in the alert; |
| --- | --- | --- |

(b)

Where the existence of a VIN-twin is confirmed, the issuing Member State shall consider whether it is necessary to maintain the alert in SIS II. If the Member State decides to maintain the alert in SIS II the issuing Member State shall:

(i)

add a vehicle related remark “Suspicion of clone” (35) in the alert;

| (ii) | invite the owner of the original manufactured vehicle to, subject to his explicit consent and according to national law, provide the SIRENE Bureau of the issuing Member State with all relevant information required to avoid the negative consequences of misidentification; |
| --- | --- |

(ii)

invite the owner of the original manufactured vehicle to, subject to his explicit consent and according to national law, provide the SIRENE Bureau of the issuing Member State with all relevant information required to avoid the negative consequences of misidentification;

| (iii) | send out an M form via its SIRENE Bureau to all other Bureaux including, as appropriate, the marks or features describing the original manufactured vehicle and distinguishing it from the vehicle entered in SIS II. The M form shall indicate words to the effect of “ORIGINAL MANUFACTURED VEHICLE” prominently in field 083. |
| --- | --- |

(iii)

send out an M form via its SIRENE Bureau to all other Bureaux including, as appropriate, the marks or features describing the original manufactured vehicle and distinguishing it from the vehicle entered in SIS II. The M form shall indicate words to the effect of “ORIGINAL MANUFACTURED VEHICLE” prominently in field 083.

| (c) | If, when SIS II is consulted, the vehicle related remark, “Suspicion of clone” is found, the user conducting the check shall contact the national SIRENE Bureau to obtain additional information in order to clarify whether the vehicle being checked is the vehicle sought or the original manufactured vehicle. |
| --- | --- |

(c)

If, when SIS II is consulted, the vehicle related remark, “Suspicion of clone” is found, the user conducting the check shall contact the national SIRENE Bureau to obtain additional information in order to clarify whether the vehicle being checked is the vehicle sought or the original manufactured vehicle.

| (d) | If during the check, it is established that the information on the M form is no longer up-to-date the SIRENE Bureau of the executing Member State shall contact the SIRENE Bureau of the issuing Member State in order to verify the current legal ownership of the vehicle. The latter SIRENE Bureau shall send a new M form accordingly, indicating words to the effect of “ORIGINAL MANUFACTURED VEHICLE” prominently in field 083. |
| --- | --- |

(d)

If during the check, it is established that the information on the M form is no longer up-to-date the SIRENE Bureau of the executing Member State shall contact the SIRENE Bureau of the issuing Member State in order to verify the current legal ownership of the vehicle. The latter SIRENE Bureau shall send a new M form accordingly, indicating words to the effect of “ORIGINAL MANUFACTURED VEHICLE” prominently in field 083.

8.3.   The exchange of information after a hit

The SIRENE Bureaux may transmit further information on alerts entered under Article 38 of the SIS II Decision and in so doing may act on behalf of judicial authorities, if this information falls within the scope of mutual judicial assistance in accordance with national law.

The SIRENE Bureaux shall send supplementary information as quickly as possible via a P form, if requested in field 089 of a G form, when a hit is achieved on an alert for seizure or use as evidence issued on a vehicle, aircraft, boat, industrial equipment or container pursuant to Article 38 of the SIS II Decision.

Given that the request is urgent and that it will not therefore be possible to collate all the information immediately, it shall not be necessary to fill all the fields of the P form. However, efforts shall be made to collate the information relating to the main headings: 041, 042, 043, 162, 164, 165, 166, 167 and 169.

Where a hit is achieved on an identifiable component of an object the SIRENE Bureau of the executing Member State shall inform the SIRENE Bureau of the issuing Member State of the circumstances of the hit using a G form, explaining in field 090 (Additional information) that the seizure is not of the complete object but of a component or components. Where several components are found at the same time, as they relate to one alert, only one G form will be sent. Any subsequent hits on the alert shall be notified to the SIRENE Bureau of the issuing Member State by means of a G form. The alert shall not be deleted unless the conditions set out in Section 8.4 are met.

8.4.   Deletion of alerts on objects for seizure or use as evidence in criminal proceedings

An alert shall be deleted upon:

| (a) | the seizure of the object or equivalent measure once the necessary follow-up exchange of supplementary information has taken place between SIRENE Bureaux or the object becomes subject of another judicial or administrative procedure (e.g. judicial procedure on good faith purchase, disputed ownership or judicial cooperation on evidence); |
| --- | --- |

(a)

the seizure of the object or equivalent measure once the necessary follow-up exchange of supplementary information has taken place between SIRENE Bureaux or the object becomes subject of another judicial or administrative procedure (e.g. judicial procedure on good faith purchase, disputed ownership or judicial cooperation on evidence);

| (b) | the expiry of the alert; or |
| --- | --- |

(b)

the expiry of the alert; or

| (c) | the decision to delete by the competent authority of the issuing Member State. |
| --- | --- |

(c)

the decision to delete by the competent authority of the issuing Member State.

9.   AUTOMATIC NUMBER PLATE RECOGNITION SYSTEMS (ANPR)

These systems are relevant for alerts under Articles 36 and 38 of the SIS II Decision. Due to the widespread use of ANPR for law enforcement purposes there is the technical capability to achieve numerous hits on a vehicle or number plate over a short period of time.

Given that some ANPR sites are manned there is the possibility of a vehicle being detected and the requested action undertaken. In this case, before any action is undertaken, the users of the ANPR system shall verify whether the hit achieved through ANPR relates to an alert under Article 36 or 38 of the SIS II Decision.

However, many fixed ANPR sites are not constantly manned. Accordingly, although the technology will register the passage of the vehicle and a hit will be achieved, the requested action may not be undertaken.

For both Article 36 and Article 38 alerts where the requested action could not be taken the following general procedure shall apply:

One H form shall be sent for the first hit. If more information is required on the movement of the vehicle it is for the SIRENE Bureau of the issuing Member State to contact the SIRENE Bureau of the executing Member State bilaterally to discuss information needs.

For alerts under Article 36 the following procedure shall apply:

| (a) | the SIRENE Bureau of the Member State achieving the hit shall inform the issuing SIRENE Bureau of the circumstances of the hit using one G form, using the word “ANPR” in field 086. If more information is required on the movement of the vehicle, the SIRENE Bureau of the issuing Member State shall contact the SIRENE Bureau of the executing Member State. |
| --- | --- |

(a)

the SIRENE Bureau of the Member State achieving the hit shall inform the issuing SIRENE Bureau of the circumstances of the hit using one G form, using the word “ANPR” in field 086. If more information is required on the movement of the vehicle, the SIRENE Bureau of the issuing Member State shall contact the SIRENE Bureau of the executing Member State.

| (b) | the SIRENE Bureau of the Member State achieving a hit on an alert for a specific check whereby the requested action could not be taken, shall inform the issuing SIRENE bureau of the circumstances of the hit using an H form, with the word “ANPR” in field 083, followed by words to the effect of: “This hit has been achieved by use of ANPR. Please inform us if your country wishes to be informed of further hits achieved through ANPR for this vehicle or number plate where the requested action could not be undertaken”; |
| --- | --- |

(b)

the SIRENE Bureau of the Member State achieving a hit on an alert for a specific check whereby the requested action could not be taken, shall inform the issuing SIRENE bureau of the circumstances of the hit using an H form, with the word “ANPR” in field 083, followed by words to the effect of: “This hit has been achieved by use of ANPR. Please inform us if your country wishes to be informed of further hits achieved through ANPR for this vehicle or number plate where the requested action could not be undertaken”;

| (c) | the issuing Member State shall decide whether the alert has achieved its purpose, shall be deleted or not and whether bilateral discussions should take place on information needs. |
| --- | --- |

(c)

the issuing Member State shall decide whether the alert has achieved its purpose, shall be deleted or not and whether bilateral discussions should take place on information needs.

For alerts under Article 38 the following procedure shall apply:

| (a) | in circumstances where a hit occurs and the requested action has been taken the SIRENE Bureau of the Member State achieving the hit shall inform the issuing SIRENE Bureau of the circumstances of the hit using one G form; |
| --- | --- |

(a)

in circumstances where a hit occurs and the requested action has been taken the SIRENE Bureau of the Member State achieving the hit shall inform the issuing SIRENE Bureau of the circumstances of the hit using one G form;

| (b) | in circumstances where a hit occurs and the requested action has not been taken the SIRENE Bureau of the Member State achieving the hit shall inform the SIRENE Bureau of the issuing Member State of the circumstances of the hit using an H form and the word “ANPR” in field 083 followed by words to the effect of; “This hit has been achieved by the use of ANPR. Please inform us if your country wishes to be informed of further hits achieved through ANPR for this vehicle or number plate where the requested action could not be taken.”; |
| --- | --- |

(b)

in circumstances where a hit occurs and the requested action has not been taken the SIRENE Bureau of the Member State achieving the hit shall inform the SIRENE Bureau of the issuing Member State of the circumstances of the hit using an H form and the word “ANPR” in field 083 followed by words to the effect of; “This hit has been achieved by the use of ANPR. Please inform us if your country wishes to be informed of further hits achieved through ANPR for this vehicle or number plate where the requested action could not be taken.”;

| (c) | when receiving such an H form, the SIRENE Bureau of the issuing Member State shall consult the competent authorities, which shall have the responsibility of deciding on the necessity of receiving further H forms or information passed bilaterally from the SIRENE Bureau of the executing Member State. |
| --- | --- |

(c)

when receiving such an H form, the SIRENE Bureau of the issuing Member State shall consult the competent authorities, which shall have the responsibility of deciding on the necessity of receiving further H forms or information passed bilaterally from the SIRENE Bureau of the executing Member State.

10.   STATISTICS

Once a year the SIRENE Bureaux shall provide statistics, which have to be sent to the Agency and the Commission. The statistics shall also be sent, upon request, to the European Data Protection Supervisor and the competent national data protection authorities. The statistics shall comprise the number of forms of each type sent to each of the Member States. In particular, the statistics shall show the number of hits and flags. A distinction shall be made between hits found on alerts issued by another Member State and hits found by a Member State on alerts it issued.

Appendix 5 sets out the procedures and formats for the provision of statistics under this section.’

---

(1)  Council Framework Decision 2002/584/JHA of 13 June 2002 on the European Arrest Warrant and the surrender procedures between Member States (OJ L 190, 18.7.2002, p. 1).

1

(2)  
  OJ L 239, 22.9.2000, p. 19.

2

(3)  Decision of the Executive Committee of 22 December 1994 on bringing into force the Implementing Convention (SCH/Com-ex (94)29 rev. 2. (OJ L 239, 22.9.2000, p. 130).

3

(4)  Decisions of the Executive Committee of 7 October 1997 (SCH/com-ex 97(27) rev. 4) for Italy and (SCH/com-ex 97(28)rev. 4) for Austria.

4

(5)  Council Decision 1999/848/EC of 13 December 1999 on the full application of the Schengen acquis in Greece (OJ L 327, 21.12.1999, p. 58).

5

acquis

(6)  Council Decision 2000/777/EC of 1 December 2000 on the application of the Schengen acquis in Denmark, Finland and Sweden, and in Iceland and Norway (OJ L 309, 9.12.2000, p. 24).

6

acquis

(7)  Council Decision 2004/926/EC of 22 December 2004 on putting into effect of parts of the Schengen acquis by the United Kingdom of Great Britain and Northern Ireland (OJ L 395, 31.12.2004, p. 70).

7

acquis

(8)  
  OJ C 340, 10.11.1997, p. 92.

8

(9)  Agreement with the Republic of Iceland and the Kingdom of Norway concerning the latter's association with the implementation, application and development of the Schengen acquis (OJ L 176, 10.7.1999, p. 36).

9

acquis

(10)  
  OJ L 370, 17.12.2004, p. 78.

10

(11)  
  OJ L 160, 18.6.2011, p. 3.

11

(12)  Regulation (EC) No 1986/2006 of the European Parliament and of the Council of 20 December 2006 regarding access to the second generation Schengen Information System (SIS II) by the services in the Member States responsible for issuing vehicle registration certificates (OJ L 381, 28.12.2006, p. 1).

12

(13)  Regulation (EC) No 562/2006 of the European Parliament and of the Council of 15 March 2006 establishing a Community Code on the rules governing the movement of persons across borders (Schengen Borders Code) (OJ L 105, 13.4.2006, p. 1).

13

(14)  This is without prejudice to other tasks given to SIRENE Bureaux based on respective legislation in the framework of police cooperation, e.g. in the application of Council Framework Decision 2006/960/JHA of 18 December 2006 on simplifying the exchange of information and intelligence between law enforcement authorities of the Member States of the European Union (OJ L 386, 29.12.2006, p. 89).

14

(15)  Council Decision 2009/371/JHA of 6 April 2009 establishing the European Police Office (Europol) (OJ L 121, 15.5.2009, p. 37).

15

(16)  See also Schengen Catalogue, recommendations and best practices.

16

(17)  This second domain exists in the technical “pre-production environment”.

17

(18)  Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (OJ L 281, 23.11.1995, p. 31).

18

(19)  Council Framework Decision 2008/977/JHA of 27 November 2008 on the protection of personal data processed in the framework of police and judicial cooperation in criminal matters (OJ L 350, 30.12.2008, p. 60).

19

(20)  Regulation (EU) No 1077/2011 of the European Parliament and of the Council of 25 October 2011 establishing a European Agency for the operational management of large-scale IT systems in the area of freedom, security and justice (OJ L 286, 1.11.2011, p. 1).

20

(21)  Certain transportation companies use other reference numbers. SIS II has a provision for entering serial numbers other than the BIC.

21

(22)  Due to the lack of standardisation in serial numbers for objects it is possible, for example, for two different firearms of different makes to have the same serial number. Equally it is possible for an object to have the same serial number as a very different object, for example, an issued document and a piece of industrial equipment. Where it is clear that the serial numbers are identical but the objects are clearly not the same no consultation between SIRENE Bureaux is required. Users may be made aware that this situation can arise. Additionally, it is possible that an object, such as a passport or car, has been stolen and reported in one country and is subsequently reported in the country of origin. This could result in two alerts for the same object. If this matter comes to light it may be resolved by the SIRENE Bureaux concerned.

22

(23)  For the technical implementation see the Data Exchange between SIRENEs document referred to in Section 1.10.2.

23

(24)  See footnote 23.

24

(25)  See also Section 1.13.1 on indication of urgency in SIRENE forms.

25

(26)  Directive 2004/38/EC of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States (OJ L 158, 30.4.2004, p. 77).

26

(27)  Article 30 of Directive 2004/38/EC provides that the person refused entry shall be notified in writing thereof and informed in full on grounds on which the decision was taken unless it is contrary to the interests of State security.

27

(28)  Article 26 of the SIS II Regulation refers to Article 15 of the Treaty on European Union. However, following the entry into force of the Lisbon Treaty this Article 15 became Article 29 in the consolidated version of the Treaty on European Union.

28

(29)  In the case of alerts for refusal of entry issued for the family members of EU citizens, it is necessary to recall that it is not possible as a matter of routine to consult SIS II prior to issuing a residence card for such a person. Article 10 of Directive 2004/38/EC lists the necessary conditions for acquiring right of residence for more than three months in a host Member State by family members of Union citizens who are third-country nationals. This list, which is exhaustive, does not allow for routine consultation of the SIS prior to the issuing of residence cards. Article 27(3) of this Directive specifies that Member States may request, should they consider it essential, information from other Member State only regarding any previous police record (that is not all of the SIS II data). Such enquiries shall not be made as a matter of routine.

29

(30)  According to Directive 2004/38/EC, a person benefiting from the right of free movement may only be refused entry or stay on the grounds of public policy or public security when their personal conduct represents a genuine, immediate, and sufficiently serious threat affecting one of the fundamental interests of society and when the other criteria laid down in Article 27(2) of the said Directive are respected. Article 27(2) stipulates: “Measures taken on grounds of public policy or public security shall comply with the principle of proportionality and shall be based exclusively on the personal conduct of the individual concerned. Previous criminal convictions shall not in themselves constitute grounds for taking such measures. The personal conduct of the individual concerned must represent a genuine, present and sufficiently serious threat affecting one of the fundamental interests of society. Justifications that are isolated from the particulars of the case or that rely on considerations of general prevention shall not be accepted.” Moreover, there are additional limitations for persons enjoying the right of permanent residence who can only be refused entry or stay on serious grounds of public policy or public security as stated in Article 28(2) of Directive 2004/38/EC.

30

(31)  In conformity with Directive 2004/38/EC the executing Member State cannot limit the free movement of third country nationals benefiting from the right of free movement on the sole ground that the issuing Member State maintains the alert unless the conditions referred to in footnote 29 are met.

31

(32)  Unaccompanied minors are children, as defined in Article 1 of the Convention on the Rights of the Child of 20 November 1989 (CRC), who have been separated from both parents and other relatives and are not being cared for by an adult who, by law or custom, is responsible for doing so.

32

(33)  Data of disappearance:

33

| (a) | Place, date and time of the disappearance. |
| --- | --- |

(a)

Place, date and time of the disappearance.

| (b) | Circumstances of disappearance. |
| --- | --- |

(b)

Circumstances of disappearance.

Details of the missing person:

| (c) | Apparent age. |
| --- | --- |

(c)

Apparent age.

| (d) | Height. |
| --- | --- |

(d)

Height.

| (e) | Skin colour. |
| --- | --- |

(e)

Skin colour.

| (f) | Colour and shape of hair. |
| --- | --- |

(f)

Colour and shape of hair.

| (g) | Colour of eyes. |
| --- | --- |

(g)

Colour of eyes.

| (h) | Other physical details (i.e. piercings, deformations, amputations, tattoos, marks, scars, etc.). |
| --- | --- |

(h)

Other physical details (i.e. piercings, deformations, amputations, tattoos, marks, scars, etc.).

| (i) | Psychological particulars: at risk of suicide, mental illness, aggressive behaviour, etc. |
| --- | --- |

(i)

Psychological particulars: at risk of suicide, mental illness, aggressive behaviour, etc.

| (j) | Other details: necessary medical treatment, etc. |
| --- | --- |

(j)

Other details: necessary medical treatment, etc.

| (k) | Clothes worn at the time of the disappearance. |
| --- | --- |

(k)

Clothes worn at the time of the disappearance.

| (l) | Photograph: available or not. |
| --- | --- |

(l)

Photograph: available or not.

| (m) | Ante-mortem form: available or not. |
| --- | --- |

(m)

Ante-mortem form: available or not.

Related information:

| (n) | Person/s who could accompany him or her (and Schengen ID if available). |
| --- | --- |

(n)

Person/s who could accompany him or her (and Schengen ID if available).

| (o) | Vehicle/s relating to the case (and Schengen ID if available). |
| --- | --- |

(o)

Vehicle/s relating to the case (and Schengen ID if available).

| (p) | If available: number of mobile phone/last “log-in”, contact via on-line social networks. |
| --- | --- |

(p)

If available: number of mobile phone/last “log-in”, contact via on-line social networks.

The titles of the different sub-fields themselves are not to be included as part of field 083, but just the reference letter. When details are already available in the fields of an alert the information shall be included in the alert, including fingerprints or photographs.

(34)  For clarity on consent in matters of on the protection of individuals with regard to the processing of personal data and on the free movement of such data see Article 2(h) Directive 95/46/EC.

34

(35)  
  “suspicion of clone” relates to cases where, for example, the registration documents of a vehicle are stolen and used to re-register another vehicle of the same make, model and colour which has also been stolen.

35

---