COMMISSION STAFF WORKING DOCUMENT EVALUATION of State aid rules for banks in difficulty
Date: 2026-03-04
Institutions: Directorate-General for Competition, European Commission
Subjects: EU competition policy, State aid, aid for restructuring, bank, control of State aid, economic recession, financial stability, restriction on competition

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 4.3.2026  SWD(2026) 85 final  COMMISSION STAFF WORKING DOCUMENT  EVALUATION  of State aid rules for banks in difficulty {SWD(2026) 86 final}  
 
 
TABLE OF CONTENTS 

1. 

Introduction ................................................................................................................. 8 

1.1.  The State aid rules for banks in difficulty ......................................................... 8 
1.2.  Purpose 8 
1.3.  Scope of the evaluation ................................................................................... 10 
1.4.  Data sources used for the evaluation & Methodology .................................... 11 

2.  What was the expected outcome of the intervention? ............................................... 12 

2.1.  Description of the intervention, its logic and objectives ................................. 12 
2.1.1.  Notion  of  State  aid  and  compatibility  of  State  aid  with  the 

internal market ................................................................................... 12 

2.1.2.  The State aid rules for banks in difficulty and their objectives: 

Intervention Logic ............................................................................. 13 
2.2.  Points Of Comparison ..................................................................................... 18 

3.  How has the situation evolved over the evaluation period? ...................................... 19 

3.1.  Key Macroeconomic developments and the EU Banking Sector ................... 19 
3.2.  Key figures and types of State aid measures ................................................... 22 
3.3.  Case practice of the Commission .................................................................... 26 
3.4.  Relevant  policy  developments:  Interaction  between  State  aid  control 

and the CMDI framework ............................................................................... 28 

4.  Evaluation findings .................................................................................................... 31 

4.1.  To what extent was the intervention successful and why? .............................. 31 
4.1.1.  Effectiveness ...................................................................................... 31 
4.1.2.  Efficiency........................................................................................... 57 
4.1.3.  Coherence .......................................................................................... 64 
4.2.  How did the EU intervention make a difference and to whom? ..................... 67 
Is the intervention still relevant? ..................................................................... 69 
4.3. 

5.  What are the conclusions and lessons learned? ......................................................... 72 

5.1.  Conclusions ..................................................................................................... 72 
5.2.  Lessons learned ............................................................................................... 74 

Annex I: Procedural Information....................................................................................... 75 

Annex II: Methodology and Analytical Models Used ...................................................... 78 

1.  Consultation activities ............................................................................................... 78 

1.1.  Public consultation .......................................................................................... 78 
1.2.  Targeted consultation ...................................................................................... 78 

2.  Expert study ............................................................................................................... 79 

3.  Other data sources ..................................................................................................... 81 

4.  Limitations and challenges of the evaluation ............................................................ 81 

5.  Method of the evaluation ........................................................................................... 83 

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Annex III: Evaluation Matrix ............................................................................................ 84 

Annex IV: External factors and policy initiatives over the evaluation period .................. 85 

Annex V: Overview of benefits and costs and Table on simplification and burden 

reduction .................................................................................................................... 90 

Annex VI: Replies and Contributions to the public and targeted consultation ................. 95 

1.  Overview of respondents ........................................................................................... 95 

2.  Summary of key messages ........................................................................................ 97 

2.1.  Effectiveness .................................................................................................... 97 
2.2.  Efficiency ...................................................................................................... 111 
2.3.  Relevance ...................................................................................................... 122 
2.4.  Coherence ...................................................................................................... 127 
2.5.  EU added value .............................................................................................. 129 
2.6.  Other  130 

3.  Conclusion ............................................................................................................... 130 

Annex VII. Overview of the State aid rules for banks in difficulty subject to the 

Evaluation ................................................................................................................ 131 

Annex VIII. Relevant Legal Provisions in the TFEU ..................................................... 133 

Annex IX: European Commission case practice on the basis of State aid rules for 

banks in difficulty .................................................................................................... 135 

Annex X. Main differences between the Rescue and Restructuring Guidelines for 

non-financial Firms and the State aid rules for banks in difficulty ......................... 143 

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Term or acronym 

Meaning or definition 

Glossary 

COVID-19 

Bail-in 

Bail-out 

Coronavirus disease 2019: a contagious disease caused by 
the virus SARS-CoV-2. 

A  bail-in  is  a  legal  procedure  that  may  be  used  in  bank 
resolution. Carrying out a bail-in means that the claims of 
shareholders  and  certain  creditors  in  a  bank  are  written 
down  or  converted  into  capital,  meaning  that  they  are 
forced  to  accept  losses  incurred  by  the  bank  and  to 
contribute to its recapitalisation. 

A  bail-out  involves  the  rescue  of  a  financial  institution 
the  government  using 
through 
taxpayers’ money for funding. 

intervention  of 

the 

BRRD 

Bank Recovery and Resolution Directive 

A directive establishing a common framework of rules and 
powers for EU Member  States to intervene in the case of 
failing banks. The directive gives broad powers to national 
authorities  to  prevent,  intervene  early  and  conduct  the 
resolution of troubled banks. Such powers include selling 
the  bank  (in  whole  or  in  parts),  setting  up  a  temporary 
bridge  bank,  and  bailing  in  shareholders  and  creditors  of 
the bank. 

Burden-sharing 

Burden-sharing  is  generally  referred  to  when  losses  in  a 
bank are borne by the bank’s shareholders and creditors. 

CDS 

Credit Default Swap 

A CDS is a financial swap agreement that the seller of the 
CDS  will  compensate  the  buyer  in  the  event  of  a  debt 
default (by the debtor) or other credit event.  

Crisis management and deposit insurance 

Capital Requirements Directive 

CMDI 

CRD 

DG COMP 

Directorate General for Competition 

DG FISMA 

Directorate  General  for  Financial  Stability,  Financial 
Services and Capital Markets Union 

iii 

 
 
 
 
Term or acronym 

Meaning or definition 

DGS 

DGSD 

ECA 

E.CA Study 

ECB 

EEA 

EU 

Deposit Guarantee Scheme 

Deposit Guarantee Scheme Directive 

European Court of Auditors 

The  expert  study  prepared  by  the  consultancy  E.CA 
Economics and its academic partners 

European Central Bank 

European Economic Area 

European Union 

Federal  Deposit 
Corporation 

Insurance 

Independent  agency  created  by  the  U.S.  Congress  to 
maintain  stability  and  public  confidence  in  the  U.S. 
financial system 

FOLF 

Failing or likely to fail 

Fund aid 

GDP 

MREL 

The first condition for resolution, relating to the imminent 
or  inevitable  inability  of  the  bank  to  continue  operating 
under normal conditions. It takes into account the financial 
situation  of  the  bank  as  well  as  compliance  with  the 
requirements for authorisation. 

In case there is no public interest in its resolution, a failing 
bank  will  normally  be  expected  to  be  wound  up  under 
national insolvency proceedings. 

Financial support from the SRF in accordance with Article 
3 and Article 19 of the SRMR. 

Gross Domestic Product 

Minimum  requirement  for  own  funds  and  eligible 
liabilities 

MREL  is  the  minimum  amount  of  equity  and  debt  that  a 
bank  is  required  to  meet  to  be  able  to  absorb  losses  and 
restore  its  capital  position,  allowing  it  to  continuously 
perform  its  critical  functions  during  and  after  a  crisis. 
MREL  is  one  of  the  key  tools  in  enhancing  a  bank’s 
resolvability.  

iv 

 
 
 
 
 
Term or acronym 

Meaning or definition 

Moral hazard 

In  economics,  a  moral  hazard  is  a  situation  where  an 
economic actor has an incentive to increase its exposure to 
risk because it does not bear the full costs of that risk. 

NCA 

National Competent Authority 

NCA  means  a  public  authority  or  body  officially 
recognised  by  national  law,  which  is  empowered  by 
national  law  to  supervise  institutions  as  part  of  the 
supervisory  system  in  operation  in  the  Member  State 
concerned. 

NRA 

OJ 

PIA 

National Resolution Authority 

Official Journal of the EU 

Public interest assessment 

the 

the  public 

to  examine  whether 

interest 
Resolution  authorities  perform 
assessment 
resolution  of 
a particular  bank  that  is  failing  or  likely  to  fail  would  be 
necessary to maintain financial stability, to protect covered 
depositors  and/or  safeguard  public  funds  by  minimising 
reliance on public financial support. If the PIA is negative, 
no  resolution  actions  are  taken  and  national  insolvency 
proceedings apply.  

Precautionary measures 

Capital or liquidity support provided to solvent banks with 
public  funds  that  may  be  exceptionally  allowed  by  the 
BRRD  without  triggering  the  declaration  that  the  bank  is 
failing or likely to fail. 

Preventive measures 

Option in Article 11(3) DGSD that allows the use of DGS 
funds  to  prevent  the  failure  of  a  bank,  subject  to  certain 
safeguards. 

Resolution authorities 

Resolution of a bank 

National  authorities  set  up  in  each  Member  State,  in 
compliance  with  the  BRRD  and  the  Single  Resolution 
Board  created  by  the  SRMR  in  the  Banking  Union,  with 
the  objective  of  planning,  preparing  and  executing  the 
orderly resolution of banks in case of failure. 

Application  of  resolution  tools  and  powers  to  a  failing 
bank with the aim of ensuring the continuity of its critical 
functions while at the same time minimising the impact of 
the failure on the financial system and the real economy. It 
can  lead  to  the  restructuring  of  the  failing  bank  or  the 

v 

 
 
 
 
Term or acronym 

Meaning or definition 

transfer of its activity to a third party and subsequent exit 
from the market. 

SRB 

RF/SRF 

Single Resolution Board 

Resolution Fund/Single Resolution Fund 

Arrangements  funded  by  the  banking  industry  to  provide 
financial  support  for  the  resolution  of  banks  in  case  their 
internal loss absorption capacity is not sufficient. The SRF 
is the resolution fund for the banks in the Banking Union 
and  is  financed  by  all  banks  in  the  Banking  Union. For 
the  national 
non-Banking  Union  Members  States, 
resolution fund that has been established in each Member 
State is financed by the domestic industry/banks. 

The  Single  Rulebook  is  the  backbone  of  the  Banking 
Union  and  of  financial  sector  regulation  in  the  EU  in 
general.  It  consists  of  legal  acts  that  all  financial 
institutions  in  the  EU  must  comply  with.  The  Single 
Rulebook lays down a single set of harmonised prudential 
rules  that  (among  other  things)  govern  the  capital 
requirements  for  banks,  ensure  better  protection  for 
depositors and regulate the prevention and management of 
bank failures. 

Micro, small and medium-sized enterprises 

Single Resolution Fund 

See RF/SRF 

Single Rulebook 

SME 

SRF 

SRMR 

Single Resolution Mechanism Regulation 

A  regulation  creating  a  single  resolution  mechanism  for 
the  resolution  of  credit  institutions  in  the  euro  area,  and, 
potentially,  other  EU  Member  States,  as  one  of  the  main 
elements of Europe’s banking union.   

SSMR 

Single Supervisory Mechanism Regulation 

A regulation  creating a single supervisory mechanism for 
credit  institutions  in  the  euro  area  and,  potentially,  other 
EU  Member  States,  as  one  of  the  main  elements  of 
Europe’s  banking  union.  The  SSMR  confers  on  the  ECB 

vi 

 
 
 
 
 
 
Term or acronym 

Meaning or definition 

specific  tasks  concerning  macroprudential  policy  and 
policies  relating  to  the  prudential  supervision  of  credit 
institutions. 

Subprime mortgages 

In  the  U.S.  financial  context,  a  subprime  mortgage 
indicates  a  loan  issued  to  borrowers  with  low  credit 
ratings, as opposed to a prime conventional mortgage. 

State Aid Scoreboard 

The  State  Aid  Scoreboard  is  a  tool  based  on  expenditure 
reports  provided  by  Member  States  which  covers  all 
existing  aid  measures  to  industries,  services,  agriculture, 
and  fisheries.  It  also  includes  aid  granted  to  financial 
institutions  in  the  context  of  the  financial  and  economic 
crisis.  Aid  to  railways  and  services  of  general  economic 
interest are not covered by the Scoreboard. 

TFEU 

Treaty on the Functioning of the European Union 

Too big to fail 

U.S. Fed 

U.S. Treasury 

A  theory  in  banking  and  finance  that  asserts  that  certain 
corporations,  particularly  financial  institutions,  are  so 
large  and  so  interconnected  that  their  failure  would  be 
disastrous  to  the  greater  economic  system,  and  therefore 
should  be  supported  by  the  government  when  they  face 
potential failure. 

U.S.  Federal  Reserve,  the  U.S.  central  bank,  or  U.S. 
Federal Reserve System, the U.S. central banking system. 

U.S.  Department  of  the  Treasury,  also  USDT,  the  U.S. 
national  treasury  and  finance  department  of  the  U.S. 
federal  government,  where  it  serves  as  an  executive 
department. 

WTO 

World Trade Organisation 

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1. 

INTRODUCTION 

This Staff Working Document (“SWD”) summarises the results of the evaluation of the 
State aid rules for banks in difficulty, launched in March 2022.  

1.1. 

The State aid rules for banks in difficulty 

Since the start of the financial crisis in 2008, the Commission has developed a dedicated 
set  of  rules  for  assessing  State  aid  to  banks  in  difficulty.  These  rules  were  specifically 
designed to address the effects of the crisis and avoid knock-on effects from bank failures 
to the financial sector and the economy in general.  

Since  2008,  the  Commission  has  revised,  updated  and  expanded  these  State  aid  rules 
several times to take into account the evolution of the financial crisis and lessons learned 
from their application.   

The relevant communications setting out the State aid rules for banks in difficulty are the 
2008  Banking  Communication  (repealed)1,  the  2009  Recapitalisation  Communication2, 
the 2009 Impaired Assets Communication3, the 2009 Restructuring Communication4, the 
2010  Prolongation  Communication5,  the  2011  Prolongation  Communication6,  and  the 
2013 Banking Communication7 (see Annex VII). 

the  above-mentioned  Commission 
in  six  of 
The  current  rules  are  set  out 
communications8,  of  which  the  most  recent  and  comprehensive  is  the  2013  Banking 
Communication.  Since  the  start  of  the  financial  crisis  in  2008,  the  Commission  has 
adopted  over  500  State  aid  decisions  concerning  banks  in  difficulty,  based  on  the 
application of these communications throughout the EU. 

1.2. 

Purpose  

The purpose of this evaluation is to analyse how the State aid rules for banks in difficulty 
have  functioned  over  time  and  to  what  extent  they  have  achieved  their  objectives.  In 
particular,  the  evaluation  will  analyse  to  what  extent  the  State  aid  rules  for  banks  in 
difficulty  have  preserved  financial  stability  in  the  EU  single  market  while  ensuring  a 
level-playing field by mitigating competition distortions. The evaluation seeks to analyse 

1  

2  

3  

4  

5  

6  

7  

8  

Communication from the Commission  –  The application of State aid rules to measures taken in 
relation  to  financial  institutions  in  the  context  of  the  current  global  financial  crisis,  OJ  C  270, 
25.10.2008, p. 8.  
Communication  from  the  Commission  —  The  recapitalisation  of  financial  institutions  in  the 
current financial crisis: limitation of aid to the minimum necessary and safeguards against undue 
distortions of competition, OJ C 10, 15.1.2009, p. 2.  
Communication  from  the  Commission  on  the  treatment  of  impaired  assets  in  the  Community 
banking sector, OJ C 72, 26.3.2009, p. 1.  
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, OJ C 195, 19.8.2009, 
p. 9.  
Communication from the Commission on the application, from 1 January 2011, of State aid rules 
to support measures in favour of banks in the context of the financial crisis, OJ C 329, 7.12.2010, 
p. 7. 
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, OJ C 356, 6.12.2011, 
p. 7.  
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, OJ C 216, 30.7.2013, 
p. 1 
The  2008  Banking  Communication  has  been  repealed  since  2013.  It  is  however  covered  by  the 
scope of this evaluation.   

8 

 
 
 
the effectiveness, efficiency, coherence, relevance, and EU-added value of the State aid 
rules for banks in difficulty.   

The purpose of the evaluation is also to verify to what extent the current rules are still fit 
for purpose, especially in the context of the current regulatory environment, and whether 
there  is  potential  to  simplify  them  or  improve  their  interaction  with  the  regulatory 
framework governing the banking sector.  

Since the rules were last revised in 2013, the regulatory environment in which EU banks 
operate has changed significantly. Enhanced bank regulatory requirements were adopted 
through  the  Capital  Requirements  Regulation  (‘CRR’)9  and  the  Capital  Requirements 
Directive  (‘CRD’)10.  New  EU  rules  were  put  in  place  to  manage  bank  crises,  preserve 
financial stability, and protect depositors: the so-called Crisis Management and Deposit 
Insurance Framework (‘CMDI framework’).11 In addition, the first two (of three) pillars 
of  the  so-called  Banking  Union  were  established:  the  institutional  mechanisms  for 
centralised  supervision  and  resolution  of  banks  (‘SSM’  and  ‘SRM’  respectively), 
providing a single rulebook for banks in euro area countries and in those non-euro area 
Member  States  opting  in.  This  new  regulatory  set-up  leads  to  interactions  between  the 
exercise  of  State  aid  control  and  the  actions  of  bank  supervisory  and  resolution 
authorities. 12 

Furthermore, market realities have also evolved. The financial crisis that started in 2008 
has abated. At the same time, pockets of vulnerability related to EU banks may remain, 
while  new  risks  for  the  EU  banking  sector  have  emerged.  The  COVID-19  pandemic, 
followed  by  the  Russian  aggression  against  Ukraine,  caused  a  continuous  period  of 
upheaval that has impacted the financial services markets. Even though the EU banking 
sector  has  managed  to  withstand  the  negative  economic  effects,  risks  for  the  sector 
remain,  as illustrated by banking  failures in  202213 and 2023.14  Beyond that, new risks 
arise, such as those stemming from the increased use of information and communication 
technology (ICT) in the provision of financial services.  

In  conclusion,  given  the  overhaul  of  the  regulatory  framework  for  banks  and  the 
evolution  of  the  market  conditions,  an  evaluation  of  the  State  aid  rules  for  banks  in 
difficulty  is  warranted.  This  is  also  in  line  with  the  Commission’s  commitment  in  the 
2013  Banking  Communication  to  review  its  State  aid  rules  for  banks  as  deemed 
appropriate,  in  particular  to  cater  for  changes  in  market  conditions  or  in  the  regulatory 

9  

10  

11  

12  
13  

14  

Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on 
prudential requirements for credit institutions and amending Regulation (EU) No 648/2012, OJ L 
176 27.6.2013, p. 1, as amended. 
Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to 
the  activity  of  credit  institutions  and  the  prudential  supervision  of  credit  institutions,  amending 
Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, OJ L 176 27.6.2013, 
p. 338, as amended. 
In  parallel  to  this  evaluation,  the  CMDI  framework  is  also  being  subject  to  review.  See 
https://finance.ec.europa.eu/publications/reform-bank-crisis-management-and-deposit-insurance-
framework_en. 
See Section 3.2.  
In February 2022, Sberbank Europe AG, headquartered in Austria, and its subsidiaries in Croatia 
and  Slovenia,  collapsed,  following  deposit  outflows  as  a  result  of  the  reputational  impact  of 
geopolitical  tensions,  further  to  the  Russian  aggression  against  Ukraine.  The  Slovenian  and 
Croatian  subsidiary  were  placed  in  resolution  in  accordance  with  the  EU’s  bank  resolution 
framework, while no resolution action was required for the parent company in Austria, which was 
wound down under national insolvency proceedings. 
In  the  course  of  2023,  global  market  tensions  emerged  following  the  failure  of  three  mid-sized 
banks in the United States (Silicon Valley Bank, Signature Bank, and First Republic Bank), and 
the loss of confidence in Credit Suisse in Switzerland, which resulted in its takeover by UBS.  

9 

 
 
environment that may affect those rules. In the same vein, an evaluation of the rules was 
also  recommended  in  the  Special  Report  of  the  European  Court  of  Auditors  on  the 
control of State aid to financial institutions in the EU that was published in October 2020 
(the “2020 ECA Special Report”)15 in view of the changes in the market conditions and 
the regulatory framework. 

Along  these  lines,  the  evaluation  will  inform  the  Commission  about  the  necessity  of  a 
revision  of  the  State  aid  rules  for  banks  in  difficulty  and  will  identify,  where  relevant, 
possible areas of improvement that a potential revision of the rules could address.  

This  SWD  reflects  the  findings  and  views  of  the  Commission’s  staff  and  does  not 
represent  the  formal  position  of  the  Commission  itself.  It  does  not  prejudge  the  final 
nature or the content of any act or decision by the Commission.  

1.3. 

Scope of the evaluation 

All  relevant  communications  setting  out  the  State  aid  rules  for  banks  in  difficulty  are 
within the scope of the evaluation, i.e., the 2008 Banking Communication (repealed), the 
2009  Recapitalisation  Communication,  the  2009  Impaired  Asset  Communication,  the 
2009  Restructuring  Communication,  the  2010  Prolongation  Communication,  the  2011 
Prolongation Communication, and the 2013 Banking Communication16. 

The evaluation does not cover the following frameworks, which concern aid measures set 
up by the Member States to support the real economy, even though they were channelled 
through banks and likely contributed to shielding banks from the negative effects of the 
sudden economic downturn:  

–  the  2009  Temporary  Framework  for  State  aid  measures  to  support  access  to 
finance  in  the  current  financial  and  economic  crisis17  (the  “2009  Temporary 
Framework”,  which  expired  at  the  end  of  2011,  following  a  prolongation 
Communication18). 

–  the 2020 Temporary Framework for State aid measures to support the economy 
in the COVID-19 outbreak,19 which, following several prolongations, was phased 
out on 30 June 2022, with some exceptions (the “2020 Temporary Framework”). 

–  The  2022  Temporary  Crisis  Framework  for  State  aid  measures  to  support  the 
economy  following  the  aggression  against  Ukraine  by  Russia,  that,  following  a 
number  of  amendments,  was  replaced  by  the  Temporary  Crisis  and  Transition 
Framework  for  State  aid  measures  to  support  the  economy  following  the 
aggression against Ukraine by Russia on 17 March 2023, which was phased out 
in part on 31 December 2023 (referred to together as the “2022 Temporary Crisis 
Framework” 20). 

15  

16  
17  

18  

19  

20  

Special Report 21/2020: Control of State aid to financial institutions in the EU: in need of a fitness 
check, available at: https://www.eca.europa.eu/en/publications?did=54624.  
See footnotes 1 to 7 above. 
Communication  from  the  Commission  —  Temporary  Community  framework  for  State  aid 
measures  to  support  access  to  finance  in  the  current  financial  and  economic  crisis,  OJ  C  16, 
22.1.2009, p. 1–9. 
Communication  of  the  Commission  —  Temporary  Union  framework  for  State  aid  measures  to 
support access to finance in the current financial and economic crisis, OJ C 6, 11.1.2011, p. 5–15. 
Communication from the Commission: Temporary framework for State aid measures to support 
the economy in the current COVID-19 outbreak, OJ C 91 I, 20.3.2020, p. 1, as amended. 
Communication from the Commission  - Temporary Crisis Framework for State Aid measures to 
support the economy following the aggression against Ukraine by Russia, OJ C 131l, 24.3.2022, 
p.  1,  as  amended.  This  Temporary  Crisis  Framework  was  replaced  by  the  Temporary  Crisis 
Framework  adopted  on  28  October  2022,  as  amended,  which  was  in  turn  replaced  by  the 

10 

 
 
 
The timeframe covered by this evaluation is the period from the entry into force of the 
2008 Banking  Communication up until the present. The main body of analysis and the 
E.CA study (the “E.CA study” or “the Study”) cover the period until the end of 2022 (as 
the  work  on  the  Study  took  place  in  2023,  end  of  2022  was  the  latest  full-year  data 
available). However, the report mentions some relevant events that occurred in the course 
of 2023 (such as the proposal of the CMDI review, the temporary State aid rules for the 
real  economy  or  the  market  turmoil  in  the  United  States).  These  events  figure  in  the 
descriptive part of the report as elements of context.   

In  terms  of  geographical  scope,  the  evaluation  covers  the  27  Member  States  and  the 
United Kingdom (which was an EU Member State during the largest part of the period 
covered by the evaluation). 21 

Annex  III  provides  more  details  on  the  evaluation  matrix,  including  the  questions  that 
this evaluation aims at addressing.     

1.4. 

Data sources used for the evaluation & Methodology 

The evaluation was launched in March 2022 with the publication of a Call for Evidence, 
informing citizens and stakeholders about the exercise. It involved a public consultation, 
a targeted consultation, bilateral meetings with Union and Member States authorities, an 
expert  study  prepared  by  an  external  contractor22  and  internal  analyses  by  the 
Commission services.  

The public and the targeted consultations were conducted between 17 March 2022 and 15 
July 2022. Bilateral meetings with representatives of the Single Supervisory Mechanism 
of  the  European  Central  Bank  (“ECB”),  the  Single  Resolution  Board  (“SRB”)  and 
authorities of several Member States took place between May 2023 and December 2023. 
These  Member  States  were  selected  for  an  in-depth  discussion  because  of  their 
comparatively extensive experience with bank restructuring under the State aid rules for 
banks in difficulty in the period covered by the evaluation.  

The  E.CA  study  was  prepared  between  24  January  2023  and  24  November  2023  and 
focused on assessing the application of the State aid rules for banks in difficulty and, in 
particular, their: (i) impact on financial stability, (ii) impact on competition, (iii) impact 
on long-term viability of aided banks, (iv) impact on market discipline and moral hazard, 
and (v) efficiency.  

To conduct the Study, a comprehensive data collection effort was undertaken. Proprietary 
economic  and  financial  data  from  multiple  sources  covering  European  banks  in  the 
timeframe covered by this evaluation were combined with information on aid amounts, 
State aid register details, Commission decisions, and data on the administrative aspects of 
State  aid  procedures.  Additional  macroeconomic  information  from  Member  States  and 
the  EU  complemented  the  dataset.  Applying  the  statistical  method  of  regression,  the 
experts compared banks that received aid with similar (to the extent possible) non-aided 
banks. They also investigated how aid impacted the banking sector of a Member State as 
a whole.  

Communication from the Commission - Temporary Crisis and Transition Framework for State aid 
measures to support the economy following the aggression against Ukraine by Russia, OJ C 101, 
17.3.2023, as amended. 
The E.CA study included the UK in the dataset and analysis by default. Where the SWD does not 
rely  on  the  Study,  the  UK  might  have  been  included  depending  on  data  availability.  The  SWD 
will clarify when the UK is not included, where relevant.  
See Annex X, Report prepared for the European Commission by the team of E.CA Economics and 
partners, “Study on the impact of State aid rules for banks in difficulty”, November 2023.  

21  

22  

11 

 
 
The  consultation  activities  and  the  Study  were  complemented  by  other  important  data 
sources,  such  as  available  statistical  data  on  the  banking  industry,  data  from  the 
Commission’s  State  aid  scoreboard,  as  well  as  insights  from  DG  Competition’s  case 
practice and from the recent evaluation of the CMDI framework.23   

Desk research, internal statistics and literature review were also used to gather data. DG 
Competition  used  several  other  publicly  available  reports  and  papers  as  well,  such  as 
Commission Staff Working Documents24, a 2011 study of the European Parliament25, as 
well as the 2020 ECA Special report26.  

Annex I and Annex II provide a detailed explanation of the process and the method of the 
evaluation.  

2. 

2.1. 

WHAT WAS THE EXPECTED OUTCOME OF THE INTERVENTION? 

Description of the intervention, its logic and objectives 

2.1.1.  Notion of State aid and compatibility of State aid with the internal market 

Competition is a major driver of growth. It incentivises enterprises, including new ones, 
to enter markets and to innovate, improving their productivity and competitiveness in a 
global context. 

State aid control  is part of Union rules on  competition  laid down  in the Treaty on the 
Functioning  of  the  European  Union  (“TFEU”  or  the  “Treaty”).  The  basic  rationale  of 
State  aid  control  is  to  avoid  undue  market  distortions  and  subsidy  races,  as  well  as  to 
safeguard the internal market and to create a competitive landscape with a level playing 
field.  

According to  Article 107(1) TFEU,  State aid  is support given by a Member State  from 
State  resources  that  provides  an  undertaking  or  a  group  of  undertakings  with  an 
advantage  over  competitors.  When  exercising  State  aid  control,  the  Commission  must 
first determine whether a measure constitutes State aid. The Commission has published a 
notice  summarising  its  case  practice  and  the  jurisprudence  of  the  European  Courts 
regarding the notion of State aid.27 

State aid can be granted in a variety of ways, most notably through subsidies or financial 
instruments (loans, guarantees) granted on terms not available in the market.   

While  Article  107(1)  TFEU  lays  down  a  general  prohibition  of  State  aid  granted  by 
Member  States  to  undertakings,  other  Treaty  provisions  allow  for  several  exceptions. 

23  

24  

25  

26  
27  

and 

economic 

https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12737-Banking-Union-
Review-of-the-bank-crisis-management-and-deposit-insurance-framework-DGSD-review-_en  
For  instance,  see  Competition  State  aid  brief,  Issue  2015-01,  February  2015,  available  at: 
https://op.europa.eu/en/publication-detail/-/publication/bac6dee1-f714-11e5-abb1-
01aa75ed71a1/language-en/format-PDF,  (the  “2015  Competition  State  aid  brief”);  Commission 
Staff  Working  Paper,  The  effects  of  temporary  State  aid  rules  adopted  in  the  context  of  the 
financial 
at: 
final, 
crisis, 
https://ec.europa.eu/competition/publications/reports/working_paper_en.pdf, 
“2011 
Commission Staff Working Paper”).   
Study  prepared  for  the  European  Parliament's  Committee  on  Economic  and  Monetary  Affairs, 
the  real  economy,  June  2011, 
State  aid  crisis  Rules 
financial  sector  and 
IP/A/ECON/ST/2010-12, 
at: 
https://www.europarl.europa.eu/document/activities/cont/201107/20110714ATT24010/20110714
ATT24010EN.pdf.  
See footnote 15. 
Commission Notice on the notion of State aid as referred to in Article 107(1) of the Treaty on the 
Functioning of the European Union, OJ C 262, 19.7.2016, p. 1. 

available 
(the 

SEC(2011) 

available 

1126 

the 

for 

12 

 
 
Article 107(3) TFEU is of particular relevance for this evaluation; most notably it allows 
State  aid  to  remedy  a  serious  disturbance  in  a  Member  State’s  economy  (Article 
107(3)(b)  TFEU)  and  State  aid  for  the  development  of  an  economic  activity  (Article 
107(3)(c)  TFEU).  State  aid  control  thus  does  not  prevent  Member  State  governments 
from supporting undertakings. State aid control ensures that any detriment arising from 
distortions of competition is outweighed by the public purpose pursued with the aid.  

The  exceptions  laid  down  in  Article  107(3)  TFEU  are  discretionary  in  nature  and  the 
Treaty  has  given  the  Commission  exclusive  competence  to  decide  on  these 
exceptions, i.e. on the so-called ‘compatibility’ of State aid with the internal market. In 
exercising  these  discretionary  powers,  when  issuing  decisions  on  compatibility,  the 
Commission, in line with the acquis, balances the negative effects of the aid measure on 
trade and competition in the internal market with its positive effects.  

To ensure predictability and legal certainty for Member States and stakeholders on how it 
applies  its  margin  of  discretion  in  interpreting  the  compatibility  provisions  in  Article 
107(3) TFEU, the Commission adopts rules in the form of ‘soft law’, such as guidelines 
for particular aid categories with considerations for the sectoral and political context.  

As an example, the State aid rules for banks lay down the conditions under which certain 
types  of  aid  may  be  compatible  with  the  internal  market  pursuant  to  Article  107(3)(b) 
TFEU, while being subject to the requirement of prior notification under Article 108(3) 
TFEU.  

There  is  no  legal  obligation  to  adopt  guidelines.  The  adoption  of  such  guidelines  by 
the Commission is an instance of the exercise of its discretion. While the guidelines on 
compatibility  set  out  how the Commission  will assess aid  measures and  allow Member 
States to grant support under Article 107 TFEU, they do not oblige Member States to 
grant aid; this remains in their discretion.  

Annex VIII provides a non-exhaustive list of the relevant legal provisions in the TFEU. 

2.1.2.  The  State  aid  rules  for  banks  in  difficulty  and  their  objectives:  Intervention 

Logic 

The Objectives  

The  general  objective  of  State  aid  control,  as  described  in  the  previous  Section,  is  to 
safeguard  the  internal  market  and  create  a  competitive  landscape  with  a  level-playing 
field  so  as  to  support  EU  economic  development  and  growth.  In  line  with  this  general 
objective,  the  specific  objectives  of  State  aid  rules  for  the  banking  sector  –  as  further 
detailed  below  under  “the  Results”  –  were  to  preserve  financial  stability  while 
minimising competition distortions.  

The Needs: Accounting for the special characteristics of the banking sector  

Until  2008,  the  Commission  assessed  State  aid  to  troubled  banks  under  the  general 
guidelines on State aid for rescuing and restructuring firms in difficulty28 (as described in 
Annex X) which applied at the time and therefore according to the same standards as aid 
to companies in financial difficulty in other economic sectors. However, the start of the 
financial  crisis  in  2008  led  to  difficulties  for  a  large  number  of  European  credit 
institutions, while the exceptional systemic nature of the crisis threatened the sector as a 
whole.  

28  

Information  from  the  Commission  -  Community  guidelines  on  State  aid  for  rescuing  and 
restructuring  firms  in  difficulty  (OJ  C  368,  23.12.1994,  p.  12);  Communication  from  the 
Commission  —  Community  guidelines  on  State  aid  for  rescuing  and  restructuring  firms  in 
difficulty (OJ C 244, 1.10.2004, p. 2), (referred to as “Rescue and Restructuring Guidelines”). 

13 

 
 
Due  to  the  magnitude  of  the  crisis  and  the  banking  sector’s  specific  role  in  the 
economy (see Box 1), it became evident that State aid to credit institutions could no 
longer  be  adequately  covered  by  those  general  guidelines,  which  provided  limited 
scope  for  emergency  rescue  interventions  and  did  not  provide  tailored  rules  for  the 
specificities  of  the  banking  sector,  which  –  because  of  its  distinctive  nature  –  is  also 
covered by  ample sector-specific regulation  and  supervision,  beyond the scope of State 
aid  rules.  A  dedicated  State  aid  approach  for  this  sector  was  then  needed  to  provide  a 
dedicated framework to coordinate aid measures by Member States to swiftly tackle bank 
failures across the EU. For this reason, starting in 2008, the Commission has developed 
specific State aid rules for the banking sector.29  

Box 1: The specific features of the banking sector  

Credit institutions occupy a special position in Member States’ economies. They take 
on  deposits,  grant  loans  to  companies  and  households  and  provide  a  wide  range  of 
other financial services to the real economy. Banks also play a fundamental role in the 
intermediation of the balance of international payments.  These activities expose them 
to risks that are different from those affecting non-financial firms. 

Banks transform short-term liquid liabilities (e.g. deposits that can be withdrawn every 
day) into long-term illiquid assets (e.g. mortgage loans that have to be repaid within up 
to  20  or  30  years).  This  process  of  ‘maturity  transformation’  exposes  them  to 
specifically high liquidity risk which non-financial institutions are not confronted with. 
A traditional bank’s main assets are loan receivables. Therefore, credit risk, i.e. the risk 
that borrowers do not repay their loans, is another more pronounced risk in the banking 
business.  

This risk exposure makes banks vulnerable to sudden collapses of the payment capacity 
of their borrowers, the value of their assets or securing collateral (e.g. house prices in 
mortgages), or of the confidence among its depositors and other investors. This applies 
even more so in times of economic downturn, general market nervosity or reputational 
crises affecting individual banks and can have serious consequences for their liquidity 
and  solvency.  Given  the  interconnectedness  of  banks  in  the  financial  system,  even 
across  countries,  and  the  dependence  of  companies  and  households  on  bank  funding 
and  access  to  deposits  and  payment  services,  the  sudden  or  disorderly  failure  of  one 
institution  may  spread  rapidly  to  other  institutions  and  the  economy  at  large,  cause 
stress  in  the  financial  system,  threaten  financial  stability  and  severely  disrupt  the 
functioning of the real economy. Such effects may also entail international spillovers.  

The inputs: Dedicated State aid rules for banks in difficulty 

The Communications setting out the State aid rules for banks were adopted on the basis 
of  Article  107(3)(b)  TFEU,  which  provides  that  State  aid  may  be  compatible  with  the 
Treaty where it remedies a serious disturbance in the economy of a Member State. This 
legal basis was deemed the most appropriate for the situation of an unprecedented global 
financial  crisis,  which  later  translated  into  a  sovereign  debt  crisis,  with  those  effects 
lingering in pockets of vulnerability in the years after the crisis.  

29  

See footnotes 1 to 7 and Annex VII. 

14 

 
 
The  Commission  developed  its  guidelines30  between  2008  and  2013,  with  the  crisis 
unfolding, to reflect the evolution of the economic environment, as well as the ample 
experience  gained  through  case  practice.  Importantly,  the  Commission  gradually 
moved away from the temporary approval of ‘rescue’ aid, which was particularly used at 
the outset  of the financial crisis, and started requiring  ailing  banks  to demonstrate their 
long-term viability before it approved a recapitalisation with public resources. Over time, 
conditions for recapitalisation were tightened further.   

The  Communications  for  the  banking  sector  set  out  principles,  which  the  Commission 
consistently  applied  across  all  Member  States  when  performing  its  compatibility 
assessment  informing  its  decision,  while  taking  into  consideration  relevant  case 
specificities.  

The  compatibility  criteria  set  out  by  the  Communications  make  a  distinction 
between three types of aid: 

1) ‘Liquidity aid’ to address temporary liquidity concerns of otherwise solvent entities. 

2)  ‘Restructuring  aid’  to  help  entities  in  distress  restore  their  long-term  viability  and 

thus support them in preserving their economic activity. 

3) ‘Liquidation aid’ to support the orderly market exit31 of entities in distress for which 

long-term viability cannot be restored. 

In this context, the compatibility assessment criteria set out in these Communications 
can be grouped under three main ‘pillars’: 

1)  The  minimisation  of  distortions  of  competition  following  the  granting  of  aid  to 
preserve  fair  competition  to  a  maximum  extent  (e.g.  by  limiting  the  growth  of  the 
balance  sheet  of  aided  banks,  requiring  the  sale  of  certain  activities  or  assets,  or 
prohibiting aggressive commercial practices). 

2)  Burden-sharing to limit the amount of State aid needed, thereby  reducing moral 
hazard  (e.g.  through  loss  participation  by  bank  shareholders  and  subordinated 
creditors32,  but  also  divestments  and  remuneration  or  pricing  requirements)  and 
reducing the burden on taxpayers. 

3)  The demonstration of the aided banks’ long-term viability to ensure that the bank 
is  capable  of  funding  itself  without  reliance  on  State  funds  and  to  ensure  financial 
stability and continuous  services to the real economy, through restructuring where 

30  
31  

32  

See footnote 29. 
Market  exit  can  happen  either  by  selling  and  integrating  the  failed  bank  or  part  of  it  in  an 
acquiring entity or by winding it (or the residual part of it) down. 
The principle of burden-sharing, set out in the 2013 Banking Communication, was confirmed by 
the  Court  of  Justice  of  the  EU  in  the  Kotnik  ruling  of  19  July  2016,  in  C-526/14,  Kotnik, 
C:2016:570. The ruling followed the legal action initiated by affected creditors of Slovenian banks 
before  Slovenian  courts.  They  questioned  the  validity  and  interpretation  of  the  2013  Banking 
Communication  and  argued  inter  alia  that  their  property  rights  had  been  violated.  The Court  of 
Justice  ruled  that  the  2013  Banking  Communication  “does  no  more  than  establish  conditions, 
designed  to  ensure  that  State  aid  granted  to  the  banks  in  the  context  of  the  financial  crisis  is 
compatible with the internal market, which the Commission must take into account in the exercise 
of the wide discretion that it enjoys under Article 107(3)(b) TFEU” and that it “cannot reasonably 
be  maintained  that  the  burden-sharing  measures,  such  as  those  laid  down  by  the  Banking 
Communication,  constitute  interference  in  the  right  to  property  of  the  shareholders  and  the 
subordinated creditors”. 

15 

 
 
appropriate, or where viability cannot be demonstrated or restored, by ensuring 
market exit in an orderly manner, taking into account the measures required under 
the other two pillars. 

The Activities: The Commission’s assessments and decisions on the compatibility of the 
aid to banks in difficulty 

As  described  in  the  previous  Section,  the  Commission  has  exclusive  ex  ante  control 
power: under Article 108 TFEU, Member States are obliged to notify their intentions to 
grant State aid and are not allowed to implement the measure before the Commission’s 
approval.  The  Commission’s  approval  takes  the  form  of  a  Commission  decision.  Such 
decisions can be challenged and are subject to scrutiny before the Union Courts. Any aid 
put into effect in contravention of Article 108(3) TFEU constitutes ‘unlawful aid’.33  

When  assessing  the  compatibility  of  the  aid,  the  Commission  considers  all  factual 
elements related to it, including any possible commitments undertaken by the Member 
States34 related to modalities on how the aid would be granted and the beneficiary would 
consequently act, so as to fulfil the compatibility criteria.  

The  Outputs:  the  authorised  State  aid  measures  and  the  Member  State’s  actions  in 
compliance with the Commission’s decision 

Once  a  measure  is  approved,  the  Member  State  is  authorised,  on  the  basis  of  the 
Commission decision, to disburse the aid to the beneficiary or beneficiaries. This may be 
done according to  its national  administrative setup  (at  the national  or regional  level for 
instance) and depending on the type of the aid measure. Only the Member State is a party 
to  a  State  aid  procedure,  the  beneficiary  is  merely  considered  a  third  party  during  the 
Commission procedure. 

The Results: The twin objectives of the State aid rules for banks in difficulty 

The objectives of the State aid rules for banks in difficulty are twofold. The rules aim 
at  ensuring  financial  stability  while  mitigating  distortions  of  competition  between 
banks and across Member States.  

As  regards  the  objective  of  ensuring  financial  stability  (i.e.  a  situation  without  major 
disturbances in the EU banking sector, in which people can access their bank accounts, 
financial  markets  are  functioning  and  banks  can  continue  to  provide  payment  services 
and  lending  to  the  real  economy),  the  rules  set  out  targeted  compatibility  criteria 
according  to  which  (i)  the  temporary  funding  issues  of  banks  are  addressed,  (ii)  the 
disorderly  failure  of  fundamentally  viable  banks  is  prevented  and  their  long-term 
viability  is  restored  through  in-depth  restructuring  to  the  extent  necessary,  and  (iii)  the 
orderly  market  exit  of  unviable  banks  is  facilitated.  Along  these  lines,  the  rules  were 
expected  to  result  in  restoring  confidence  and  stability  in  the  banking  sector,  ensuring 
inter-bank lending as well as supply of credit to the real economy, limiting the systemic 
risk of possible disorderly insolvency and avoiding contagion in the banking system and 
between Member States, and ensuring the long-term  viability  of the EU banking  sector 
through  improved  solvency  and  profitability  of  credit  institutions.  Financial  stability 
contributes to increased resilience of the EU banking sector, which in turn is more likely 
to finance the economy creating growth, including for the benefit of the green and digital 
transition. Therefore, these objectives best correspond to UN’s Sustainable development 

33  

34  

See Article 1(f) of the Procedural Regulation. Lawfulness (or ‘legality’) of an aid measure is thus 
a different concept than ‘compatibility’.  
Some examples of typical commitments related to aid for banks in difficulty are presented in Box 
3, in Section 3.3. 

16 

 
 
goals  8  Decent  work  and  economic  growth  and  9  Industry, 
infrastructure35.   

innovation  and 

As regards the limitation of competition distortions, the rules set out the principles for 
appropriate  safeguards  having  regard  to  the  market  circumstances  of  the  case  and  the 
scale of the State intervention. Thereby, the rules were expected to result in an enhanced 
level  playing  field  and  preservation  of  fair  competition  through  the  limitation  of 
distortions between aided banks and non-aided banks while avoiding fragmentation and 
market partitioning and creating conditions which foster the development of competitive 
markets.  In  this  context,  the  rules  also  set  out  principles  for  limiting  the  aid  to  the 
minimum necessary, inter alia, by requiring appropriate burden-sharing, which were also 
expected to  result in  reduced  moral hazard, while, incidentally,  reducing  the burden  on 
taxpayers.    

The  compatibility  criteria,  as  presented  above  under  "the  Inputs”,  and  the  twin 
objectives are closely interlinked in the intervention logic chain, as the former constitute 
the  pillars  for  the  latter,  and  are  –  to  a  large  extent  –  specific,  measurable,  achievable, 
relevant and time-bound (i.e. “SMART”)36.  

The Impacts 

In terms of overall impact, by reaching their twin objectives by enabling necessary and 
proportionate support by Member States to the banking sector, the rules were expected, 
together with  other relevant  EU policies, to  re-establish trust  in  the EU banking  sector, 
contributing  to  an  economic  climate  conducive  to  investment,  consumer  welfare  and 
growth. 

The External Factors 

The  ability  of  the  State  aid  rules  to  reach  their  objectives  (results  and  impacts)  is  also 
dependent on a number of external factors, which include notably the EU and the global 
macro-economic  conditions,  the  regulatory  framework  applicable  to  the  banking  sector 
and the other policy initiatives having an effect on the banking sector. All these elements 
are described in detail in Sections 3.1, 3.4 and 4.1.1.1.  

35  
36  

See Sustainable Development Goals. 
See tool 15 of the Better Regulation Guidelines as well as Annex 1 for additional details. 

17 

 
 
Table 1: The Intervention Logic 

   Objectives 

General 

-  Safeguarding the internal market  
-  Supporting EU economic growth 

Specific 

-  Preserving financial stability 
-  Minimising competition distortion 

Needs 

Inputs 

-  Reflecting the specificities of the banking sector 
-  Reacting to the global financial crisis 

-  Adopting dedicated guidelines for the assessment of the compatibility of 

State aid to banks in difficulty based on 3 criteria: 

1.  Return to viability or market exit of beneficiary banks 
2.  Minimisation of competition distortion 
3.  Application of burden-sharing measures 

-  Commission’s assessment of the State aid, as notified by the Member 

Activities 

States, in line with the three compatibility criteria 

-  Commission’s decisions on its assessment 

Outputs 

in compliance with the Commission’s decision  

-  Actions taken by the Member States with regard to the State aid measure, 

-  Twin objectives (as resulting from the three compatibility criteria): 

Results 

o  Preserving financial stability 
o  Minimising competition distortion 

Impacts 

-  Safeguarding the internal market  
-  Supporting EU economic growth 

External Factors 

-  Macroeconomic developments 
-  EU policy and regulation for the financial sector 
-  Extra-EU policy initiatives having an impact on the EU banking sector 

2.2. 

Points Of Comparison 

An evaluation needs an appropriate point of comparison to be able to assess the change 
that  the  EU  action  has  brought  forth  over  time.  In  general,  the  main  baseline  (or 
counterfactual) is a situation without the EU intervention.  

In the context of this evaluation, the EU intervention is the adoption and application of 
the State aid rules for banks in difficulty, which started with the entry into force of the 
2008 Banking Communication and evolved over time. Therefore, the baseline scenario is 
one  in  which  the  Rescue  and  Restructuring  Guidelines  for  non-financial  firms,37  which 
were the rules in place at the time, would have continued to apply as they were. 

The current evaluation does not assess the scenario where the rules in force prior to the 
2008  Banking  Communication  would  have  simply  been  abolished  or  expired  without 
having been replaced. Since the Rescue and Restructuring Guidelines constitute a long-
standing  instrument  that  has  been  enhancing  legal  certainty  for  Member  States  and 
market  actors  in  the  situations  covered  by  their  scope,  this  scenario  is  unlikely.  In  any 

37  

See footnote 28. 

18 

 
 
 
 
 
 
 
  
 
 
 
event, the consequence of the absence of dedicated substantive rules would have been the 
direct  application  of  the  TFEU,  i.e.  the  notification  of  each  and  every  measure 
constituting  State  aid  in  the  meaning  of  Article  107(1)  TFEU  and  its  compatibility 
assessment  by  the  Commission  directly  under  the  TFEU,  without  any  substantive 
guidance  provided  to  Member  States  by  relevant  soft  law.  The  absence  of  State  aid 
control  as  such  is  excluded,  as  the  general  prohibition  of  State  aid  is  enshrined  in  the 
Treaty since 1957. 

Given  the  specificities  of  the  banking  sector  (as  summarised  in  Box  1)  and  the 
differences between the Rescue and Restructuring guidelines for non-financial firms and 
the  State  aid  rules  for  banks  in  difficulty  (see  Annex  X),  under  the  counterfactual 
scenario, Member States would not have been able to provide compatible aid, with 
swift  timing,  the  design  of  aid  instruments  tailored  for  the  sector,  and  related 
commitments, as was possible under the dedicated rules under evaluation. 

Although this constitutes the main baseline scenario, the Sections below present various 
other  points  of  reference  depending  on  the  specific  assessment.  For  example,  Section 
4.1.1  assesses  the  effectiveness  of  the  intervention  with  respect  to,  among  others,  the 
aimed  results/objectives.  Section  4.1.2  assesses  the  efficiency  of  the  intervention  in 
comparison with, among others, other geographical areas and different legal frameworks.  
Sections  4.1.3  and  4.3  take  into  account  how  the  context  evolved  over  time  to  assess 
whether the intervention  is still consistent  and relevant,  e.g. in  light  of  the main policy 
developments  and  changing  economic  and  legal  environments,  in  particular  the 
introduction of the CMDI framework, which is currently under review. 

3. 

3.1. 

HOW HAS THE SITUATION EVOLVED OVER THE EVALUATION PERIOD? 

Key Macroeconomic developments and the EU Banking Sector 

In  terms  of  macroeconomic  developments,  the  European  banking  sector  faced  a 
sequence  of  shocks,  notably  in  the  wake  of  the  financial  crisis  of  2008,  which 
propagated itself through the European financial sector, with a substantial impact on the 
real economy. More recently, the COVID-19 pandemic, the Russian military aggression 
against Ukraine and the normalisation of the previously extraordinarily  accommodating 
monetary policy across the Atlantic also created pressure for the banking sector at large.  

Annex  IV  provides  additional  details  on  the  main  macro-economic  events  and  policy 
responses  for  the  period  under  evaluation,  including  the  EU  strengthening  of  the 
regulatory  and  institutional  banking  framework,  e.g.  through  the  setup  of  the  bank 
supervisory  and  resolution  frameworks  and  the  enhancement  of  the  bank  regulatory 
requirements. Among those policy initiatives, Section 3.4  focuses on the CMDI and its 
interaction with the State aid rules.  

The global financial crisis and the euro sovereign debt crisis 

In  the  first  phase  of  the  crisis,  namely  the  global  financial  crisis,  financial 
institutions  faced  acute  liquidity  shortage,  as  uncertainties  around  their  exposures 
to  U.S.  subprime  assets  increased.  Following  the  collapse  of  a  major  U.S.  bank 
(Lehman Brothers) in September 2008, the crisis revealed contagious solvency problems 
related  to  a  significant  number  of  institutions  holding  poorly  performing  assets.  This 
included, among others, some Irish banks. In the second phase of the crisis, namely the 
euro  area  sovereign  debt  crisis  of  2010-2012,  the  banking  sectors  of  Greece,  Portugal, 
Spain, and Cyprus in particular (in addition to Ireland) came under significant pressure. 

From  a  macroeconomic  standpoint  (see  Figure  1),  the  financial  crisis  of  2008 
prompted a substantial economic downturn, with the global economy experiencing its 

19 

 
deepest and most widespread recession in the post-war era. In 2009, within the EU, GDP 
and  investments  fell  by  4.3%  and  11.3%  respectively  and  imports  and  exports  sharply 
decreased. Although to a lesser extent, the euro area sovereign debt crisis also weighed 
on  the  EU  economy,  which  registered  a  GDP  and  investment  decline  of  respectively 
0.7% and 2.8% in 2012.  

Figure  1:  EU  macroeconomic  indicators  (2007-2022,  chain  linked  volumes, 
percentage change from previous period) 

Source: Eurostat. The United Kingdom not included.  

The COVID-19 pandemic, the Russian military aggression against Ukraine and the latest 
developments 

The  COVID-19  pandemic  was  recognised  as  a  major  shock  to  the  global  and  EU 
economies. The need to mitigate those negative repercussions on the EU economy was 
recognised as  well. From  a macroeconomic point of view, the COVID-19-related crisis 
generated  a  severe  recession  in  the  EU,  with  a  GDP  decline  of  5.6%  in  2020.  In  this 
context,  the  Commission  adopted,  on  19  March  2020,  the  Temporary  Framework, 
amended several times afterwards.38  

On  24  February  2022,  Russia  launched  an  unprovoked  and  unjustified  military 
aggression against Ukraine. The EU and international partners immediately reacted to 
the serious violation of the territorial integrity, sovereignty, and independence of Ukraine 
by imposing restrictive measures (for example, sanctions) against Russia and Belarus39. 
As a result, on 23 March 2022, the Commission adopted a Temporary Crisis Framework 
to  enable Member States to  use the flexibility foreseen under State aid  rules to  support 
the economy in the context of Russia's military aggression against Ukraine40. 

Under  the  2020  Temporary  Framework  adopted  following  the  outbreak  of  COVID-19, 
the  aggregate  aid  element  provided  by  all  EU27  Member  States  in  2021  amounted  to 
EUR 190.65 billion. By the end of 2022, out of nearly EUR 672 billion of aid approved 
during  that  period  under  the  2022  Temporary  Crisis  Framework  adopted  following 
Russia’s  war  of  aggression  against  Ukraine  or  directly  under  the  Treaty,  EUR  93.52 
billion  was  granted  to  non-financial  corporations.  Although  State  aid  measures  under 
both  the 2020 Temporary Framework  and the 2022 Temporary Crisis  Framework were 
not granted to banks but channelled through the banking sector with a view to benefit the 

38  
39  
40  

See footnote 19. 
Due to its role in facilitating Russia’s military aggression. 
See footnote 20.  

20 

-8.0-6.0-4.0-2.00.02.04.06.08.02007200820092010201120122013201420152016201720182019202020212022Total consumptionInvestmentNet exportsInventoriesGDP (y-o-y %) 
 
 
real  economy,  such  measures  may  have  prevented  a  deterioration  of  banks’  balance 
sheets,  notably  by  contributing  to  shielding  them  from  an  increase  in  non-performing 
loans.41 

Most recently, in March 2023, the failure of three medium-sized banks in the United 
States – Silicon Valley  Bank, Signature Bank and later  First  Republic  – as  well  as  the 
takeover  of  Credit  Suisse  in  Switzerland  by  UBS,  led  to  broader  market  concerns  over 
the  resilience  of  banks,  amid  the  context  of  the  increasing  interest  rates,  in  relation  to 
their  exposure  to  long-term  fixed  income  securities,  the  cost  and  stability  of  deposit 
funding, as well as their risk management practices.42 However, EU banks have remained 
unaffected by these shocks so far, in part due to the unparalleled reforms put in place in 
the aftermath of the financial crisis, as mentioned above.43 This turbulence seen in spring 
2023 has in the meantime abated, although risks to financial stability remain.44 

The structure of the EU banking sector today 

Against this backdrop, from a structural standpoint, the number of EU credit institutions 
declined from 8 525 in 2008 to 5 076 in 202245. In terms of profitability, banks’ average 
Return on Equity rebounded from the lowest level of -2.8% in 2008 (and 0.5% in 2012 in 
the  context  of  the  sovereign-debt  crisis)  to  4.0%  in  2022.  Currently,  the  size  of  the 
banking  sector,  when  measured  in  total  assets,  is  the  largest  in  France,  followed  by 
Germany, Italy, Spain, and the Netherlands (see Figure 2).  

41  

42  

43  
44  
45  

It  is  also  recalled  that  in  February  2022,  Sberbank  Europe  AG  and  two  of  its  subsidiaries 
collapsed,  as  a  result  of  the  reputational  impact  of  geopolitical  tensions,  further  to  the  Russian 
aggression  against  Ukraine,  but  were  effectively  resolved  in  accordance  with  the  EU’s  bank 
resolution framework. See footnote 13. 
See e.g. press articles: https://www.bloomberg.com/news/articles/2023-03-11/svb-fallout-spreads-
around-the-world-as-uk-firms-plea-for-help; 
https://www.cnbc.com/2023/03/10/european-bank-
stock-sink-as-silicon-valley-bank-contagion-spreads.html; 
https://www.reuters.com/business/finance/global-markets-banks-instant-view-2023-03-10/  
See Section 3.4 for additional details, as well as Section 4.1.1.1. 
ECB Financial Stability Review, November 2023.  
A  more  granular  look  at  the  data  from  the  ECB  indicates  the  effect  of  Brexit  on  the  overall 
reduction of the number of credit institutions in the period 2008-2022. In particular, the number of 
credit institutions decreased from 5982 in December 2019 (just prior to Brexit) to 5551 in March 
2020. Hence, the bulk of the reduction of the credit institutions pre-dated Brexit. 

21 

 
 
Figure 2: 

Number of credit institutions in the EU46 
(right-hand scale) and Return on Equity 
(left-hand scale, in %) 

Share by Member State of total assets 
held by banks in the EU in 2022 (total 
assets EUR 40,82 trillion) 

Source: ECB (statistical data warehouse) 

Source: European Banking Federation 

3.2. 

Key figures and types of State aid measures 

As  set  out  in  Section  2.1,  the  State  aid  rules  for  banks  in  difficulty  make  a  distinction 
between three types of aid based on their aim: (i) liquidity aid, (ii) restructuring aid, and 
(iii)  liquidation  aid.  Based  on  the  type  of  involved  instruments,  aid  can  instead  be 
classified  as  liquidity  or  capital  support47.  Liquidity  support  encompasses  (i)  State 
guarantees  on  liabilities,  and  (ii)  direct  lending  by  the  State  or  other  types  of  liquidity 
support.  Capital  support  can  take  the  form  of  (iii)  equity  or  hybrid  capital  instruments 
(e.g. preference shares, contingent convertible bonds) and (iv) impaired asset measures48.  

Box 2: Distinction between approved and used State aid 

When  discussing  State  aid  amounts,  two  concepts  should  be  distinguished:  the  aid 
approved  (or  aid  authorised)  and  the  aid  used  (or  aid  granted).  The  aid  approved 
represents the overall maximum  nominal  amount of measures (i.e.  instruments) set up 
by  Member  States  and  authorised  by  the  Commission.  That  figure  corresponds  to  the 
upper  limits  of  support  which  Member  States  are  allowed  to  grant  to  the  financial 
institutions. The  aid  used  refers  to  the nominal amounts of  aid measures that Member 
States actually implemented for the benefit of the aided financial institutions, including 
the amounts of e.g. loans  that are paid out, capital that is injected,  guarantees  that are 
extended (even if not called/activated).  

The State aid Scoreboard, annually published by the Commission, shows annual stocks 
of  approved  and  used  aid.  Starting  from  that,  the  aggregated  stock  of  aid,  over  the 
period  under  evaluation,  could  be  calculated  either  as  the  sum  of  all  the  annual 

46  
47  

48  

The United Kingdom is included until 2020.  
When matching the classifications by aim and type of aid, it could be observed that “liquidity aid” 
may be in the form of liquidity instruments only, “restructuring aid” may be in the form of capital 
instruments only, “liquidation aid” can be either in the form of liquidity or capital instruments. 
Those latter measures aim to transfer the risk related to banks’ impaired assets to the State. They 
can take the form of a purchase of the assets by a centralised vehicle owned, funded or guaranteed 
by the State (the so called ‘Asset Management Company’ (AMC)); alternatively, the assets remain 
either on the balance sheet of the beneficiary bank or on the one of a dedicated vehicle (a so-called 
“bad bank”), and the State commits to protect the entity from a certain amount of credit losses. 

22 

0100020003000400050006000700080009000-3-2-1012345Number of credit institutions, rhsROE (%) 
 
 
 
outstanding stocks or as the sum of all annual flows (as derived from the annual stocks). 
The  report  considers  that  it  is  acceptable  to  calculate  approved  aid  as  the  sum  of  the 
annual stocks, but it is preferrable to calculate used aid as the sum of the annual flows. 
The  latter  is  because  some  used  instruments  (e.g.  guarantees  or  loans)  are  likely  to 
remain in place over several years, contributing to the outstanding stock of used aid in 
each of those years. Summing  up the annual  used aid  stocks would therefore result in 
these instruments being multiply counted (for each year they remained in place).  

Used  aid  does  not  represent  either  the  fiscal  costs  incurred  by  the  granting  Member 
States,  intended  as  government  outlays  linked  to  the  aid  provision,  or  the  net  fiscal 
costs, intended as fiscal costs minus recoveries. Not all the financial instruments used to 
support  banks  in  difficulty,  as  listed  above,  entail  an  immediate  disbursement  by  the 
State  (e.g.  guarantees  and  impaired  asset  measures  unless  called/activated);  those 
instruments that entail a disbursement may envisage a recovery by the State (e.g. loans 
or,  to  a  different  extent,  capital  injections).  Accordingly,  the  losses  for  the  State’s 
budget may well be lower than the amount of used aid. The State aid Scoreboard does 
not include data on disbursements/costs borne by Member States, as these data are not 
directly related to the Commission’s role as State aid controller. In fact, the competition 
distortion, which State aid rules seek to mitigate, occurs at the moment when a State aid 
instrument is used or even approved. Accordingly, the State aid Scoreboard cannot be 
used to estimate the net costs for Member States due to the provision of aid to banks in 
difficulties. Notwithstanding this, the SWD proposes in Section 4.1.2 some estimates of 
the fiscal costs for the Member States for restructuring their banking system, based on 
different sources and datasets.  

From  2008  to  2022,  the  State  aid  for  banks  in  difficulty  approved  by  the  European 
Commission amounted to EUR 6 811 billion49, of which EUR 2 904 billion50, or 42.6%, 
was  granted  by  Member  States  to  banks.  The  remaining  aid  was  authorised  by  the 
European  Commission  but  never  used  by  the  Member  States.  When  looking  at  the  aid 
instruments, the bulk of the approved aid (78%) was for liquidity purposes, in the form of 
commitments by the State mostly to guarantee banks’ liabilities, while the remaining aid 
(22%)  was  committed  for  capital  purposes,  in  the  form  of  direct  equity  injections  or 
impaired  asset  relief  measures  (see  left  graph  in  Figure  3).  In  terms  of  used  aid,  the 
picture  is  more  balanced  with  liquidity  and  capital  instruments  each  accounting  for 
roughly half of the aid (see right graph in Figure 3). Accordingly, the ratio between used 
and  approved  aid  is  much  lower  for  liquidity  instruments  (30%)  than  for  capital 
instruments (90%). These results are in line with the instruments’ features and the logic 
of  the  related  interventions.51  In  particular,  Member  States  have  typically  announced 
commitments  to  guarantee  bank  debt  as  a  first  response  in  moments  of  extraordinary 
market  stress,  with  the  aim  of  enabling  the  banks  to  cover  their  liquidity  needs.  Such 
commitments were sufficient by themselves to calm down market stress in a number of 
cases, hence reducing liquidity outflows and actual liquidity needs.  

49  

50  

51  

This  figure  is  based  on  the  sum  of  the  annual  amounts  recorded  by  the  State  aid  Scoreboard 
without further adjustments (see Box 2). 
This  figure  has  been  calculated  by  E.CA  as  the  yearly  “aid  inflow”,  calculated  as  the  positive 
(only) changes in the “aid stock”, with some adjustments. The “aid stock” is based on the State aid 
Scoreboard (see Box 2).  
Liquidity  support  and  guarantees  on  liabilities  temporarily stabilise  the  liability  side  of  a  bank's 
balance  sheet.  Recapitalisations  and  impaired  asset  measures  (including  asset  guarantees)  are 
typically granted to cover a capital shortfall. 

23 

 
 
Figure 3:  

Breakdown of approved State aid by type 
of measure (EUR billion, %) 2008-2022 

Breakdown  of  used  State  aid  by  type  of 
measure (EUR billion, %) 2008-2022 

Source: European Commission 

Source: E.CA 

The highest amounts of State aid were approved at the outset of the financial crisis 
in  2008,  for  a  nominal  amount  of  EUR  3  457.5  billion,  representing  26.4%  of  EU 
GDP  and  half  of  the  total  amount  of  authorised  aid  in  the  period  under  review. 
After  a subsequent  significant  decline, the  State  support authorised by the Commission 
increased at moderate levels in 2012 (EUR 621.5 billion) in the context of the euro area 
sovereign debt  crisis, and in 2016 and 2017 (EUR 319.2 billion and EUR 368.4 billion 
respectively) against the backdrop of persisting pockets of vulnerability in some Member 
States as well as legacy issues (Figure 4). 

Figure 4: State aid approved by type of aid (EUR, billion), 2008-2022 

Source: European Commission 

In terms  of  overall  used amounts of aid by Member States, after a  sharp  increase 
following  the  beginning  of  the  financial  crisis,  the  highest  levels  were  reached  in 
2009 and 2010 (EUR 1 042 billion per year or 8% of EU GDP). The vast majority of 
this increase was driven by the liability support through guarantees, the amount of which 
has  constantly  declined  since  then.  The  other  types  of  financial  instruments  also 
underwent  a  gradual  decline  over 
the  notable  exception  of 
recapitalisations,  which  recorded  a  sizeable  rebound  at  EUR  112  billion in  2012  in  the 
midst of the euro area sovereign debt crisis. (Figure 5). 

the  years,  with 

24 

1,514 , 22%5,296 , 78%Recapitalisation and Impaired asset measuresGuarantees and liquidity measures1,391 , 48%1,513 , 52%Recapitalisation and Impaired asset measuresGuarantees and liquidity measures0500100015002000250030003500050100150200250300350400200820092010201120122013201420152016201720182019202020212022Recapitalisations (lhs)Impaired asset measures (lhs)Other liquidity measures (lhs)Guarantees (rhs) 
 
 
 
 
Figure 5: State aid used by type of aid (EUR, billion) 

Source: European Commission.  

Notes: For guarantees and other liquidity measures, the amounts represent outstanding aid in a given year 
(in nominal amount) and not only the new liquidity aid granted in that year. 

Over the period under review, the Member States for which the largest amounts of State 
aid  were  authorised  were  the  United  Kingdom  (EUR  767,1  billion),  followed  by 
Germany (EUR 654,6 billion), Ireland (EUR 569,6 billion), Spain (EUR 544,2 billion), 
and  France  (EUR  362,3  billion).52  These  Member  States  are  among  the  ones  with  the 
largest banking sectors in the EU (see Figure 2)53. Significant amounts of State aid were 
also  authorised  in  Member  States  such  as  Belgium,  the  Netherlands,  Italy,  and  Greece, 
whereas  State  aid  in  other  Member  States  was  more  limited,  with  no  or  marginal  aid 
being  authorised in  Czechia, Estonia, Croatia, Malta, Romania,  Bulgaria,  Slovakia, and 
Finland. 

In  terms  of  types  of  aid,  the  largest  amounts  of  recapitalisation  and  impaired  asset 
measures  (left  graph  of  Figure  6)  were  authorised  in  the  United  Kingdom  (EUR  360 
billion),  Spain  (EUR  314  billion),  Germany  (EUR  197  billion),  and  Ireland  (EUR  153 
billion).  With  the  UK  banks  making  barely  any  use  of  the  impaired  asset  measures 
because of the concurrent use of direct recapitalisations, the main providers of impaired 
asset measures were Germany, mainly in the form of asset protection  for dedicated bad 
banks,  as  well  as  Ireland  and  Spain  in  the  form  of  centralised  AMCs54.  With  regard  to 
guarantees  on  bank  debt  and  direct  liquidity  provision  (right  graph  of  Figure  6),  the 
largest  amounts  were  authorised  at  the  outbreak  of  the  crisis  in  Denmark  (EUR  580 
billion),  Germany  (EUR  448  billion),  Ireland  (376  billion),  and  the  UK  (EUR  364 
billion). However,  Danish banks  made only  very  minor  use of them, making Irish, UK 
and German banks the main beneficiaries of guarantees on their liabilities.  

52  

53  

54  

These amounts are equivalent to, respectively, 29%, 20%, 127%, 46% and 15% of the countries’ 
2022  GDP  at  constant  prices.  GDP  sources:  Office  for  National  Statistics  for  UK  (GBP/EUR 
exchange rate equal to 1.16), Ameco for the other EU Member States. These nominal amounts do 
not  differentiate  for  the  risk  entailed  by  the  specific  aid  instrument  and/or  for  the  timing  of  the 
granting. 
The total assets of the Irish banking sector were about 70% larger, at the peak of November 2008, 
than today. Source: Central Bank of Ireland, Statistics. 
The  National  Assets  Management  Agency  (NAMA)  in  Ireland  and  the  Sociedad  de  Gestión  de 
Activos Procedentes de la Reestructuración Bancaria (SAREB) in Spain were established in 2009 
and  2012  respectively.  As  a  further  example  of  AMC,  the  Bank  Asset  Management  Company 
(BAMC) was also established in 2013. 

25 

01002003004005006007008009001000020406080100120140200820092010201120122013201420152016201720182019202020212022Recapitalisations (lhs)Impaired asset measures (lhs)Other liquidity measures (lhs)Guarantees (rhs) 
 
 
Figure 6: 

Capital-type  State  aid  authorised  across 
Member States (EUR, billion), 2008-2022 

Liquidity-type State aid authorised across 
Member States (EUR, billion), 2008-2022 

Notes: Maximum yearly oustanding amounts 
(corresponding  year  specified  on  top  of  the 
bars) 

Source: European Commission 

In the first  phase of the  financial crisis,  the most  significant amounts of  State aid  were 
used in Germany and Ireland, followed by France and Belgium, whereas at the height of 
the euro area sovereign debt crisis (2011 and 2012), Ireland, Spain, and Greece recorded 
the highest levels (see Figure 7). 

Figure 7: State aid used by a selection of Member States (EUR, billion) 

Source: European Commission 

Notes: For guarantees and other liquidity measures, the amounts represent outstanding aid in a given year 
(in nominal amount) and not only the new liquidity aid granted in that year. 

3.3. 

Case practice of the Commission 

Member States can grant State aid either in the form of a ‘scheme’ or as ‘individual aid’. 
An aid scheme is a measure which defines beneficiaries in a general and abstract manner 
and gives the authorities in charge of applying that scheme no margin of discretion in its 

26 

050100150200250300350400United KingdomSpainGermanyIrelandPolandNetherlandsGreeceBelgiumPortugalAustriaItalyFranceDenmarkSloveniaCyprusSwedenFinlandLuxembourgLithuaniaLatviaHungarySlovakiaRecapitalisations Impaired asset measures888888881781688151589812898100100200300400500600700DenmarkGermanyIrelandUnited KingdomFranceBelgiumNetherlandsSpainItalySwedenGreeceAustriaFinlandPolandPortugalSloveniaHungaryLatviaCyprusLuxembourgSlovakiaBulgariaLithuaniaGuarantees Other liquidity measures050100150200250300350200820092010201120122013201420152016201720182019202020212022BelgiumGermanyIrelandGreeceSpainFranceItalyNetherlandsAustriaPortugalSweden 
 
 
 
 
 
application.55 On the contrary, individual aid means (i) aid that is either not awarded on 
the  basis  of  an  aid  scheme  or  (ii)  notifiable  individual  awards  on  the  basis  of  an  aid 
scheme.56  

Over the period under review, the Commission adopted  730 decisions relating to aid to 
the  banking  sector,  either  in  the  form  of  schemes  or  of  ad  hoc  support  to  individual 
institutions.  Individual  aid  decisions  represented  55%  (or  403)  of  the  overall  decisions 
and were related, on average, to much larger institutions than  scheme aided institutions. 
Whereas, from 2008 to 2010, the number of decisions on aid schemes was only slightly 
lower  than  that  of  individual  aid  decisions,  its  share  in  the  total  number  of  decisions 
declined in later years (see Figure 8). As a general rule, aid schemes were used to address 
non-bank-specific,  usually  sector-wide  problematic  issues  (such  as  liquidity  shortage), 
while  individual  aid  decisions  were  targeted  solutions  addressing  bank  specific 
situations. 

Figure 8: 

Types of decisions (number) 

Types of decisions by year (number) 

Source: European Commission 

When considering the number of beneficiary banks over the period under review57, 444 
credit institutions received public support under an aid scheme and 122 in the form of an 
individual support. Out of the 444 scheme-aided banks, 90% used liquidity aid only. Of 
the  individually  aided  banks,  85%  used  capital  support,  with  a  large  part  receiving 
liquidity aid on top of the capital support (57%). The use of liquidity aid without capital 
support  was  more  limited  (15%).  Notably,  93  individually  aided  institutions  received 
restructuring  aid  and  22  institutions  received  liquidation  aid.  See  Annex  IX  for  some 
examples of individual cases and schemes. 

From  a  case  practice  standpoint,  the  Commission  considered  liquidity  measures  as  the 
least  distortive  instruments  for  competition,  due  to  their  temporary  nature  and  because 
liquidity is generally authorised for banks that are fundamentally sound. For this reason, 
the  Commission’s  compatibility  assessment  of  liquidity  measures  remained  relatively 
light.  Only  limited  measures  to  mitigate  competition  distortions  were  required  and 
there was no need to submit a restructuring plan ex ante or to implement burden-sharing. 
In contrast, restructuring aid  was generally considered to  be the most distortive type of 
aid. Therefore, a strict compatibility assessment was required, with dedicated measures to 

55  

56  
57  

See  Article  1(d)  of  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. 5, (“Procedural Regulation”). 
See Article 1(e) of the Procedural Regulation. 
Source: E.CA and partners’ calculations.  

27 

403327Individual decisionsSchemes decisions010203040506070200820092010201120122013201420152016201720182019202020212022Individual decisionsSchemes decisions 
 
 
 
 
 
 
mitigate  the  severe  competition  distortions  stemming  from  the  aid  and  to  protect  non-
aided competitors. As regards liquidation aid, market exit was realised through the sale of 
parts  of  the  liquidated  bank  to  and  integration  into  a  competitor  as  an  alternative  to  a 
wind-down (i.e., “sale-or-wind-down decisions”).  

Out of the adopted Commission State aid  decisions over the period under review,  36% 
included structural measures, 33% quasi-structural measures, 40% behavioural measures 
and 1% market opening measures. (See Box 3). 

Box 3: State aid commitments to limit distortion of competition  

To mitigate the effects of the aid on competition in the banking sector, the Commission 
has  accepted  a  wide  range  of  measures  proposed  by  Member  States  in  relation  to  the 
beneficiaries,  the  implementation  of  which  was  supervised,  in  some  cases,  by  an 
independent  third-party  monitoring  trustee.  These  measures,  also  referred  to  as 
commitments, can be categorised as follows: 

•  Structural measures, which encompass divestments (e.g. of a bank’s subsidiaries), the 
transfer or sale of certain key assets, and obligatory access to the infrastructure of the 
beneficiary.  

•  Quasi-structural measures, which are commitments altering the balance sheet towards 
a  structure  that  potentially  no  longer  (or  less)  distorts  the  level  playing  field.  Such 
balance sheet structure paths are built on quantified annual or semi-annual targets. 

•  Behavioural  measures,  which  are  constraints  changing  the  aided  entity’s  behaviour 
and  strategy  on  the  market  and  include  acquisition  bans  and  the  prohibition  to 
advertise the receipt of State aid. 

•  Measures for opening markets, which include commitments by the Member State to 
facilitate  the  entry  of  competitors  or  improve  the  quality  and  availability  of  credit 
history information and reporting by banks. 

Other  types  of  commitments  may  be  undertaken  by  Member  States  to  achieve  banks’ 
viability and ensure burden-sharing. 

3.4. 

Relevant  policy  developments:  Interaction  between  State  aid  control  and 
the CMDI framework 

Since the State aid rules for banks in difficulty were last revised in 2013, the regulatory 
environment  in  which  EU  banks  operate  has  changed  significantly,  notably  with  the 
adoption  of  the  Bank  Recovery  and  Resolution  Directive  (BRRD)58,  the  Single 
Resolution  Mechanism  Regulation  (SRMR)59,  and  the  Deposit  Guarantee  Scheme 

58  

59  

Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing 
a  framework  for  the  recovery  and  resolution  of  credit  institutions  and  investment  firms  and 
amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 
2005/56/EC,  2007/36/EC,  2011/35/EU,  2012/30/EU  and  2013/36/EU,  and  Regulations  (EU)  No 
1093/2010  and  (EU)  No  648/2012,  of  the  European  Parliament  and  of  the  Council,  OJ  L  173, 
12.6.2014, p. 190–348. 
Regulation  (EU)  No  806/2014  of  the  European  Parliament  and  of  the  Council  of  15  July  2014 
establishing  uniform  rules  and  a  uniform  procedure  for  the  resolution  of  credit  institutions  and 
certain  investment  firms  in  the  framework  of  a  Single  Resolution  Mechanism  and  a  Single 
Resolution Fund and amending Regulation (EU) No 1093/2010, OJ L 225, 30.7.2014, p. 1–90. 

28 

 
 
Directive (DGSD)60, together referred to as the CMDI framework. This brought about a 
new  regulatory  and  institutional  setting,  with  new  powers  for  bank  supervisors  and  the 
creation  of  national  resolution  authorities.  For  Member  States  participating  in  the 
Banking  Union,  the  Single  Supervisory  Mechanism  and  the  Single  Resolution 
Mechanism  were  set  up,  with  the  adoption  of  the  Single  Supervisory  Mechanism 
Regulation  (SSMR)61  and  the  SRMR,  introducing  institutional  mechanisms  for 
centralised supervision and resolution of banks, respectively consisting of the European 
Central Bank (ECB) and national supervisors, and of the Single Resolution Board (SRB) 
and national resolution authorities. 

Since  2015,  the  CMDI  framework  and  the  State  aid  rules  for  banks  in  difficulty  have 
applied  in  parallel,  each  referring  to  each  other  but  following  their  own  underlying 
logic.62  Thus,  while  pursuing  their  twin  objective  to  preserve  financial  stability  and 
mitigate  competition  distortions,  the  State  aid  rules  for  banks  in  difficulty  no  longer 
constitute  the  main  framework  for  coordinated  action  in  support  of  the  banking  sector 
that allows for ensuring financial stability. 

In  fact,  the  CMDI  framework  aims  at  protecting  financial  stability,  depositors,  and 
taxpayers,  while  limiting  recourse  to  State  aid  (albeit  without  precluding  it  entirely)  to 
support the banking sector, by enabling authorities to handle bank crises through the use 
of industry-funded safety nets, such as the Single Resolution Fund (SRF) in the Banking 
Union,63  national  resolution  funds  outside  the  Banking  Union  and  financing  means  of 
national  deposit  guarantee  schemes  (DGSs).  Along  these  lines,  the  introduction  of  the 
CMDI framework has provided new tools for the regulatory treatment of failing banks. 
The BRRD and SRMR set out the circumstances in which the competent supervisory (or 
resolution) authority will determine a bank as “failing or likely to fail” (FOLF) and then 
resolve  the  bank  if  this  is  assessed  to  be  in  the  public  interest  (positive  public  interest 
assessment, PIA) or allow it to be liquidated in accordance with national insolvency laws 
if the resolution is not assessed to be in the public interest (negative PIA). In resolution, 
before the resolution funds (also called Fund aid in cases involving the use of the SRF) 
can be accessed, shareholders and creditors should effectively support losses (through the 
so called “bail-in”). The framework  further establishes a number of resolution tools for 
the authorities to deal with banks in resolution.64 

To enable the resolvability of banks, Member States have set resolution strategies and a 
minimum  requirement  for  own  funds  and  eligible  liabilities  (MREL)65  to  be  met  by  1 
January 2024. The very large majority of banks under the remit of the SRB has met the 
MREL  final  targets66,  with  the  SRF  being  in  place  to  support  resolution  should  this 

60  

61  

62  

63  
64  
65  

66  

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. 149–178. 
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. 63–89. 
It  has  been  the  Commission's  consistent  practice  to  apply  the  same  set  of  rules  to  a  bank  in 
resolution from start to the end, in order to preserve the unity of the resolution process. Therefore, 
the EU bank resolution framework did not apply to legacy cases that were designed and initiated 
under the national legal frameworks in place prior to its entry into force. Further aid in those cases 
continued to be governed by the rules predating the entry into force of the CMDI framework. 
See further information at: Single Resolution Fund | Single Resolution Board (europa.eu).  
See further information at: https://www.srb.europa.eu/en/content/tasks-tools. 
See  further  information  at:  Minimum  Requirement  for  Own  Funds  and  Eligible  Liabilities 
(MREL) / SRB Policy under the Banking Package (europa.eu) 
See the 4Q 2023 MREL dashboard, published by the SRB. 

29 

 
 
become  necessary.67  In  addition,  the  SRB,  together  with  the  national  resolution 
authorities, has by now developed resolution plans for the major EU banks. 

This new regulatory environment has led to interactions and interdependencies between 
bank  supervision,  bank  resolution  and  State  aid  control,  as  further  assessed  in  Section 
4.1.3.  Such  interactions  arise  when  State  aid  (whatever  its  form)68  or  Fund  aid69  is 
provided  to  banks  as  both  State  aid  rules  and  bank  prudential  rules  and  the  CMDI 
framework apply in parallel. The CMDI framework mentions the following possibilities 
for  external  support  to  banks  before  and  during  resolution  as  well  as  in  national 
insolvency proceedings,  all of which may  fall  under State aid  control: (i) precautionary 
State budget support to solvent banks, (ii) measures to prevent the failure of a bank by a 
DGS,  (iii) resolution  funding  from  the  (Single)  Resolution  Fund,  a  DGS  or  (as  a  last 
resort) a Member State  (government  financial stabilisation  tools)  or (iv) DGS measures 
to  preserve  access  to  deposits  in  national  insolvency proceedings after  a  public interest 
for the resolution of bank has been denied. In that period after a negative public interest 
assessment,  also  (v) State  aid  from  national  budgets  is  possible,  subject  to  national 
insolvency  rules  and  the  State  aid  rules  for  banks  but  without  further  provisions  in  the 
current CMDI framework.70 

67  

68  

69  

70  

On  15  February  2024,  the  SRB  announced  that  target  for  the  build-up  of  the  Single  Resolution 
Fund had been achieved at the end of 2023. Single Resolution Fund: no expected contribution in 
2024 as target level reached | Single Resolution Board (europa.eu). 
While DGS interventions to reimburse depositors, in accordance with Member States’ obligations 
under  the  DGSD,  do  not  constitute  State  aid,  DGS  interventions  intended  to  assist  in  the 
restructuring or wind-up of credit institutions prior to or after the failure of a bank may constitute 
State  aid.  Whilst  the  DGS  financing  means  may  derive  from  the  private  sector,  DGS  measures 
may constitute aid to the extent that they come within the control of the State and the decision as 
to  their  application  is  imputable  to  the  State,  in  the  sense  of  Article  107(1)  TFEU.  The 
Commission  has  been  assessing  the  compatibility  of  State  aid  in  the  form of  such  interventions 
under the State aid rules for banks in difficulty. 
Even though Fund aid does not constitute State aid as such, pursuant to Article 19 of the SRMR, 
resolution action that involves Fund aid is subject to approval by the Commission under the rules 
laid down in that Article and the State aid rules.     
The CMDI review proposal lists State support from the public budget as one case of extraordinary 
public financial support outside for resolution, which may be granted exceptionally and subject to 
the Union State aid framework, in the context of winding-up, i.e. after a negative public interest 
assessment. 

30 

 
 
Table  2:  Correspondence  between  BRRD/SRMR/DGSD  regulatory  scenarios  and 
State aid typology 

Regulatory scenario 
under the 
BRRD/SRMR/DGSD 

Precautionary 
support/DGS 
preventive 
measures71 

Resolution 

State aid 
compatibility regime 
(See Section 2.1.2) 

Liquidity aid74 

Restructuring aid 
(long-term viability is demonstrated; no 
market exit) 

Wind-up under national 
insolvency 
proceedings72/DGS 
alternative measures73 

Liquidation aid 
 (long-term viability cannot be 
demonstrated at the moment 
when the aid is granted; market 
exit) 

Drawing  on  practical  experience  on  its  application  so  far,  the  CMDI  framework  is 
currently subject to revision, the outcome of which will further impact its interaction with 
State aid control. Notably, in April 2023, the Commission has proposed a reform to the 
CMDI  framework75,  aiming  at  facilitating  the  application  of  the  resolution  tools  for 
failing smaller and medium-sized banks, including through the use of DGS funds in the 
financing  of  the  tools,  when  necessary  to  safeguard  financial  stability  and  protect 
taxpayers  and  depositors.  The  reform  is  currently  negotiated  by  the  co-legislators  who 
will decide on its ultimate shape. 

4. 

4.1. 

EVALUATION FINDINGS 

To what extent was the intervention successful and why? 

4.1.1.  Effectiveness 

This Section evaluates the extent to which the State aid rules for banks in difficulty have 
achieved  their  objectives.  As  described  in  the  “intervention  logic”,  presented  in 
Section 2.1,  the  first  objective  of  these  rules  has  been  to  ensure  financial  stability, 
namely a situation without major disturbances in the EU banking sector, in which people 
can access their bank accounts and deposits without interruption, and banks can continue 
to  provide  payment  services  and  lending  to  the  real  economy.  The  second  objective  of 
these  rules  has  been  to  preserve  a  level-playing  field  by  mitigating  competition 
distortions  that  may  result  from  State  aid,  both  between  banks  and  across  Member 
States.  Those  twin  objectives  are  interlinked  and  must  be  seen  alongside  the  general 

71  

72  

73  

74  
75  

DGS preventive measures, as referred to in Article 11(3) DGSD, are interventions by DGS using 
DGS funds, supporting financially a bank in distress, for example, in the form of guarantees, cash 
injections,  participation  in  capital  increase,  before  any  resolution  action  is  triggered.  DGS 
preventive measures may qualify as State aid, depending,  inter alia, on the measure, its context 
and the circumstances in which it is adopted. When these interventions qualify as State aid, they 
are assessed under the State aid rules for banks in difficulty. See also footnote 68.   
Bank  support  using  the  State budget  during  national  insolvency  proceedings  is  not  governed by 
the CMDI framework. The CMDI review proposal requires a negative public interest assessment 
to discard resolution, exceptionality and compliance with State aid rules – see above. 
DGS alternative measures, as referred to in Article 11(6) DGSD, are interventions supporting the 
transfer  of  deposits  and  assets  of  the  failing  bank  to  another  bank  (e.g.  in  the  form  of  a  cash 
contribution  to  fill  the  gap  between  assets  and  deposits,  guarantees)  in  the  context  of  a  bank’s 
wind-down to preserve the access of depositors to their money. When these interventions qualify 
as State aid, they are assessed under the State aid rules for banks in difficulty. See also footnote 
68.   
In the case of resolution, jointly with a restructuring or wind-down plan. 
See footnote 11 and, in particular, the Commission’s Communication on the review of the CMDI 
framework contributing to completing the Banking Union, COM(2023) 225 final. 

31 

 
 
 
 
objective of State aid control to safeguard the internal market and support a competitive 
landscape with a level-playing field. 

As further presented in Section 2.1, to achieve these twin objectives, three main ‘pillars’ 
of compatibility assessment criteria are set by the State aid rules for banks in difficulty:  

1)  The demonstration of the long-term viability of the aided banks not exiting the 
markets  –  which  is  intended  to  contribute  primarily  to  financial  stability,  while 
avoiding that unviable banks are kept alive and further distort competition.  

2)  Burden-sharing  (primarily  through  contribution  by  bank  shareholders  and 
subordinated creditors) – which is intended to contribute to both minimisation of 
competition  distortion,  by  reducing  the  amount  of  aid,  and  preservation  of 
financial stability, by ensuring market discipline and mitigating moral hazard on 
the side of the bank’s shareholders and creditors.  

3)  The  minimisation  of  distortions  of  competition  through  e.g.  divestment 
measures – which aims at preserving fair competition to a maximum extent.  

In accordance with this logic, this Section first assesses the overall impact of State aid - 
in the forms and amounts approved under State aid rules - on financial stability, taking 
into account external factors and other EU policies (as summarised in Annex IV). It then 
assesses  how  each  individual  compatibility  criterion  performed  in  achieving  the 
overarching twin objectives.  

As set out in detail below, the evaluation suggests that the State aid rules for banks 
in  difficulty  have  largely  met  their  twin  objectives  of  preserving  financial  stability 
while mitigating competition distortions, and hence were largely effective as a State 
aid framework.   

4.1.1.1.  Preserving  financial  stability:  overall  impact  on  financial  stability  and  the  real 

economy 

Over  the  period  under  review,  the  financial  system  faced  a  series  of  shocks,  as 
highlighted in Section 1.1 and further summarised in Annex IV. The adverse effects of 
such  shocks  on  the  banking  sector  and,  more  broadly,  the  financial  system,  can  be 
illustrated  by  well-established  financial  instability  indicators76,  such  as  SRISK,  which 
measures  banks’  contribution  to  systemic  risk  and  financial  market  distress77.  Figure  9 
shows that systemic risks increased and remained at high levels until 2012/13, i.e. in the 
midst of the global financial crisis and the euro sovereign debt crisis78, before starting to 

76  

77   

78  

Well  established  financial  instability  indicators  typically  include  (i)  the  SRISK  index,  which 
measures banks’ systemic risk contributions, (ii) the country level index of financial stress (CLIFS 
index),  (iii)  the  composite  indicator  of  systemic  stress  (CISS  index).  CLIFS  is  an  indicator  of 
financial  stress  developed  by  Duprey  et  al.  (2017)  that  includes  six,  market-based,  stress 
measures.  Specifically,  it  captures  three  market  segments:  equity  markets,  bond  markets  and 
foreign exchange markets. CISS is an indicator developed by Holló et al. (2012) that includes 15 
raw,  mainly  market-based  financial  stress  measures  that  are  split  equally  into  five  subindices, 
namely  the  financial  intermediaries’  sector,  money  markets,  equity  markets,  bond  markets  and 
foreign exchange markets (see the E.CA study). 
Specifically,  SRISK  can  be  defined  as  the  expected  capital  shortfall  of  a  bank  in  a  period 
conditional  on  a  crisis  event  and  measures  how  much  capital  would  be  needed  in  a  crisis  for  a 
bank  to  maintain  a  k%  capital-to-assets  ratio.  The  larger  SRISK  is,  the  higher  the  systemic  risk 
contributions of banks. The components of SRISK are bank size, leverage, and long-run marginal 
expected shortfall (LRMES). 
In the same way as the SRISK index, the CLIFS index and the CISS index increased significantly 
in the early years of the global financial crisis, revealing high levels of financial distress that could 

32 

 
 
 
decrease until 2019, when the risks moderately increased again and stabilised amidst the 
COVID-19 pandemic and the Russian military aggression against Ukraine. Furthermore, 
as  described  in  Section  3.2,  most  of  State  aid  was  deployed  until  2010/11,  with  the 
outstanding amount gradually and constantly decreasing up to the present date.  

Figure 9: Banks’ contribution to systemic risk (SRISK) and stock of State aid at EU 
level 

Source: E.CA and partners based on MS database.  
Note: The left-hand side vertical axis is in percentages. The right-hand side vertical axis is in billion EUR. 

With the aim of assessing the impact of State aid on financial stability in the short 
run, E.CA included a market event study focusing on major banks’ Credit Default 
Swaps79 (CDS) spread changes.  In this context, CDS spreads were used as a proxy of 
the  way  market  participants  perceived  the  fact  that  a  bank  receives  State  aid.  More 
specifically,  the  chosen  approach  aimed  at  assessing  whether  the  public  support 
authorized by the Commission decisions is perceived by the market as decreasing the risk 
of default of beneficiary banks. 

The  E.CA  study  suggests  that  market  participants  have  reacted  positively  to  the 
interventions  related  to  EU  significant  banks80  as  they  have  acknowledged  a  lower 
risk  of  default  of  the  banks  concerned  within  the  60-day  window  around  the 
announcement  of  individual  State  aid  decisions.  In  this  respect,  the  markets’  perceived 
risks of default of significant banks tend to decrease following the adoption of the State 
aid  decisions,  as  reflected  by  a  20  basis  points  decline,  on  average,  of  banks’  CDS 
spreads in the 30 days following the adoption of the Commission decisions.  

79  

80  

put  the  stability  of  the  financial  system  in  jeopardy.  The  period  of  heightened  financial  distress 
persisted until mid-2013, at which point the indicators started decreasing. 
A Credit default swap (CDS) is a contract in which a ‘protection buyer’ pays a periodic premium 
to  a  ‘protection  seller’  and  in  exchange  receives  a  payment  by  the  ‘protection  seller’  if  the 
reference entity (a firm or a government issuer) experiences a credit event (e.g. a failure to meet 
interest  payments).  The  market  price  of  the  premium  is  thus  an  indicator  of  the  perceived  risk 
related  to  the  entity  concerned.  A  CDS  works  similarly  as  an  insurance  against  a  credit  event, 
since  it  provides  the  ‘protection  buyer’  with  protection  against  a  credit  event,  such  as  default,  a 
credit rating downgrade etc. 
The analysis in this regard covers credit institutions with assets above €30 billion, or whose total 
assets represent more than 20% of the GDP of the Member State of establishment. 

33 

02004006008001000120014001600180020000510152025303540Jan 05Sep 05May 06Jan 07Sep 07May 08Jan 09Sep 09May 10Jan 11Sep 11May 12Jan 13Sep 13May 14Jan 15Sep 15May 16Jan 17Sep 17May 18Jan 19Sep 19May 20Jan 21Sep 21SRISK over GDPEU State aid stock 
      
 
 
The  2011  Commission  Staff  Working  Paper81  reached  a  similar  conclusion.  The  E.CA 
study  results  are  also  consistent  with  a  study  of  the  Bank  of  International  Settlements 
(BIS) (2009)82 which has emphasized the strong link between the announcement and use 
of  a  State  aid  measure  (either  through  guarantees,  recapitalisation  or  impaired  asset 
measures) and the decrease in the CDS spreads of banks in the concerned Member States 
over  the  following  days.  The  BIS  study  also  concludes  that  “government  interventions 
[have] been effective in reducing banks' default risk, at least over a short time horizon”.  

When  distinguishing  between  types  of  State  aid  measures,  the  E.CA  study  shows  that 
capital  support,  namely  recapitalisations  and  impaired  asset  measures,  seems  to 
have  a  more  positive  effect  on  financial  stability  than  liquidity  support,  as  it  is 
associated  with  a  quicker  decrease  of  financial  market  distress83.  These  findings  are  in 
line with previous studies, which found that most of the benefits of State aid for financial 
stability pertain to capital-like interventions, and are also significant in the long run.84  

The E.CA study further looked at a series of indicators to explore a correlation between 
State  aid  and  the  overall  improvement  in  financial  stability,  finding  evidence  of  a 
negative and lagged link of State aid and financial instability85, but it also recognised 
that accurately measuring the contribution of State aid to financial stability, especially in 
the  long  term,  faces  methodological  limitations.  Notably,  changes  in  system-wide 
financial  instability  can  be  caused  by  factors  that  can  be  endogenous  and  sometimes 
unobservable.86  The  assessment  of  the  compatibility  criteria,  as  presented  in  Sections 
4.1.1.2 - 4.1.1.4,87 provides further contribution to the assessment of the impact of State 
aid  rules  to  financial  stability.  In  fact,  this  evaluation  assesses  the  effectiveness  of  EU 
State aid rules, as opposed to evaluating the use of State aid by disbursing Member States 
as one type of policy response to the financial crisis. This Section therefore looks at the 
role  of  State  aid  as  a  contributing  factor  to  financial  stability  to  the  extent  that  it  is 
relevant for the scope of this evaluation.  

Against the background of the limitations of the statistical assessment as well as of the 
scope of the evaluation, before venturing into the assessment of the compatibility pillars, 
this Section presents a plausible interpretation of the long-term role of State aid based on 
available evidence. In particular, the observation of the main events in the period under 
evaluation (as also summarised on Annex IV) suggests that State aid played a crucial role 
in  restoring  market  confidence  in  the  period  of  the  most  acute  stress,  i.e.,  2007-2013, 

81  
82  

83  

84  

85  

86  

87  

See footnote 24. 
Bank of International Settlements, (2009), An assessment of financial sector rescue programmes 
(BIS Papers No 48), available at: "https://www.bis.org/publ/bppdf/bispap48.pdf.  
Specifically,  the  E.CA  study  finds  that  a  negative  and  significant  association  of  State  aid  with 
CLIFS and CISS indicators of market distress appears with a one-year lag. 
See Nistor, S., & Ongena, S, (2023), The Impact of Policy Interventions on Systemic Risk across 
Banks,  Journal  of  Financial  Services  Research,  available  at:  https://doi.org/10.1007/s10693-023-
00404-8.  Homar,  T,  (2016),  Bank  Recapitalizations  and  Lending:  A  Little  is  Not  Enough, 
available at: SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3723361. 
In  particular,  E.CA  found  that  a  one  standard  deviation  increases  in  the  stock  of  State aid  three 
years earlier is associated with (i) a reduction in banks’ systemic risk contributions equivalent to 
10%  of  the  sample  average,  and  (ii)  a  decline  in  the  CISS  index  of  financial  market  distress 
equivalent  to  22%  of  the  sample  average.  For  more  details  on  CISS,  see  “CISS  –  a  Composite 
Indicator of Systemic Stress in the Financial System”, Holló et al., ECB, Working Paper Series, n. 
1426, 2012. 
One example is time-varying, country-specific changes in the investors’ perception of the banking 
sector’s resilience. 
These  assessments  rely  mostly  on  bank-level  data.  For  additional  details  on  the  methodology 
applied in Sections 4.1.1.1.2-4.1.1.1.4 and its own limitations, see Annex II. 

34 

 
 
encompassing the global financial crisis and the sovereign debt crisis. The role of State 
aid became more subdued but still relevant in the following years when financial stress 
gradually  abated  and  major  policy  initiatives  were  put  in  place.  This  interpretation  is 
consistent  with  the  findings  above,  including  the  lagged  relationship  between  State  aid 
and financial stability and the decoupling between aid stock and financial instability after 
2013, as shown by Figure 9. It is supported by the economic literature and the findings of 
the stakeholders’ consultation, as further discussed below. 

While it is not possible to design an accurate counterfactual to assess what would have 
happened if State aid could not have been (swiftly and orderly) deployed in EU Member 
States,88  it  is  possible  to  note  that  the  “unaided”  default  of  some  non-EU  financial 
institutions  in  2008  triggered  an  increase  of  risk  aversion,  fostering  worldwide 
contagion.  This  was  notably  the  case  as  regards  the  failure  of  the  globally  connected 
U.S. investment bank Lehman Brothers in September 2008, which constituted the climax 
of the global financial crisis.89 Albeit to a minor extent, one can also refer to the collapse 
of  the  3  main  Icelandic  banks  (Kaupthing,  Landsbanki  and  Glitnir),  which  experienced 
serious difficulties in October 2008 on the back of excessively leveraged activities and – 
due to their combined size of nearly ten times the country’s GDP – could receive public 
support almost exclusively for domestic covered deposits, having to  then liquidate their 
foreign activities at significant losses, e.g. for UK depositors.90 Amid this context, banks 
became more and more reluctant to lend to each other, as also shown at that time by the 
increase  in  the  spread  between  the  (unsecured)  3-month  euro  interbank  offered  rate 
(Euribor) and the (secured) 3-month euro overnight index average (EONIA) swap rate. In 
this context, some banks lost market access, risking an immediate default on that basis. 
State  aid  to  banks  aims  at  fostering  financial  stability  exactly  by  avoiding  disorderly 
liquidations, absent other tools to provide equivalent results. 

Between October 2008 and December 2009, 18 EU Member States provided aid to 
banks, in particular as support to access liquidity (see Section 3.2). Such interventions, 
combined  with  the  easier  liquidity  provision  by  the  ECB91,  were  overall  successful  in 
addressing  the  most  urgent  issues  of  the  sector  on  aggregate,  as  shown  by  the  gradual 
normalisation  of  the  3-month  Euribor-EONIA  spread.92  However,  the  Member  States’ 
ability to support a more fundamental bank balance sheet repair hinged on their relative 
fiscal  capacity.  Amid  this  context,  5  Member  States  (Ireland,  Greece,  Portugal,  Spain, 
Cyprus)  had  to  request  external  financial  assistance93  to  deal  –  in  the  context  of  the 
globally  impaired  markets’  confidence  and  great  recession  –  with  the  consequences  of 
the bursting of serious macroeconomic imbalances94. This took a toll on these countries’ 

88  

89  

90  

91  
92  

93  
94  

As  specified  in  Section  2.2,  the  evaluation  considers  the  main  baseline  scenario  as  the  one  in 
which  the  assessment  of  compatibility  of  aid  to  banks  in  difficulty  would  have  had  to  be 
performed in line with the rescue and restructuring guidelines for non-financial firms, to the extent 
applicable,  or directly  under  the  Treaty,  where  the  rescue  and  restructuring  guidelines  had  been 
unfit for purpose. 
See  Wiggins  and  Metrick,  (2019),  The  Lehman  Brothers Bankruptcy  H:  The  Global  Contagion, 
Journal of Financial Crisis.  
Financial Stability Institute (FSI) (2020), FSI  crisis management series No.1, The banking crisis 
in Iceland. 
See endnotes iii, vi, x, xiv of Annex IV. 
See “State aid, Crisis rules for the financial sector and the real economy”, European Parliament, 
DG  for  Internal  Policies,  2011;  the  “2011  Commission  Staff  Working  Paper”  (as  detailed  in 
footnote 24). 
See endnotes ix and xvi of Annex IV. 
For  further  details  see:  Ex  post  evaluation  of  the  economic  adjustment  programme  for  Ireland 
(2010-2013).  Institutional  Paper  4  -  July  2015;  Evaluation  of  the  Financial  Sector  Assistance 
Programme. Spain, 2012-2014. Institutional Paper 19  - January 2016;  Ex Post Evaluation of the 

35 

 
 
 
economy  as  well  as  on  their  interlinked  sovereign  and  banks,  facing  very  impaired  (if 
any) market access95. All these five countries, which – except Ireland – were not among 
the  five  largest  initial  grantors  of  aid  to  banks  (in  proportion  to  their  GDP)96,  had  to 
continue  providing  aid,  in  2011-13  (see  Section  3.2),  under  the  umbrella  of  the 
adjustment programmes  to  enable the restructuring of the  banking  sector by facilitating 
the  exit  of  unviable  players  and  equipping  the  viable  ones  with  sufficient  capital97  to 
continue  adjusting  their balance sheets. This  process  helped  restore confidence in  these 
Member States’ banking sector, which gradually regained market access98. Based on this, 
it could be said that State aid was instrumental in stabilising EU financial markets in 
the  midst  of  the  crisis,  in  combination  with  the  monetary  policy  and  the  external 
financial support to countries for which the threats to financial stability were more 
deeply rooted in their economy.  

As  the  emergency  gradually  phased  out,  further  major  EU  and  multilateral  policy 
initiatives  were  adopted  from  2013  onwards,  laying  the  basis  of  a  more  structural 
solution  to  the  lessons  learnt  from  the  financial  crisis,  with  notably  the  adoption  of 
enhanced bank regulatory requirements reflecting the Basel III principles99, and the set-
up  of  single  bank  supervisory  and  resolution  frameworks.100  State  aid  rules  themselves 
were  adjusted  to  embed  the  principles  emerging  from  the  discussion  on  these  parallel 
policy initiatives, e.g. with the introduction of the explicit requirement of burden-sharing 
of subordinated debt under restructuring and liquidation since 2013. While some Member 
States101 had yet to disburse some residual aid to deal with the pockets of vulnerability 
from the crisis, the combination of the policy initiatives mentioned above was associated 
with  further  improvements  in  financial  stability  in  2014-19,  as  shown  by  the  SRISK 
indicator in Figure 9. The improved resilience of the EU banking system has been shown 
in 2020-23, amidst the tensions due to the COVID-19 pandemic, the Russian aggression 
against Ukraine and the stress in the U.S. and Swiss banking markets. In fact, any rising 
issue  has  been  dealt  with  in  a  timely  manner102,  without  tensions  spreading  across  the 
European  banking  sector,  as  also  shown  by  the  SRISK  indicator  that  moderately 
increased  but  broadly  stabilised.  In  conclusion,  the  combination  of  all  EU  policy 
initiatives,  including  the  adoption  of  the  enhanced  capital  requirements  and  the 

95  
96  

97  

98  

99  
100  
101  
102  

Economic Adjustment Programme. Portugal, 2011-2014. Institutional Paper 40 – November 2016; 
Ex-Post  Evaluation  of  the  Economic  Adjustment  Programme.  Cyprus,  2013-2016.  Institutional 
Paper 114, October 2019; Ex-post evaluation of the Economic Adjustment Programmes of Greece 
during the period 2010-2018. SWD(2023) 90 final. 
With the exception of Spain, where the sovereign continued to finance itself in the markets. 
The  top  2008/9  spenders  included  Ireland,  Belgium,  the  Netherlands,  the  United  Kingdom, 
Germany.  For  the  purpose  of  this  calculation,  capital  injection  and  impaired  asset  measures  are 
counted  at  their  nominal  value,  while  guarantees  and  liquidity  measures  are  counted  at  20%  of 
their  maximum  nominal value,  to  reflect  the  different  risk  entailed  by  the different  instruments. 
See Box 2.  
Capital needs emerged, among others, as a result of the first EU wide stress tests and the related 
capital strengthening recommendations. See endnote xiii of Annex IV. 
E.g.,  Irish  AIB  and  Bank  of  Ireland  received  EUR  1.2  billion  and  EUR  12.7  billion  capital 
injections  (including  convertible  instruments)  by  the  State  in  2011  and  managed  to  tap  the 
unguaranteed  senior  debt  market,  raising  EUR  500  million  and  EUR  1  billion,  respectively,  by 
end-2012. 
See endnotes xix and xx of Annex IV.  
See Section 3.4. 
Including e.g., Greece, Cyprus, Portugal, Italy, Slovenia, Austria, Poland.   
E.g., in February 2022, Sberbank Europe AG and two of its subsidiaries collapsed, as a result of 
the reputational impact of geopolitical tensions, further to the Russian aggression against Ukraine, 
and  were  effectively  resolved  in  accordance  with  the  EU’s  bank  resolution  framework.  See 
footnote 13. 

36 

 
 
CMDI  framework,  eventually  ensured  that  threats  to  financial  stability  were 
effectively addressed, and the EU was well equipped to face upcoming shocks. 

Against the background of significant improvement in financial stability and resilience of 
the banking sector, moments of sporadic increases in the stress related to the banking 
sector of EU Member States could still be observed through the years under evaluation. 
Notably, as mentioned by some public authorities, these moments mostly corresponded 
to the occasions  when  losses were suffered by  unsecured depositors, because aid  or 
alternative means  were  not  available to absorb the bank losses.103  This  was the case of 
the  bail-in  of  uninsured  depositors  and  senior  bond  holders  of  the  two  main  Cypriot 
banks in 2013, resulting in a short-term need to impose temporary capital controls, with 
spillovers in Greece and Romania, and in long-standing “flight to cash” in the country104. 
To a lesser extent, it was also the case in the resolution of some Polish cooperative banks 
in 2020.105 However, as noticed by other public authorities, not all the cases of bail-in of 
unsecured depositors fed financial stress, as demonstrated by the failure of the Danish 
cooperative  banks  JAK  Slagelse  in  October  2015  and  Københavns  Andelskasse  in 
September 2018, where a minor write-down was applied to unsecured depositors, while 
ensuring uninterrupted access to the bank’s deposits and critical functions.  

Box 4: U.S. approach to combat the Financial Crisis of 2008 

The approach to combat the Financial Crisis of 2008 in the U.S. (as also summarised in 
Annex IV) was different due to a number of reasons. Firstly, as the place of origin of 
the crisis, the overall exposure of the U.S. financial institutions to assets of dubious and 
deteriorating  quality  (e.g.  subprime  mortgages,  asset-backed  securities,  credit  default 
swaps,  etc.)  was  much  higher  than  in  Europe.  They  were  in  fact  the  originators  and 
primary holders of many of these financial products, and not just subsequent acquirers 
and  distributors  of  some  of  these  products  as  was  largely  the  case  with  financial 
institutions in Europe. Secondly, due to a more centralized institutional setup with (i) a 
central  bank  acting  as  a  lender  of  last  resort,  (ii)  the  U.S.  federal  budget  ultimately 
providing  the  financial  means  for  bailing  out  financial  institutions,  and  (iii)  other 
federal  institutions  participating  in  rescuing  the  financial  system  (such  as  the  Federal 
Deposit  Insurance  Corporation,  federal  housing  agencies,  etc.),  the  initial  response  in 
the  U.S.  was  both  quicker  and  more  robust  and  sweeping  than  was  the  case  with  the 
reaction  of    the  independent  and  separate  fiscal  authorities  and  deposit  guarantee 
schemes  of  individual  Member  States  that  were  affected  by  the  crisis  to  different 
degrees.  

Moreover, in the  U.S., emergency loan  facilities  granted and  asset purchases on non-
market  terms  by  the  central  bank  were  overlapping,  combined  with  Treasury 
interventions,  and  also  accompanied  by  further  monetary  policy  interventions.  The 
overall  result  of  stabilizing  the  financial  system  was  the  outcome  of  the  combined 
effects of all these interventions rather than the result of State aid-like interventions in 

103  

104  

105   

For a more complete but non-exhaustive list of observed depositor runs/outflow in the context of 
bail-in,  see  Annex  8.1  of  the  Impact  Assessment  Report,  accompanying  the  Commission’s 
proposal for the review of the CMDI framework, SWD(2023) 225 final. 
See  Brown  M.,  Evangelou  I.,  Stix  H.  (2017),  Banking  Crises,  Bail-ins  and  Money  Holdings, 
Central Bank of Cyprus Working Paper 2017-2 
See  M  Iwanicz-Drozdowska (2023),  Resolution and depositors’ trust empirical  analysis  of three 
resolution cases in Poland. 

37 

 
 
 
the European sense of the notion. In fact, the differences between the EU and the U.S. 
(e.g.  in  the  legal  powers  of  intervening  institutions  –  including  the  U.S.  federal 
government – and related institutional set up) prevents attempts to identify and quantify 
analogous  U.S.  mechanisms  that  would  be  equivalent  to  State  aid  measures  as 
understood in the EU.  

As  regards  the  impact  of  State  aid  measures  on  the  real  economy  through  their 
positive impact on financial stability, the E.CA study shows overall positive, albeit 
limited, effects. These are reflected by the slight decrease of the cost of banks’ lending to 
non-financial  corporations  and  of  the  EU  Member  States’  10-year  sovereign  bonds 
yields. The lack of fully conclusive results regarding the impact of State aid measures on 
the  real  economy  is  consistent  with  the  findings  of  past  studies  (as  presented  in  the 
subsequent developments on economic literature) suggesting the difficulties to delineate 
such an impact, given numerous effects at play. 

From a descriptive analysis standpoint,  Figure 10 shows the development of the supply 
conditions of euro area banks’ loans to non-financial corporations (NFC) over the period 
under review, based on the ECB Bank Lending Survey106. A worsening of banks’ loans 
supply conditions to NFC (e.g. by rendering more difficult/expensive for NFC to obtain 
bank  loans)  is  illustrated  by  the  increase  of  the  net  percentage  of  banks  reporting  a 
tightening  of  their  credit  standards.  This  has  been  witnessed  in  particular  during  the 
global financial crisis, the euro area sovereign debt crisis, the outbreak of the COVID-19 
crisis and the Russian aggression against Ukraine.  

Figure  10:  Supply  conditions  of  banks’  loans  to  non-financial  corporations  (NFC) 
and amounts of State aid used in the euro area 

Source: ECB Bank Lending Survey, Commission services 
Note: Credit Standards to NFC have a time horizon of three months forward-looking indicator and are 
calculated as a weighted net percentage (tightened minus eased or reverse) based on the share of each 
country in the total loan outstanding amounts of the area aggregate. The figure shows the net percentages 

106 ` 

The  euro  area  bank  lending  survey  (BLS)  was  launched  by  the  Eurosystem  in  2003.  Its  main 
objective is to enhance the Eurosystem’s knowledge of bank lending conditions in the euro area. It 
provides information on the lending policies of euro area banks and supplements existing statistics 
on  loans  and  bank  lending  rates  with  information  on  the  supply  of  and  demand  for  loans  to 
enterprises and households. The BLS is conducted four times a year and addressed to senior loan 
officers  at  a  representative  sample  of  euro  area  banks,  comprising  around  150  institutions 
representing  all  euro  area  countries,  and  takes  into  account  the  characteristics  of  the  respective 
national banking structures. 

38 

-400-20002004006008001000-20-10010203040506070Jan 08Jul 08Jan 09Jul 09Jan 10Jul 10Jan 11Jul 11Jan 12Jul 12Jan 13Jul 13Jan 14Jul 14Jan 15Jul 15Jan 16Jul 16Jan 17Jul 17Jan 18Jul 18Jan 19Jul 19Jan 20Jul 20Jan 21Jul 21Jan 22Jul 22Jan 23Jul 23State aid used, in EUR billion (rhs)Credit Standards to NFC, in % (lhs) 
 
 
of banks reporting a tightening of credit standards (lhs). The figure does not include the aid granted under 
the 2020 Temporary Framework and the 2022 Temporary Crisis Framework. Although the State aid 
measures under these frameworks were not granted to banks but channelled through the banking sector 
with a view to benefitting the real economy, such measures may have prevented a deterioration of banks’ 
balance-sheets notably by contributing to shielding them from an increase in their non-performing loans. In 
addition, they may have mitigated the tightening of loan supply conditions to NFC. 

More  specifically,  in  terms  of  contributing  factors  behind  these  trends,  the  ECB  bank 
lending  survey  points  out  that  euro  area  banks’  net  tightening  of  credit  conditions 
(making it more difficult/expensive for NFC to obtain bank loans) in the third quarter of 
2008 was due to the expectations regarding future economic activity and the industry or 
firm-specific outlook. At the same time, the impact of banks’ funding costs and balance 
sheet  constraints  also  contributed  to  the  net  tightening,  particularly  banks’  ability  to 
access  market  financing.  Differently,  in  the  third  quarter  of  2009,  the  ECB  lending 
survey underlines that some of the supply-side factors, namely banks’ access to market 
financing and banks’ liquidity position, supported an easing of credit standards for loans 
to enterprises. The reversal of this positive trend in the third quarter of 2011 should be 
seen,  according  to  the  ECB,  against  the  background  of  a  re-intensification  of  the 
sovereign debt crisis that undermined the perceived soundness of euro area banks. Survey 
results also indicate that constraints on banks’ liquidity management and the deterioration 
of funding conditions were key factors behind the rebound in the net tightening of credit 
standards. It was also partly due to a deterioration in both the general and the industry-
specific economic outlook, in line with the weaker economic conditions expected for the 
euro area in the second half of 2011. According to the April 2012 bank lending survey, 
the net tightening of credit standards by euro area banks declined substantially in the first 
quarter  of  2012,  both  for  loans  to  NFC  and  for  loans  to  households.  This  drop  mainly 
reflected milder pressures from cost of funds and balance sheet constraints, in particular 
as  regards  banks’  access  to  funding  and  their  liquidity  position.  In  terms  of  financial 
institutions’  net  lending  to  the  total  economy  in  the  euro  area,  expressed  in  volumes, 
Figure 11 shows that the most important negative trends were also registered during the 
first years of the financial crisis starting in 2008, with some rebounds in 2009 and 2011. 

Figure  11:  Lending  to  the  total  economy  in  the  euro  area  by  financial  institutions 
(million, EUR) 

Source: ECB data, Commission services 
Note: Lending flows correspond to the Net lending (positive territory) / net borrowing (negative territory) 

As regards the access to finance of companies, some discrepancies remained depending 
on the size of the companies, as shown by Figure 11. Hence, from 2009 until 2014, while 
the  changes  in  the  availability  of  financing  through  bank  loans  became  punctually 

39 

-80,000-60,000-40,000-20,000020,00040,00060,00080,000100,000120,000140,000Mar 08Sep 08Mar 09Sep 09Mar 10Sep 10Mar 11Sep 11Mar 12Sep 12Mar 13Sep 13Mar 14Sep 14Mar 15Sep 15Mar 16Sep 16Mar 17Sep 17Mar 18Sep 18Mar 19Sep 19Mar 20Sep 20Mar 21Sep 21Mar 22Sep 22Mar 23 
 
positive  for  large  euro  area  companies  in  2010,  2011  and  2013,  euro  area  small  and 
medium  size  enterprises  (SMEs)  continued  to  face  negative  trends  (although  subdued) 
during  these  years  as  well  as  the  whole  period.  The  more  difficult  access  to  banks’ 
lending  by  SMEs  can  be  attributed  to  the  intrinsic  higher  riskiness  of  such  companies, 
which is taken into account by banks’ risk management and lending procedures as well 
as the applicable regulatory requirements. Furthermore, the credit squeeze for SMEs was 
accentuated  by  the  lack  of  alternative  financing  mechanisms,  contrary  to  larger 
companies, which shifted as early as 2009 to bonds issuances to find substitution funds. 

More specifically, following the outbreak of the global financial crisis, the ECB lending 
survey for the third quarter of 2008 points out that for both large enterprises and SMEs, 
the  expectations  regarding  general  economic  activity  and  the  industry  or  firm-specific 
outlook were the most important factors in the tightening of credit standards. At the same 
time, banks’ funding costs and balance sheet  constraints  were more important  for large 
firms than for SMEs, which is likely to be related to the greater importance of market-
based  bank  funding  for  loans  to  large  firms.  In  the  following  years  and  until  2013,  the 
reports  on  the  joint  European  Commission/ECB  surveys  on  access  to  finance  of 
companies107  highlight  that  difficult  access  to  finance  was  among  the  top  concerns  of 
European SMEs. In this respect, about one third of the SMEs did not get the finance they 
had planned for. In general, SMEs considered that the conditions of bank financing were 
negative in terms of the interest rate and other costs, collateral and required guarantees. 
The  2011  report  underlined  that  the  highest  rejection  rate  was  among  the  micro 
companies  employing  less  than  10  people  and  among  SMEs  active  between  2  and  5 
years. Regarding equity  financing,  it was  used by  a small  portion of  the SMEs and the 
main challenge concerning this source of financing is the lack of investment readiness or 
financial knowledge. 

Figure 12: Changes in the availability of external financing through bank loans for 
euro area large companies and SMEs 

Source: ECB Survey on the access to finance of enterprises (SAFE), Commission services 
Note: changes are expressed in weighted percentages 

Overall, insofar as most of the State aid in the EU over the period under review was 
granted during the financial crisis, it is likely that it contributed to an improvement 
or preservation of financial institutions’ lending capabilities to the real economy in 
the subsequent years, as reflected by Figure 10 and Figure 11. In the same way as for 
the  impact  on  financial  stability,  the  positive  effect  of  State  aid  on  banks’  financial 

107  

See European Commission access-finance/data-and-surveys-SAFE 

40 

-40-30-20-10010203040Large EnterprisesSMEs 
 
 
intermediation role becomes however less obvious over time, against the background of a 
progressive decrease of State aid measures. Since 2020, however, it is worthwhile noting 
that  the  very  significant  amounts  of  liquidity  aid  granted  under  the  2020  Temporary 
Framework108 following the COVID-19 outbreak and under the 2022 Temporary Crisis 
Framework109  in  the  context  of  the  Russian  aggression  against  Ukraine  contributed  to 
mitigating the tightening of banks’ credit standards in times of crisis (see Figure 10). 

in  turn,  has  resulted 

These  results  are  consistent  with  past  studies,  which  found  that  State  aid  has 
contributed  to  higher  financial  stability  which, 
in 
improvements  in  real  economy  outcomes.  However,  these  studies  focus  on  the 
aftermath  of the financial  crisis  of 2008 during  which limited alternatives to  the use of 
State aid were available. The Beck et al. (2020) study110 on shocks that have the potential 
to  affect  financial  stability  concluded  that  in  some  EU  Member  States,  more  prone  to 
provide  State  aid  rather  than  bail-ins,  systemic  risk  contributions  were  less  important 
after large shocks. More specifically, that study highlights that, differently from State aid 
support or bailouts, resolution measures such as bail-ins may reinforce uncertainty, under 
certain  circumstances,  in  the  middle  of  a  crisis  and  may  give  rise  to  contagion  effects, 
therefore exacerbating system-wide shocks. Importantly, that study covered a period that 
predates the entry into force of the fully-fledged CMDI framework in the EU, including 
its crucial components that increase loss absorption and recapitalisation capacity of banks 
(e.g.  through  MREL)  and  improve  the  authorities’  and  financial  market  actors’ 
preparedness for resolution in general and for bail-ins in particular, thereby limiting the 
contagion  effects  that  any  disorderly  bank  failure  would  have  on  the  economy.  The 
Barucci  et  al.  (2019)  study111  on  the  real  effects  of  State  aid  found  that  State  financial 
support was able to enhance economic conditions by restoring trust in financial markets. 
More  specifically,  improvements  in  financial  stability  brought  about  by  State  aid 
enhanced non-financial companies’ capabilities to issue bonds and shares (as a response 
to reduced bank lending), which is interpreted as State aid improving the credit provision 
to the real economy. As far as the impact of State aid on the real economy is concerned, 
the  Berger  (2018)  study112  included  findings  in  the  context  of  the  assessment  of  the 
Troubled  Asset  Relief  Programs  (TARP113)  bailouts  in  the  United  States.  Hence,  that 
study points to the difficulties to delineate such effects, given both positive and negative 
impacts at play. Furthermore, it is not known to what extent the benefits outweigh costs 
(or  vice  versa).  For  instance,  it  can  be  noted  that  State  aid  for  banks  increases  overall 
supply  of  credit  and  lowers  cost  of  capital,  leading  to  more  investment  and  boosting 
economic growth. On the other hand, increased  credit supplies  can limit investment  by 
reducing risk-taking, thereby restricting overall economic growth. 

The  above  findings  are  also  consistent  with  the  stakeholders’  replies  to  the  public  and 
targeted  consultations  (see  also  Annex  VI).  In  the  public  and  targeted  consultations, 
most  respondents  agreed  with  the  statement  that  the  State  aid  rules  for  banks  in 

108  
109  
110  

111  

112  

113  

See footnote 19. 
See footnote 20. 
Beck, T., Radev, D., & Schnabel, I. (2020), Bank Resolution Regimes and Systemic Risk, SSRN 
Electronic Journal, available at: https://doi.org/10.2139/ssrn.3593542. 
Barucci, E., Colozza, T., & Milani, C. (2019),  The effect of bank bail-outs in the EU, Journal of 
International 
at: 
Money 
https://doi.org/10.1016/j.jimonfin.2019.03.004.  
Berger,  A.  N.  (2018).  The  benefits  and  costs  of  the  TARP  bailouts:  A  critical  assessment. 
Quarterly Journal of Finance, 8(02), 1850011. 
TARP  refers  to  the  plan  initiated  by  the  US  government  mainly  to  purchase  large  quantities  of 
distressed or “structured” assets from financial institutions when the markets for these assets were 
not functioning well. See endnote iv of Annex IV.   

available 

Finance, 

14-26, 

and 

95, 

41 

 
 
difficulty  have  been  successful  in  achieving  the  objective  of  contributing  to  the 
preservation  of  financial  stability  by  enabling  the  continued  smooth  functioning  of 
individual  banks  and  the  banking  sector.  More  specifically,  while  14  respondents 
(including 7 business organisations/associations, 3 public authorities, 1 EU citizen) were 
neutral  as  regards  the  question,  13  (7  public  authorities,  4  EU  citizens  and  2  Trade 
Unions) considered that the achievement of this objective was rather successful and 4 (2 
public authorities, 1 EU citizen and 1 business organisation) that it was very successful. 
By  contrast,  5  respondents  (of  which  3  business  associations/organisation,  1  public 
authority  and  1  non-specified)  considered  that  the  fulfilment  of  the  financial  stability 
objective  was  rather  not  successful,  and  3  (2  non-governmental  associations  and  1 
company  organisation)  that  it  was  not  successful.  Furthermore,  aside  from  State  aid  to 
banks  in  difficulty,  other  financial  stability  drivers  were  also  referred  to,  such  as  the 
implementation  of  the  CRR114  and  the  CRD115  package,  the  establishment  of  a  macro-
prudential  framework  and  the  Banking  Union  in  2013,  as  well  as  the  accommodative 
monetary policy conducted by the ECB. To note also that some respondents referred to 
the  entry  into  force  of  the  CMDI  framework  and  the  need  to  ensure  consistency  with 
State  aid  rules  in  order  to,  e.g.  further  limit  the  amount  of  public  support  to  banks  in 
difficulty while addressing the objective of financial stability. 

As regards the long-term impact of State aid rules on the real economy, whereas most 
respondents  (between  21  and  22)  did  not  express  any  specific  view,  some  of  them 
(between  9  and  12116)  agreed  that  the  rules  have  been  successful  in  ensuring  that 
creditworthy  enterprises  were  able  to  get  the  bank  loans  or  other  forms  of  credit  they 
needed,  with  no  significant  differentiation  between  small  and  medium-sized  and  large 
enterprises (see Figure 13). 

114  
115  
116  

See footnote 9. 
See footnote 10. 
Of  which,  depending  on  the  specific  question,  5  to  6  public  authorities,  1  to  2  EU  citizens,  1 
business organisation and 1 trade union. 

42 

 
 
Figure 13: Consultations’ replies on the extent to which State aid rules for banks in 
difficulty  were  successful  in  contributing  to  long-term  impacts  related  to  banks’ 
lending. 

Source: European Commission 

In  bilateral  meetings  held  with  EU  and  Member  States’  authorities,  the  authorities 
underlined  the  important  role  played  by  State  aid  measures  in  preserving  financial 
stability,  especially  during  the  financial  crisis.  The  swift  implementation  of  such 
measures  was  also  pointed  out  as  a  key  factor  for  achieving  this  objective.  Some 
authorities were nevertheless of the view that, as of 2015, the measures taken under the 
CMDI  framework,  including  precautionary  measures  and  resolution,  should  have 
increasingly fulfilled this function instead. 

4.1.1.2.  Restoring viability  

As  stated  in  Section  2.1,  in  order  to  achieve  its  objective,  the  State  aid  rules  under 
evaluation  set  out  targeted  compatibility  criteria.  Accordingly,  Member  States  should 
encourage  the  exit  of  non-viable117  players  in  an  orderly  manner,  with  the  support  of 
liquidation aid if needed to preserve financial stability. Aid, either in the form of liquidity 
or capital, to banks remaining in the market should be limited to institutions expected to 
preserve  or  restore  their  viability,  including  –  where  applicable  –  through  the 
implementation  of  a  restructuring  plan,  submitted  by  Member  States  as  part  of  their 
commitments, analysed by the Commission as part of the initial compatibility assessment 
and subsequently monitored in its implementation, with the support of a trustee, during 
the restructuring period (which is normally expected to last up to 5 years).  

Against this background, the evaluation assesses whether the State aid rules for banks in 
difficulty have been effective in ensuring that aid was properly channelled based on the 
ex ante assessment of the viability prospects of the beneficiary bank, and – in particular – 

117  

Viability  is  further  defined  by  point  13  of  the  2009  Restructuring  Communication  as  achieved 
when a bank is able to cover all its costs including depreciation and financial charges and provide 
an appropriate return on equity, taking into account the risk profile of the bank. 

43 

 
 
 
whether  restructuring  aid  was  granted 
implementation of their restructuring plan, to return to viability. 

to  banks 

that  managed, 

through 

the 

The 2015 Competition State aid brief argued that the restructuring plans – as approved by 
the Commission as part of its decision on the compatibility of the aid measure with  the 
rules  under  evaluation  –  helped  the  banks  that  had  benefited  from  restructuring  aid 
improve their operational  and risk indicators, and  their funding and solvency positions, 
and thus converge towards their unaided peers.118 Gerhardt and Vander Vennet (2017)119 
suggest  that  any  turnaround  of  the  aided  banks  was  arguably  slow.  Lamers  at  al. 
(2022)120 confirm the convergence of the weakest banks towards the industry average as 
well  as  the  slow  pace  of  this  process.  In  short,  the  literature  provides  evidence  to 
conclude  that  aided  banks  remaining  in  the  market  have  slowly  restored  their  viability, 
although  the  contribution  of  State  aid  rules  to  that  result  remains  uncertain.  While 
acknowledging this trend, the 2020 ECA Special Report noted that not all the banks that 
had received restructuring aid properly restored their viability. 121 

Against  this  background,  the  Study  has  assessed  the  evolution  of  relevant 
performance indicators of aided banks, in terms of profitability, asset quality, cost 
structure, capital structure and liquidity profile. In doing so the E.CA study ran: (i) a 
descriptive analysis where the evolution of indicators for banks that at some point in time 
received aid is compared to the full sample of non-aided banks; (ii) a comparison of the 
indicators between aided banks with a matched sample of non-aided banks with similar 
size  and  business  models;  (iii)  an  econometric  difference-in-differences  analysis122 
aiming  at  assessing,  to  the  extent  possible,  the  effect  of  aid  on  a  selected  number  of 
performance indicators as a function of the time elapsed since aid was received.  

Evidence  of  convergence  of  the  indicators  between  aided  and  non-aided  banks 
suggests the restoration of viability for aided banks, to the extent that non-aided banks 
can be expected to be viable on average. While the return to viability of aided banks has 
an  impact  on  the  viability  of  the  banking  sector  at  large  and  on  financial  stability,  the 
State aid rules under evaluation do not aim at addressing by themselves the  viability of 
the  aggregate  banking  sector,  which  goes  beyond  the  remit  of  State  aid  control,  as 
described Section 2.1.2. 

The E.CA study found that the levels of broadly all the tested indicators recorded by 
the aided banks converged, after aid was received, towards  the levels  recorded by 
the non-aided banks. This convergence was typically achieved within the timeframe 
of five years targeted by the Commission, with some exceptions, such as for the non-
performing  loans  (NPLs)  ratio.  This  finding  is  robust  across  the  three  different 
methodological  approaches  described  above.  In  particular,  the  econometric  method 
further allows us to observe that the evolution of the performance indicators during the 
restructuring period depends on the type of State aid procedure employed (individual vs. 
scheme aid), while the return to long term viability after more than five years is largely 

118  
119  

120  

121  
122  

See footnote 24. 
Gerhardt,  M.,  &  Vander  Vennet,  R.  (2017),  Bank  bailouts  in  Europe  and  bank  performance, 
Finance Research Letters, 22, 74–80, available at: https://doi.org/10.1016/j.frl.2016.12.028. 
Lamers,  M.,  Present,  T.,  &  Vander  Vennet,  R.  (2022),  European  bank  profitability:  The  great 
convergence?, Finance Research Letters, 49, 10308.8. 
See footnote 15, paragraph 25.   
A statistical method employed to estimate the causal effect of a treatment, policy, or intervention 
in observational studies. This technique compares the changes in outcomes over time between a 
treatment group and a control group. The accuracy of the estimates hinges on the ability to match 
the  treatment  and  the  control  groups,  ideally  defined  randomly  -  which  was  not  possible  in  the 
context of this study. See Annex II (Methodology and Analytical Model Used) for more details. 

44 

 
 
independent of the framework under which this aid is administered. This evidence may 
suggest that the aid procedure contributed to the restoration of viability but cannot 
confirm whether it was the (main) driver of such restoration. 

With specific regard to the ratio of NPLs of aided banks, which – as mentioned above – 
converged to the one of non-aided banks with  a slower pace than expected, it could be 
mentioned  that  their  high  levels  negatively  affect  not  only  banks’  profitability  but  also 
their ability to finance  new lending, with  wider  repercussions  on the  real  economy  and 
potentially  on financial stability.  Recognising  the importance for banks to address high 
NPL  ratios  swiftly,  the  restructuring  plans  of  aided  banks,  as  agreed  with  the 
Commission,  have  virtually  always  contained  explicit  and  timely  targets  on  NPL 
reduction.  Against  this  background,  in  line  with  the  already  mentioned  difficulties  to 
estimate  “causality”  in  this  context,  significant  factors  other  than  State  aid  control 
should  be  mentioned  to  explain  the  relatively  slow  decrease  in  NPL  levels  in  the 
context of an unprecedented increase of such assets.123 This is certainly the case of (i) the 
prolonged  negative  macro-economic  environment  during  the  global  financial  and 
sovereign debt crises124, (ii) the slow or partial improvements of the insolvency and debt 
enforcement  frameworks  in  some  Member  States125,  (iii)  the  gradual  introduction  of 
dedicated  regulatory  and  supervisory  actions126,  and  (iv)  the  difficulties  in  the 
development of markets for distressed assets127. 

The  E.CA  study  also  found  that  the  profitability  of  individually  aided  banks,  while 
converging toward the profitability of non-aided banks, tended to remain below the 
level recorded by those aided banks before they had received aid (see Figure 14 for 
return on average equity and return on average assets). Among the possible explanations, 
the E.CA study considers plausible that a bank in need of restructuring aid had typically 
deployed - before the aid was needed - higher leverage and riskier business models, both 
feeding  higher profitability in  stable times and unfolding their negative effects  in crisis 
times, possibly resulting in the request for aid. To this extent, the evidence summarised 
above, that restructured banks tend to converge toward their peers rather than their past 
levels, may suggest that the restructuring process was ultimately effective in reaching 
a  more  sustainable  viability,  even  if  this  possibly  required  some  time  to  clean  up  the 
balance sheet and reshuffle it towards a more sustainable business model. 

123  See Aiya et al. (2015). A Strategy for Resolving Europe’s Problem Loans – IMF Discussion Note. 
124   
125  

See Figure 1 in Section 3.1. 
See e.g. Coutinho et al. (2023). Insolvency Framework across the EU: Challenges after COVID-
19 – Discussion Paper 182 – European Commission. 
In December 2015, EBA strengthened the  reporting standards on NPLs.  However, the  incurred-
loss  approach  to  loan  provisioning  under  International  Financial  Reporting  Standards  (IFRS) 
remained backward-looking until the introduction of IFRS 9 in 2018. 
To facilitate that, the Commission has also adopted decisions authorising (i) the set-up - under the 
State aid rules under evaluation - of aided asset management companies dedicated to the clean-up 
of  NPLs  from  the  national  banking  systems  at  larger  (e.g.  in  Ireland  and  Spain),  and  (ii)  the 
provision by Member States of market-conform guarantees, available to all banks, to facilitate the 
securitisation and sale of NPLs  (e.g. in Italy and Greece). 

126  

127  

45 

 
 
Figure 14: Return on average equity  (RoAE) (left) and ron average assets (RoAA) 
(right) 

 Source: E.CA and partners  
Notes: The figure shows the estimated size of the effect of aid for scheme and individually aided banks in 
the dynamic DiD approach. See footnote 122 and Annex II for more details on the methodology. The 
vertical axis shows the changes in percentage points of the levels of the given indicator (RoAA and RoAE) 
between aided and non-aided banks; a level of zero indicates convergence between aided and non-aided 
banks. The horizontal axis presents the interval of time, expressed in number of years, before and after the 
time (“T”) of the granting of the aid. 

Moreover, E.CA studied the main features and outcomes of the restructuring processes. 
While  some  banks that  received restructuring aid  needed additional aid,  Figure 15 (left 
graph)  shows  that  almost  all  those  cases  of  repeated  aid  (orange  bars)  occurred  at  the 
peak  of  the  crisis.  Accordingly,  the  need  for  additional  public  support  disappeared 
relatively fast,  compared to  other financial crises.128 Subsequent  aid measures were not 
always  used  to  further  support  the  restructuring  processes  of  the  concerned  banks  but 
sometimes  to  facilitate  their  subsequent  market  exit,  whenever  the  planned  return  to 
viability  proved  unrealistic.  While  this  can  be  interpreted  as  the  Commission’s  ex  ante 
viability assessment not always being proved correct ex post, it contributed to the finding 
-  shown  by  Figure  15  (right  graph)  –  that  banks  that  benefitted  from  restructuring  aid 
(orange bars) eventually exhibited similar exit rates129 as banks that did not receive any 
aid  (yellow  bars),  on  aggregate,  over  the  period  under  evaluation.  Banks  that  had 
benefitted from restructuring aid but ultimately exited the market did so on average after 
3.23 years from the first receipt of restructuring aid, i.e. relatively swiftly. In other words, 
restructuring aid did not structurally distort the typical market survival dynamics, 
as it did not maintain artificially in the markets banks with no viability prospects.  

128  

129  

For  example,  in  the  case  of  the  Japanese  banking  crisis,  banks  received  additional  capital 
injections more than ten years after the initial shock. See Hoshi and Kashyap (2010); "Will the US 
Bank  Recapitalization  Succeed?  Lessons  from  Japan."  Journal  of  Financial  Economics  97  (3): 
398-417. 
Exit should not be read as corresponding only to an event of a bank failing, as it could result also 
from other technical reasons as e.g., a merger or acquisition. 

46 

T-3yrsT-2yrsT-1yrsTT+1yrsT+2yrsT+3yrsT+4yrsT+5yrsT+6yrsT+7yrsT+8yrs-40-35-30-25-20-15-10-505101520T-3 yrsT-2 yrsT-1 yrsTT+1 yrsT+2 yrsT+3 yrsT+4 yrsT+5 yrsT+6 yrsT+7 yrsT+8 yrsChange in indicator (p.p.)Individually aidedScheme aidedT-3 yrsT-2 yrsT-1 yrsTT+1 yrsT+2 yrsT+3 yrsT+4 yrsT+5 yrsT+6 yrsT+7 yrsT+8 yrs-3.5-3.0-2.5-2.0-1.5-1.0-0.50.00.51.01.52.0T-3 yrsT-2 yrsT-1 yrsTT+1 yrsT+2 yrsT+3 yrsT+4 yrsT+5 yrsT+6 yrsT+7 yrsT+8 yrsChange in indicator (p.p.)Individually aidedScheme aided 
 
 
 
Figure 15 : Additional aid and exits 

Percentage  of  banks  receiving  additional 
aid, by aid type 

Annual exit rates, by aid type 

Source: E.CA and partners  
Note: The figure on the right shows the percentage of banks that use additional aid in a given year in the 
different groups. The percentage is computed as the share of aided banks of a given type that receive 
additional aid in a specific year, relative to banks of that type that had been aided for the first time in that 
year or before. The figure on the left shows the probability that a bank of a given type exits the sample in a 
given year. The probability for aided banks is computed as the share of banks of a given type that exit the 
sample in a specific year, relative to banks of that type present in that year that had been aided in that year 
or before. The probability for non-aided banks is computed as the share of non-aided banks that exit the 
sample in a specific year, relative to non-aided banks present in the sample in that year. 

The  Study  further  analysed  the  factors  that  could  potentially  be  used  to  distinguish  ex 
ante fundamentally viable banks from banks that should exit the market and could hence 
help  to  avoid  potential  problems  in  the  restructuring  process.  Interestingly,  the  Study 
found that the restructuring process has been more difficult not just  – as expected – for 
banks with  relatively worse  ex ante performance  indicators  (e.g.  higher NPLs) but  also 
for  the  once  more  profitable.  This  can  further  confirm  that  banks  requiring  aid  may 
typically  do  so  because  of  riskier  and/or  more  leveraged  business  models  that  get 
exposed to a shock - which may in turn result in the need of more dramatic turnaround 
from  the  banks  in  question  to  return  to  a  new  viable  steady  state.  The  study  also 
highlights that restructuring of large banks seems to be more difficult than that of smaller 
banks: larger banks need more time to return to profitability and more often continue to 
exhibit losses after the restructuring period. 

At the same time, it is not possible to find a set of statistically significant indicators 
and  related  thresholds  easily  applicable  to  clearly  distinguish,  ex  ante  and  with 
sufficient  confidence,  banks  that  could  reasonably  be  expected  to  restore  their 
viability and those that could not.  

In other terms, the ex ante assessment of the viability of aided banks is hindered by 
the same uncertainty applying to any financial or business decision and, as such, has 
natural  limitations.  For  this  reason,  the  assessment  of  the  restructuring  plan  is  a 
delicate  exercise  that  deserves  proper  and  close  follow-up  monitoring.130  When  the 
reality turns out different than initially forecasted (e.g. because of unforeseen changes in 
the macro-economic conditions), a swift adaptation of the restructuring plans (including 

130  

See footnote15, paragraph 65. ECA found that the Commission assessed restructuring plans very 
rigorously, requiring detailed information and scrutinising it thoroughly.  

47 

01020304050607020052007200920112013201520172019Aided - LiquidationAided - RestructuringAided - Scheme0102030405020052007200920112013201520172019Aided - LiquidationAided - RestructuringAided - SchemeNon-Aided 
 
 
 
 
through  –  if  needed  –  the  provision  of  additional  aid  and/or  the  market  exit  of  the 
beneficiary) may be needed to preserve financial stability.  

In  the  context  of  the  stakeholders’  consultation,  a  significant  number  of  respondents 
(namely 16 who did not express any opinion and 11 that were neutral131) were not able to 
confirm  whether  the  return  to  viability  of  the  troubled  banks  was  the  result  of  the 
application  of  the  State  aid  rules  under  evaluation.  Such  replies  are  consistent  with  the 
statistical difficulty in distinguishing “causation” and “correlation” in this context. Most 
of  the  7  respondents  (namely  5  public  authorities,  1  citizen  and  1  non-governmental 
organisation) who had a positive view acknowledged that the State aid rules have been 
effective  in  addressing  the  liquidity  issues  faced  by  some  banks  and  in  ensuring  the 
orderly market exit of unviable banks.  

authorities 

(viewed  positively  by  3  public 

When  asked  about  the  types  of  restructuring  measures  that  were  more  effective  in 
restoring  the  bank’s  viability,  most  of  the  respondents  who  replied  to  this  question 
supported  those  aiming  at  reforming  internal  risk  management  policy  and  corporate 
governance 
and  6  business 
organisations/associations), the divestment of loss-making activities and more generally 
the  balance-sheet  de-risking  (viewed  positively  by  3  public  authorities  and  6  business 
organisations),  as  opposed  to,  e.g.,  measures  aiming  at  improving  the  aided  bank’s 
revenue-generating  potential  (viewed  negatively  by  1  public  authority  and  4  business 
organisations/associations) (see Figure 16). Recalling the need to strike the right balance 
in  the  fundamental  trade-off  between  the  objectives  of  restoring  viability  and  curbing 
competition  distortions,  both  enshrined  in  the  State  aid  rules  and  reflected  in  the 
restructuring plans, respondents pointed out that due attention should be paid to measures 
that  actually  risk  limiting  banks’  long-term  viability,  such  as  requirements  to  divest 
profitable subsidiaries by specific deadlines.  

131  

Of  which  5  business  organisations/associations,  2  public  authorities,  1  trade  union  and  1  EU 
citizen. 

48 

 
 
Figure 16: Consultations’ replies on the extent to which the implementation of the 
following measures to restore the long-term viability of banks have been effective 

Source: European Commission 

In the bilateral meetings, some public authorities pleaded in favour of a bolder approach 
aiming at either a swift exit or a prompter return to viability of the beneficiary banks, as 
opposed to  a more complex and gradual  restructuring process  aiming  at  balancing  both 
the  viability  and  competition  objectives.  However,  some  public  authorities  also 
highlighted the uncertainty linked to the ex ante viability assessment and pointed to the 
two opposing scenarios of (i) providing restructuring aid to a bank  ultimately unable to 
return  to  viability  or  (ii)  refusing  restructuring  aid  to  a  potentially  viable  bank.  On  the 
one  hand,  granting  restructuring  aid  to  a  bank  that  would  ultimately  exit  the  market 
would likely result in higher net  costs due to the protracted adjustment process. On the 
other hand, not granting restructuring aid to a bank that could have ultimately restored its 
viability could also result in higher costs for the bank’s stakeholders, including, e.g. its 
employees and suppliers, and ultimately also for the State which may have to counteract 
potential negative effects on the economy and/or financial stability if it does not grant the 
aid resulting in the potentially disorderly failure of the bank. To that extent, they pleaded 
in favour of a flexible approach towards the restructuring processes.  

Considering all available evidence,  it  can be  concluded that  the State aid rules under 
evaluation  were  overall  effective  in  supporting  the  restoration  of  viability  of  the 
banks that received restructuring aid and the market exit of other banks receiving 
liquidation aid. The ex ante viability analysis, performed by the Commission as part of 
its  compatibility  assessment  based  on  the  rules  under  evaluation,  was  satisfactory,  as 
viability has been restored in the majority of cases of banks having received restructuring 
aid.  The  limited  cases  of  beneficiaries,  which  had  ex  ante  been  assessed  as  potentially 
viable and had to receive subsequent aid to exit the market, occurred almost exclusively 
at the peak of the crisis. It is important to note that these cases were promptly identified, 
through close monitoring of the implementation of their restructuring plans, and that the 
provision  of  liquidation  aid,  whenever  necessary  to  the  banks  exiting  the  markets,  has 
helped minimise any ensuing market turbulence.  

49 

 
 
The  return  to  viability  has  taken  on  average  5  years,  with  some  delay  in  certain  cases 
and/or  for  certain  indicators  (e.g.  NPLs).  While  weak  banks  can  be  expected  to 
implement  a  turnaround  plan  regardless  of  the  State  aid  rules,  the  requirement  of  a 
restructuring  plan  has  added  discipline  to  the  adjustment  process,  with  the  aim  of 
achieving  a  viability  that  was  sustainable,  e.g.  by  avoiding  simple  leveraging-up  or 
market  share  grabbing.  Accordingly,  while  it  can  be  argued  that  some  measures 
introduced  in  the  restructuring  plans,  e.g.  to  curb  competition  distortions  and/or  to 
minimise  the  amount  of  aid,  such  as  divestments  of  certain  profitable  businesses,  may 
have added some complexity to the restructuring process, this should be read in light of 
the  objective  of  the  State  aid  rules  under  evaluation,  which  aim  not  only  at  preserving 
financial stability in the short-term but also at supporting it in the medium- to long-term, 
e.g.  by  fostering  a  healthy  banking  sector,  through  the  minimisation  of  competition 
distortions. 

4.1.1.3.  Mitigating competition distortions 

One  of  the  key  objectives  of  the  State  aid  rules  under  evaluation  is  to  minimise 
competition distortions stemming from granting such aid. Indeed, State aid may provide 
a  competitive  advantage  to  the  recipient  banks  at  the  expense  of  competitors  that  have 
not  received  aid.  The  Commission  recognises  these  problems  and  therefore  the 
authorisation of aid to banks that continue to act on the market has typically relied on a 
series  of  measures  (laid  down  in  commitments)  intended  to  mitigate  competition 
distortions (see Box 3 in Section 3.3).  

In  this  context,  the  E.CA  study  investigated  the  impact  of  State  aid  to  banks  on 
competition within the banking sector. Effective State aid control (via effective measures 
to  mitigate  competition  distortions)  would  imply  no  significant  distortive  effect  of  the 
State aid on competition. 

The literature on the effects of granting State aid to banks in difficulty on competition in 
the  banking  sector  is  rather  limited.  The  findings  resulting  therefrom  are  mostly  not 
sufficiently  clearly  pointing  to  any  relationship  between  the  level  of  State  aid  and  the 
level  of  competition.  For  example,  the  2011  Commission  Staff  Working  Paper132 
analysed how State aid given in response to the financial crisis to Member States related 
to concentration in the European banking sector between 2007 and 2009 and did not find 
any immediate relation between State aid to the banking sector and the evolution of the 
concentration  of  the  European  banking  market.  Significant  State  support  led  to  higher 
concentration of the market in some Member States and to lower market concentration in 
other Member States. 
Similarly, Cardillo et al.133 (2023) looked at a different angle and analysed a sample of 
256 commercial banks from the EU, Switzerland and Iceland. The bank data covered the 
period from 2007 to 2017. Using a difference-in-differences analysis,134 that study found 
that  government  interventions  led  to  lower  margins  and  higher  risk.  However,  these 
results hold only when government intervention did not come with restricting conditions 
for the aided banks.  In other words,  no significant  negative impact  on competition  was 
found  when  constraints  were  attached  to  the  government  intervention.  The  results  of 

132  
133  

134  

See footnote 24. 
Cardillo,  G.,  Fiordelisi,  F.  &  Ricci,  O.  (2023),  Bank  Bailouts  and  Competitive  Distortions, 
available at SSRN: https://ssrn.com/abstract=3912465 or http://dx.doi.org/10.2139/ssrn.3912465. 
See footnote 122. 

50 

 
 
some  studies  analysing  the  banking  sector  in  the  United  States  contrast  with  the  above 
results from the European or global context.135 

Building on and expanding the existing literature, the E.CA study provides an empirical 
assessment  of  the  impact  of  State  aid  on  competition.  The  main  insights  from  this 
assessment  are  based  on  a  bank-level  analysis.  The  underlying  question  of  this 
assessment  is  whether,  following  the  reception  of  aid,  competition  indicators  of  banks 
that have received State aid followed a different evolution than those of non-aided banks. 
To  answer  this  question  in  a  methodologically  sound  way,  a  difference-in-differences 
approach136  with  propensity  score  matching137  was  used,  allowing  to  establish  relevant 
counterfactual observations.    

The  E.CA  study  assesses  the  effect  of  aid  on  competition  through  proxies  of  banks’ 
market  power  (raw  markup,  Lerner  index),  cost  structures  (marginal  cost)  and  other 
measures  of  the  level  of  competition  (net  interest  margin,  market  shares).138  The  joint 
interpretation  of  the  aid  impact  on  these  five  indicators  allows  for  robust  conclusions 
about  the  overall  effect  on  the  competitive  environment  in  the  banking  sector.  The 
analysis  is  undertaken  separately  depending  on  the  type  of  the  State  aid  decision,  i.e. 
distinguishing between banks  that received  aid  on the basis of a scheme  and those that 
received aid on an individual basis. 

As  regards  banks  that  received  State  aid  on  the  basis  of  a  scheme,  which  are  much 
smaller  than  the  individually  aided  banks  and  their  matched  peers,  the  analysis  reveals 
that those banks experienced a temporary increase in their income relative to their costs 
(the  “raw  markup”  indicator),  suggesting  that  the  aided  banks  were  able  to  generate 
additional revenues with unchanged costs after being aided. In essence, these higher raw 
markups were achieved by scheme-aided banks during a three-year period following the 
granting  of  State  aid,  as  opposed  to  their  matched  non-aided  counterparts.  A  further 
narrowing down of the observed sample revealed that the increase was driven mainly by 
non-significant  banks  and  banks  located  in  Member  States  highly  affected  by  the 
financial  crisis.  This  observation  possibly  suggests  the  banks’  ability  to  exercise  some 
market power after being aided and thus benefitting from an advantage liable to distort 

135  

136   
137  

138  

Berger, A. N., & Roman, R. A. (2015), Did TARP banks get competitive advantages?, Journal of 
Financial  and  Quantitative  Analysis,  50(6),  1199-1236.  Berger  and  Roman  study  a  sample  of 
7,323 banks between 2005 and 2012 which were the recipients of the TARP in the United States. 
Using  a  difference-in-differences  setting,  the  authors  found  a  negative  effect  of  aid  on 
competition, as aided banks gained market shares, measured by local market shares of assets and 
market power, measured by the Lerner index. 
See footnote 122. 
A statistical technique used to reduce selection bias in observational studies by making treated and 
untreated groups more comparable, thus mitigating the methodological limitations highlighted in 
footnote 122.  
The indicators can be understood as follows: Raw markup is a performance indicator based on the 
simple ratio of a bank’s income over costs. An increased raw markup can be read as the banks’ 
ability to increase their price  without a corresponding increase in their costs, hence as increased 
market  power  or  reduced  competition.  Lerner  index  (based  on  cost  function  estimation)  is  a 
performance indicator measuring the ability of firms to price above marginal costs; conceptually, 
it relates to the level of firms’ market power. Marginal cost (based on cost function estimation) is 
a  performance  indicator  providing  insight  into  how  banks’  cost  structure  has  developed to  shed 
additional  light  on  whether  the  changes  in  the  Lerner  index  are  driven  by  the  changes  in  cost 
structure or changes on the income side, and hence possible changes in competition. Net interest 
margin is a performance measure defined as the differential between the interest income generated 
by banks and the interest expense  paid out to their depositors. It may capture several aspects of 
operations  (bank’s  risk  profile,  efficiency,  macroeconomic  environment,  or  market  power)  and, 
therefore,  should  be  interpreted  with  caution.  Banks’  market  share  is  a  structural  indicator  to 
capture a bank’s market share at Member State level.   

51 

 
 
competition, albeit on a temporary basis. However, although statistically significant, the 
increase  in  the  raw  markup  was  limited  to  around  +5%.  Its  magnitude  was  therefore 
relatively limited even for these subsets of banks. Moreover, looking at the development 
of the other relevant indicators mentioned above, no such change following the granting 
of aid was observed with respect to the aided banks’ market power or cost structure that 
would support this hypothesis. Therefore, the result based on the indicator of raw markup 
cannot be overinterpreted. Given the temporariness of the change in the indicator of raw 
markup,  and  the  lack  of  further  supporting  empirical  evidence,  it  is  not  possible  to 
conclude that the aid under aid schemes caused a significant market distortion.  

Figure 17: Development of raw mark-up and Lerner index indicators 

Source: E.CA and partners 
Note: the figure shows the development of the mean raw markup (left panel) and the mean Lerner index 
(right panel) over the nine-year window around the treatment (grant of State aid), separating the sample 
into scheme and individually aided banks, as well as their respective matched controls (non-aided banks). 

The findings related to scheme-aided banks are likely mostly attributable to aid schemes 
comprising mostly liquidity aid. Indeed, when further restricting the sample only to those 
scheme-aided banks that benefitted from liquidity instruments and no capital support, the 
results  are  almost  the  same  as  in  the  baseline  results  and  indicate  that  the  effects  for 
scheme-aided  banks  are  attributable  to  those  scheme-aided  banks  that  received  aid 
involving liquidity instruments.   

Conversely,  the  Study  has  demonstrated  that  banks  that  had  received  individual  aid 
experienced  a  decline  in  raw  markups,  meaning  that  the  banks’  profitability  worsened 
after  they  had  received  aid.  The  Study  shows  that  this  decrease  in  markups  seems 
primarily  tied  to  an  increase  in  marginal  costs.  In  economic  terms,  the  aided  banks 
became less cost-efficient compared to their non-aided peers. The observed cost changes 
most likely result from the restructuring processes or more assertive loan loss recognition 
undertaken  by  banks,  as  also  suggested  by  insights  from  the  assessment  of  the  banks’ 
viability as well as existing literature.  

When  considering  only  those  banks  that  were  aided  by  capital  support  (alone,  or  in 
combination  with  liquidity  aid),  the  baseline  results  are  even  more  pronounced  in 
magnitude and in significance. This highlights that the observed effects for individual aid 
are driven by banks that received aid in the form of capital support. 

The  E.CA  study  thus  shows  that  banks  that  received  aid  under  individual  State  aid 
decisions were not in a position to significantly distort competition. The Study has 
not identified  any lasting signs of increased market power of the aided banks, nor 
an improved competitive position of these banks in the market.  

52 

1.31.351.41.451.51.551.6T-3T-2T-10T+1T+2T+3T+4T+5Individually aidedMatched non-aided (individual)Scheme aidedMatched non-aided (scheme)0.220.240.260.280.30.32T-3T-2T-10T+1T+2T+3T+4T+5Individually aidedMatched non-aided (individual)Scheme aidedMatched non-aided (scheme) 
 
 
The  Study  thus  explicitly  analysed  the  impact  of  the  imposed  measures  on  market 
structures and addressed  one of the issues raised by the European Court of Auditors as 
missing in the analysis of the existing practice. 

In search for possible explanations of the observed outcomes, the Study then explored the 
role of State aid conditionality in the mitigation of competition distortions caused by the 
State aid. The analysis of commitments for individually aided banks sheds further light 
on  the  possible  causes  of  the  findings  of  the  analysis  at  bank  level.  In  particular, 
individual aid to banks has been typically authorised on the basis of certain commitments 
designed  to  mitigate  competition  distortions  caused  by  the  aid.  Also,  many  such  banks 
faced multiple commitments in  parallel: more than half of the individually  aided banks 
were bound by structural, quasi-structural and behavioural commitments simultaneously. 
For  capital  support,  commitment  intensity  correlated  positively  with  bank  size  and  aid 
volume.  

The  findings  of  no  significant  and  lasting  distortions  of  competition  for  individually 
aided  banks,  e.g.  in  connection  with  increased  market  power  or  improved  competitive 
market  position,  are  consistent  with  the  idea  that  commitments  involved  in  cases  of 
individual  aid  have  likely  played  a  role  in  mitigating  competition  distortions.  This 
aligns  with  previous  studies  that  emphasise  that  conditions  attached  to  bailouts  are 
relevant  with  regard  to  their  impact  on  competition.  In  addition,  the  E.CA  study  also 
looked  more  specifically  at  the  case  of  divestitures  as  one  of  the  strictest  categories  of 
commitments  and  found  that  the  observed  results  could  not  be  attributed  to  the 
divestitures alone. 

Views  of  stakeholders  that  expressed  their  opinion  in  the  consultations  were  rather 
diverse. Yet,  many respondents (with 10 neutral opinions and 8 positive views,  from  6 
public authorities, 4 business organisations/institutions, 3 EU citizens, 2 academics and 1 
trade  union)  agreed  on  the  importance  of  minimising  competition  distortions  that 
possibly arise as a result of providing State aid to banks in difficulties. Respondents who 
considered that State aid rules to banks in difficulty have (rather) not been successful in 
minimising competition distortions between aided and non-aided banks included 5 public 
authorities,  6  business  organisations/institutions,  3  citizens,  2  non-governmental 
organisations and 1 trade union. 

However,  when  it  comes  to  prioritising  the  goal  of  minimising  competition  distortions 
among  different  policy  objectives,  some  respondents  (including  7  public  authorities,  5 
business  associations/institutions,  1  academic,  1  EU  citizen,  1  non-governmental 
association and 1 trade union) opined that the goal of preserving financial stability should 
not take precedence over others, including competition distortions. They observed that in 
the  past  cases,  the  preservation  of  financial  stability  was  ensured  in  some  cases  to  the 
detriment  of  limiting  distortions  of  competition.  Other  respondents  (including  4  public 
authorities,  6  business  organisations/institutions  and  1  academic),  on  the  other  hand, 
argued  that  in  case  of  systemic  crises,  where  most  banks  receive  State  aid,  the  risk  for 
competition distortions is very limited and the preservation of financial stability is crucial 
for the whole sector.  

4.1.1.4.   Burden-Sharing  

Burden-sharing measures under State aid control aim at limiting the amount of State aid 
needed, thereby protecting the interest of taxpayers, and at reducing moral hazard, while 
ensuring market discipline, by obliging the aided bank, its shareholders and some of its 
the  bank’s 
creditors 
management,  shareholders  and/or  creditors  may  have  incentives  to  take  excessive 
financial risks because they may count on being shielded from the bank’s losses by the 
State.  

losses.  Otherwise, 

to  contribute 

to  absorbing 

the  bank’s 

53 

 
The 2013 Banking Communication tightened the initial burden-sharing rules by requiring 
that  banks  with  a  capital  shortfall  obtain  shareholders’  and  subordinated  debtholders’ 
contribution  before  resorting  to  public  recapitalisations  or  impaired  asset  measures. 
Burden-sharing measures, broadly speaking, can also include divestments and limits on 
management remuneration or pricing constraints.  

The  effectiveness  of  this  requirement  was  assessed  on  the  basis  of  two  key  indicators: 
ensuring  market  discipline  and  mitigating  excessive  risk  taking  of  banks/moral  hazard. 
However, from the outset, it is noted that State aid rules alone are not an instrument to 
tackle moral hazard in general and exhaustively.  
Economic literature focusing on market discipline is quite abundant.  139 A specific area 
of market discipline relates to implicit subsidies.140 Implicit subsidies are defined in the 
literature  as  an  advantage  that  some  banks  benefit  from  due  to  a  perceived  higher 
probability of receiving State aid in case of need. A common case of implicit subsidies is 
a  lower  cost  of  funding  that  banks  considered  too-big-to-fail  (TBTF)  have  to  pay  in 
relation  to  smaller  banks,  which  have  a  lower  probability  of  being  bailed  out.141  The 
implicit subsidy is the difference in interest costs paid by banks identified as too-big-to-
fail (TBTF banks) and other banks due to the expected bailout.  

The  E.CA  study  provides  an  analysis  of  the  implicit  subsidies  during  the  evaluation 
period, accounting for the entry into force of the 2013 Banking Communication and of 
the  CMDI  framework.  FSB  (2021)  indicates  that  credible  reforms  aimed  at  reinforcing 
market discipline should result in a reduction of implicit subsidies. Implicit subsidies are 
not  directly  observed,  but  they  may  be  estimated  using  two  main  methodologies:  the 
contingent  claim  model  and  the  funding  advantage  model.  The  E.CA  study  uses  the 
methodology  based  on  funding  cost  advantages  of  large  versus  small  banks  and 
differentiates implicit subsidies regarding interbank deposit pricing, client deposit pricing 
and  overall  liability  pricing.  The  implicit  subsidies  calculated  for  the  three  types  of 
liability pricing show pricing decreases in the period after the entry into force of the 2013 
Banking  Communication  and  of  the  CMDI  framework.  A  major  change  in  the  2013 
Banking  Communication  was  the  introduction  of  an  explicit  requirement  of  burden-
sharing  of  subordinated  debt  and  equity  under  restructuring  and  liquidation  scenarios. 
2013 was therefore chosen as one of the milestones, and the Study compared the level of 
implicit subsidy prior to this change in the rules and after the change. The second such 
milestone  was  2015  with  the  entry  into  force  of  parts  of  the  BRRD.  Accordingly,  the 
E.CA  Study  tests  whether  the  evolution  of  the  implicit  subsidies  recorded  a  “structural 
break” in 2013 and in 2015.  

The  results  indicate  that  when  looking  at  systemically  important  and  large  banks  in  all 
the  analysed  countries,  the  pricing  of  the  calculated  implicit  subsidies  on  the  interbank 
market strongly converged with that of the smaller institutions after 2012. This may be 
linked  with  the  decrease  of  potential  benefits  for  large  banks  after  the  introduction  of 

139  

140  

141  

See  e.g.,  Bennett,  R.L.,  Hwa,  V.  &  Kwast,  M.L,  (2015),  Market  discipline  by  bank  creditors 
during  the  2008-2010  crisis,  Journal  of  Financial  Stability,  20,  51-69;  Balasubramnian,  B.  & 
Cyree,  K.B.  (2014).  Has  market  discipline  improved  after  the  Dodd-Frank  Act?  Journal  of 
Banking & Finance, 41, 155-166. 
FSB  (2021)  Financial  Stability  Board’s  Report  on  Evaluation  of  the  Effects  of  Too-Big-To-Fail 
Reforms; Kloeck, A. (2014), Implicit subsidies in the EU banking sector, Study commissioned by 
the Greens/EFA group in the European Parliament. 
Baker,  D.,  &  McArthur,  T.  (2009),  The  value  of  the  "too  big  to  fail"  big  bank  subsidy,  CEPR 
Reports  and  Issue  Briefs,  Center  for  Economic  and  Policy  Research;  Jacewitz,  S.,  Pogach,  J. 
(2018),  Deposit  Rate  Advantages  at  the  Largest  Banks,  Journal  of  Financial  Services  Research, 
53, 1–35. 

54 

 
 
stricter  rules  on  burden-sharing  with  the  2013  Banking  Communication  and  the  bail-in 
rules under the CMDI framework. The estimated impact related to implicit subsidies for 
client  deposits,  as  well  as  for  overall  liabilities,  is  much  smaller  than  on  the  interbank 
market but still shows convergence between large and small banks in relation to the pre-
2013  period.  The  implicit  subsidies  observed  for  the  largest  European  banks  decreased 
when the 2013 Banking  Communication entered into force, and this decrease was even 
higher  after  the  CMDI  framework  entered  into  force.  This  indicates  that  market 
discipline on the part of banks perceived as TBTF also increased, both in terms of 
deposit pricing and overall liability pricing. 

The  E.CA  study  also  provides  a  descriptive  assessment  of  the  main  changes  to  the 
methodologies by the rating agencies as a consequence of the entry into force of the 2013 
Banking Communication and, more importantly, the CMDI framework. The main rating 
agencies (Standard & Poor’s, Moody’s and Fitch Ratings) changed their methodologies 
and  rating  practices  to  account  for  the  introduction  of  the  CMDI  framework.  Those 
changes  in  the  rating  methodologies  were  mostly  focused  on  the  areas  accounting  for 
government support and loss absorbing capacity relating to the resolution regime. Given 
that credit ratings have an impact on market pricing, the revised methodology accounting 
for burden-sharing contributes to market discipline. 

As  to  the  second  success  indicator,  the  effect  on  moral  hazard,  it  is  first  noted  that 
economic  literature  specifically  focusing  on  the  link  between  public  support  and  moral 
hazard is scarce. Duchin and Sosyura (2014)142 show that banks that have received U.S. 
government  support  under  the  TARP  have  higher  default  risk.  Other  studies  find  that 
government  guarantees  increase  risk-taking  of  competitor  banks.  Gropp  et  al.  (2011)143 
demonstrate  that  government  guarantees  strongly  increase  the  risk  to  competitor  banks 
and  Gropp  et  al.  (2014)144  also  find  that  German  banks  that  experienced  a  removal  of 
government  guarantees  reduced  credit  risk,  with  no  such  effect  visible  for  the  control 
group.  

When  assessing  moral  hazard,  in  conjunction  with  State  aid,  the  E.CA  study  considers 
two types of risk: (i) general default risk proxied by Z-score145 and standard deviation of 
Return  on  Assets  (sd  ROA)146,  and  (ii)  credit  risk,  represented  by  loan  loss  provisions 
(LLP)147. The Study finds that there is a strong and statistically significant link between 
State aid and risk for banks in the sample. Banks that received State aid have on average 
higher default probability (lower Z-score), higher ROA fluctuation and create more loan 
loss  provisions  compared  to  banks  with  similar  characteristics  that  did  not  receive  aid. 
The results are in line with the literature, and they are shown in descriptive statistics for 
the sd ROA and the LLP (see Figure 18). 

142  

143  

144  

145  
146  
147  

Duchin, R., & Sosyura, D. (2014), Safer ratios, riskier portfolios: Banks׳ response to government 
aid, Journal of Financial Economics, 113(1), 1-28. 
Gropp,  R.,  Hakenes,  H.  &  Schnabel,  I.  (2011),  Competition,  Risk-shifting,  and  Public  Bail-out 
Policies, The Review of Financial Studies, 24, 2084-2120. 
Gropp,  R.,  Gruendl,  C.,  &  Guettler,  A.  (2014),  The  impact  of  public  guarantees  on  bank  risk-
taking: Evidence from a natural experiment, Review of Finance, 18(2), 457-488. 
Z-score: the sum of ROA and Equity to Assets divided by the standard deviation of ROA. 
The sd ROA represents the volatility of a bank’s net income. 
LLP  show  the  amount  of  provisions  that  are  created  through  the  profit  and  loss  statement  in  a 
given  year.  Higher  LLP  usually  imply  higher  credit  risk  that  may  be  visible  in  increased  non-
performing loan ratios. 

55 

 
 
Figure 18: Developments of default risk (sd ROA, left graph) and credit risk (LLP, 
right graph) 

Source: E.CA and partners 

The  E.CA  study,  however,  points  to  methodological  limitations  of  this  analysis  and 
cautions that the results should be interpreted as links rather than causal effects. This is 
chiefly  due  to  strong  pre-trends  (aided  banks  were  riskier  before  they  encountered 
difficulties and it is not possible to isolate the effect of State aid alone), but also because 
banks increased risk before they received State aid because they counted on future State 
aid. The E.CA study therefore concludes that it could not be proven that banks increased 
risk as a result of receiving aid.  

The  E.CA  study  finds  that  the  introduction  of  burden-sharing  measures  in  2013  did 
not significantly change the risk reported by the aided banks after they received aid. 
The same findings appear when controlling for the intensity of burden-sharing measures, 
since there are no significant changes in the risk profile of the banks. However, referring 
to the methodological limitations above, overall, the evidence on excessive risk taking at 
the level of the aided banks is not conclusive.  

The  replies  to  the  public  consultation  and  the  targeted  consultation  broadly 
considered  that  the  different  burden-sharing  measures,  applied  since  the  2008 
Banking  Communication  and  reinforced  with  the  entry  into  force  of  the  2013 
Banking  Communication,  namely  with 
to 
shareholders and subordinated creditors, have been effective. 

the  burden-sharing  measures 

The  burden-sharing  measures  were  identified  and  valued  in  a  different  manner  by  the 
respondents  to  the  aforementioned  consultations.  At  least  10  respondents,  including  at 
least  5  business  organisations/institutions  and  5  public  authorities,148  to  the  public  and 
targeted  consultations  expressed  that  burden-sharing  measures  contribute  to  reinforcing 
market  discipline  and  reducing  moral  hazard.  At  least  4  respondents,  including  public 
authorities  and  business  organisations/associations,  considered  that  the  effectiveness  of 
the individual burden-sharing measures is difficult to measure. 1 public authority and 2 
business organisations/associations also highlighted the different levels of burden-sharing 

148  

Please note that out of the 48 respondents to the public and targeted consultations, only an average 
of  14  respondents  expressed  their  opinion  with  regard  to  the  effectiveness  of  burden-sharing 
measures. 

56 

0.00.10.20.30.40.50.60.70.820052006200720082009201020112012201320142015201620172018201920202021Individually aidedMatched non-aided0.00.10.20.30.40.50.60.70.80.920052006200720082009201020112012201320142015201620172018201920202021Individually aidedMatched non-aided 
 
 
 
measures. Some measures like dividend bans or restrictions on coupon payments are less 
intrusive than the write-down of existing shareholders and subordinated creditors. 

A selection of Member States presented their opinions on the application of the State aid 
rules for banks during dedicated bilateral meetings. In the context of measures applied 
to  reinforce  market  discipline  and  tackle  moral  hazard,  some  of  the  selected  Member 
States mentioned that behavioural measures contributed to limiting moral hazard, while 
other  Member  States  considered  that  certain  measures  were  not  sufficiently  effective 
when  applied  to  the  aided  banks.  For  example,  the  change  in  management  was  a 
successful  measure but  a static remuneration cap may have posed obstacles to  hire and 
retain the best managers for ensuring a successful turnaround of the aided banks, and not 
being  able  to  hire  the  best  managers  may  have  delayed  or  posed  challenges  to  the 
completion of restructuring. Some Member States underlined that a dividend ban may not 
be an effective measure because private investors may not find the investment attractive 
anymore, and thus  be detrimental  to  any potential  private recapitalisation  efforts, while 
others expressed the view that the dividend ban may not have had a significant impact as 
the aided bank was already in distress and hence not able to pay dividends in any case.  

The  application  of  burden-sharing  measures  to  shareholders  and  subordinated  creditors 
also  raised  divergent  opinions  among  Member  States.  Some  Member  States  expressed 
their  support  regarding  the  current  application  of  burden-sharing  to  shareholders  and 
subordinated  creditors  as  being  the  most  effective  option  and  not  being  problematic. 
Other Member States stated that the current burden-sharing requirements under the State 
aid  rules  for  banks  are  not  sufficient  and  the  objective  should  be  to  ensure  their 
consistency with the bail-in requirement under the CMDI framework. For specific cases, 
evidence was presented that the pricing of capital instruments subject to  burden-sharing 
was not affected after the State aid intervention. In addition, some Member States raised 
the issue that the application and related impact of burden-sharing measures may differ in 
systemic  crises  and  idiosyncratic  bank  failures.  In  their  view,  the  context  in  which 
burden-sharing measures were applied to shareholders and subordinated creditors should 
also be considered. 

It  follows  from  the  above  that  State  aid  rules  for  banks  have  been  effective  in 
reinforcing market discipline. The analysis of the implicit subsidies for large systemic 
banks  demonstrates  their  reduction  after  the  entry  into  force  of  the  2013  Banking 
Communication  and  the  CMDI  framework.  Similarly,  changes  in  the  methodologies  of 
rating agencies, following the entry into force of the 2013 Banking Communication and 
the CMDI framework, prove the impact of these rules on the assessment of banks’ ratings 
as stricter assessments were applied. Finally, as the evidence on mitigating risk taking by 
the banks was not conclusive, the effect of State aid rules at mitigating moral hazard by 
not  increasing  the  risk  of  the  aided  banks  could  not  have  been  satisfactorily  evaluated. 
The  SWD  therefore  relies  on  the  robust  evidence  on  market  discipline  (decrease  of 
implicit subsidy).  

4.1.2.  Efficiency 

This Section aims at evaluating the efficiency of the rules subject to the evaluation.  

It should first be noted, when assessing efficiency from the Commission’s perspective by 
means  of a comparison  between  the inputs  (i.e. the Communications dedicated to  State 
aid to banks in difficulty) and the outputs (i.e. the authorised State aid measures), that the 
administrative efforts required to draft and adopt the relevant 7 Communications149 seem 
proportionate to the unprecedented number of adopted decisions (ca. 700, as described in 

149  

Of which six are currently in force. 

57 

 
 
Section 3.3) and approved and disbursed aid (ca. EUR 7 trillion and ca. EUR 3 trillion, 
respectively, as described in Section 3.2), in the period under evaluation150. When further 
looking  at  the  Commission’s  perspective,  it  is  worth  mentioning  that  the  2020  ECA 
Special Report found that the Commission had the  powers to  exercise State aid control 
efficiently.151 

When  assessing  efficiency  of  the  overall  intervention  under  evaluation  (as  described  in 
Section 2.1.2), it should first be considered that the quantification of the aggregate costs 
and benefits (as identified in Annex V) is subject to significant limitations.  

With regard to the costs,  

–  It  could  be  roughly  estimated  that  the  administrative  costs  for  Commission 
services’ activity of applying the rules under evaluation over the relevant period 
amount to ca. EUR 25 million152 (or ca. EUR 35 000 per decision);  

–  while the administrative costs arising from the application of those rules by the 
national  administrations  and/or  the  concerned  business  cannot  be  estimated 
precisely,  with  no  known  studies  having  been  able  to  do  so,153  they  can  be 
considered on aggregate proportionate to the costs borne by the Commission154;  

–  it could be roughly estimated that - for the restructuring of their banking systems 

- EU Member States incurred fiscal costs of ca. EUR 650-900 billion.155  

With regard to the benefits, as also discussed in Section 4.1.1.1, the contribution of State 
aid  to  the  objectives  of  the  rules  cannot  be  fully  disentangled  by  other  contributing 
factors and hence properly quantified.  

–  It could be recalled that the other side of the token of the granted State aid is the 
benefit  received  by  the  beneficiary  bank.  This  economic  benefit  does  not 
however correspond exactly to the fiscal cost of the aid, as quantified above. The 
benefits for the recipient banks are also influenced by the actions undertaken by 

150  

151  
152  

153  

154  

155  

Available 

As  a  point  of  comparison,  ca.  1  300  decisions  were  adopted  and  ca.  EUR  3.2  trillion  aid  was 
authorised  under  the  2020  Temporary  Framework,  which  was  amended  six  times,  after  its 
information: 
adoption; 
https://ec.europa.eu/commission/presscorner/detail/en/statement_22_2980 
See footnote 15, p.29-20, 37. 
The estimate covers the staff directly dedicated to the cases under evaluation. It does not include 
either  the  costs  of  the  supporting  functions,  such  as  IT  or  legal,  or  any  external  advice.  The 
Commission has exact data on workload per case since 2012. With this limitation, the evaluation 
team has estimated the number of staff and hours for the previous years, based on the indicators 
used to build the “administrative effort index”, presented in Section 4.1.2.1.  
Similar  conclusions  were  drawn  in  (i)  the  evaluation  of  the  State  subsidy  rules  for  health  and 
social  services  of  general  economic  interest  (“SGEIs”)  and  of  the  SGEI  de  minimis  Regulation, 
SWD(2022)  388  final,  (ii)  the  evaluation  of    the  State  Aid  rules  for  broadband  infrastructure 
deployment,  SWD(2021)  194  final,  (iii)  the  fitness  check  of  the  2012  State  aid  modernisation 
package, railways guidelines and short-term export credit insurance, SWD(2020) 257 final. 
This is because the role of national administrations is symmetrical to the one of the Commission 
in  a  State  aid  procedure,  in  that  the  Member  State  prepares  a  submission  later  assessed  by  the 
Commission  services  on  the  justification  for  the  aid  and  on  its  compliance  with  State  aid  rules. 
The  administrative  costs  for  the  banks  themselves  can  be  considered  relatively  limited  as  the 
typical deliverables for them, such as the dedicated business plan, are normally  implemented by 
the banks regardless of the requirements under the rules. 
The figures are based on Laeven and Valencia, Systemic Banking Crises Revisited, IMF Working 
Paper,  WP/18/2006.  On  this  basis,  E.CA  finds  the  fiscal  costs  for  some  selected  EU  Member 
States  in  some  selected  “crisis  time”  to  be  ca.  4.9%  of  their  GDP.  On  this  basis,  a  further 
extrapolation of the data for all EU Member States and for the entire period under evaluation  has 
been performed by the evaluation team. The resulting fiscal cost should not be directly compared 
to the amount of used State aid. For more details on these two concepts, see Box 2 in Section 3.2.  

58 

 
 
the  beneficiaries,  in  line  with  the  State  aid  rules,  to  minimise  competition 
distortion.  

–  By supporting the banks in difficulty, State aid also provided a benefit to their 
stakeholders,  notably  the  depositors  that  have  typically  been  shielded  from 
losses beyond the levels protected by the DGS, the clients at large that benefitted 
from  the  preservation  of  the  bank  payment  functions,  the  employees  and 
suppliers for which the skills and added value may have been protected, etc. 

–  Ultimately,  through  the  protection  of  financial  stability,  State  aid  enabled  the 
continuous  flow  of  lending  to  governments  and  the  real  economy,  with  a 
further  positive  effect  on  the  economic  growth,  only  limited  by  the  negative 
effects of aid on competition distortion.  

In conclusion, as the administrative costs are a small fraction of the costs entailed by the 
granting of aid, the overall balance of the costs and benefits  broadly corresponds to the 
trade-off between the negative effects of aid on the public finances and competition and 
the  positive  effects  on  financial  stability  and  hence  the  economy.  While  a  proper 
quantification  is  not  possible,  the  evidence  that  financial  stability  at  large  has  been 
preserved, through the combined contribution of various elements including State aid (as 
found in Section 4.1.1.1), and the negative effects on competition have been effectively 
minimised  (as  found  in  Section  4.1.1.3)  indicates  that  the  benefits  are  likely  to  have 
outweighed the costs.  

It  is  not  in  the  remit  of  this  evaluation  to  assess  whether  the  recourse  to  State  aid  was 
among  the  most  efficient  means  to  preserve  financial  stability,  as  compared  to  other 
solutions.  This  is  a  broader  policy  question  to  which  EU  policy  makers  have  reacted  – 
notably through the adoption of the CMDI framework (as described in Section 3.4) – by 
envisaging less recourse to State aid and more reliance on industry funds, combined with 
a  given  contribution  by  the  banks’  shareholders  and  creditors.  This  SWD  assesses 
efficiency  within  the  frame  of  the  defined  intervention  (as  described  in  Section  2.1.2), 
diving in the assessment of how the administrative costs and State aid costs evolved over 
time and testing how these costs were affected by the specific rules under the evaluation.  

The overall body of evidence, when taken together, suggests that the State aid rules for 
banks  in  difficulty  have  facilitated  the  reasonably  limitation  of  the  administrative 
burden related to State aid control. There still seems to be room for improvement, 
in particular with regard to the clarification of certain concepts and the interactions with 
the  regulatory  framework,  as  further  detailed  below,  as  well  as  with  regard  to  the 
consolidation  of  the  rules.  The  overall  body  of  evidence  further  suggests  that,  overall, 
the State aid rules for banks in difficulty allowed for an efficient State expenditure. 

4.1.2.1.  Administrative efficiency 

For the analysis below, it is useful to recall that Member States can grant State aid either 
in the form of a ‘scheme’ or as ‘individual aid’ (these concepts are explained in Section 
3.3). The use of schemes  has a particular impact on Member States’ authorities and on 
beneficiaries,  since  due  to  the  omission  of  the  specific  ex  ante  procedure  with  the 
Commission with respect to each of the individual beneficiaries, they may have access to 
aid  faster.  The  rules  under  evaluation  have  defined  a  dedicated  set  of  conditions 
applicable to the schemes.   

The  E.CA  study  has  assessed 
the 
implementation of through the construction of an index (“admin effort index”). The index 
is constructed as a composite indicator of five effort measures, for which data is available 
for  each  specific  State  aid  case:  (i)  total  number  of  decisions  dedicated  to  the  specific 
State aid case; (ii) number of pages across all State aid decisions; (iii) total duration of 

the  administrative  burden  associated  with 

59 

 
the  related  State  aid  procedures;  (iv)  number  of  all  registered  documents  across  all 
relevant State aid decisions; (v) team size (i.e., total number of assistants, case handlers, 
support, chief economist, and experts). As these measures are detailed and available for 
all State aid decisions adopted under the rules under evaluation, the index overcomes - in 
a reliable manner  - the  unavailability of  “worked hours” data  for  some  of the State aid 
cases under the evaluation156. Moreover, based on the reasonable assumption mentioned 
above that the administrative costs incurred by beneficiaries and granting authorities due 
to State aid control, at bank level by Member State, are proportionate to the ones incurred 
by  the  Commission,  the  index  allows  to  approximate  –  in  relative  terms  –  the  efforts 
made by Member States.  

Figure  19  below  presents  the  resulting  administrative  effort  index  at  bank  level  by 
Member  State,  for  aid  granted  based  on  schemes  and  as  individual  aid,  across  three 
periods: before the entry into force of the 2013 Banking Communication, after the entry 
into  force  of  the  2013  Banking  Communication  but  before  the  entry  into  force  of  the 
CMDI framework, and after the entry into force of the CMDI framework.157   

Figure 19:  Admin  effort  index  at  bank  level  by  Member  State,  type  of  aid 
procedure and time period 

Source: E.CA and partners  
Note: Individual aid considers both ad hoc decisions and/or specific applications within a scheme. 
Additionally, the category includes also banks receiving both scheme and individual aid. No admin effort 
index is presented for Czechia, Estonia, Malta, Romania, and Slovakia since these Member States did not 
grant any State aid and, consequently, require any administrative effort. In the case of Finland, the existing 
administrative effort led to no aid and is, therefore, not considered in the analysis. Finally, Bulgaria reports 
both administrative effort and State aid but could not be processed into the index due to data 
inconsistencies. 

The analysis indicates that aid granted on the basis of aid schemes was associated in 
general  with  lower  levels  of  administrative  burden  compared  to  individual  aid.  In 
fact,  Figure  19  shows  -  across  the  various  Member  States  -  orange  observations 
(indicating  the  administrative  efforts  for  individual  decisions)  generally  below  the  blue 
observations  (indicating  the  administrative  efforts  for  schemes).  This  is  consistent  with 
the features of the approval process in the case of aid schemes as set out above.  

156  
157  

See footnote 152.  
For  the  purpose  of  this  overview  the  entry  into  force  of  the  CMDI  framework  is  approximated 
with the date of 1 January 2015.  

60 

00.10.20.30.40.50.60.70.80.91Individual aid, Pre-2013Scheme aid, Pre-2013Individual aid, BC2013Scheme, BC2013Individual aid,  CMDIScheme aid,  CMDI 
 
 
However,  it  should  be  also  noted  that  reducing  the  administrative  burden  through  aid 
schemes  has  not  been  a  specific  objective  of  the  State  aid  rules  under  evaluation.  Yet 
State aid schemes contributed to the minimisation of competition distortion. Aid schemes 
are considered as less distortive than individual decisions from a competition distortion 
perspective, because they are authorised only for a limited period, subject to conditions 
and  only  accessible  to  selected  beneficiaries  (solvent  banks)  which  are  usually  small 
credit  institutions.  When  compatible  aid  is  granted  under  an  aid  scheme,  no  individual 
State aid decision by the Commission is required for that aid to be authorised. The lighter 
administrative burden associated with aid schemes therefore reflects the associated lower 
risk  of  competition  distortion,  both  within  the  Member  State  concerned  vis-à-vis  other 
credit institutions, and across the EU, compared to  individual State aid measures which 
apply to larger credit institutions, with higher amounts of State aid.  

The analysis further shows that, regardless of the form under which aid is granted, i.e. on 
the basis of a scheme or on an individual basis, the level of administrative effort per bank 
gradually  increased  over  time.  These  findings  are  consistent  with  the  evolution  of  the 
State aid rules under evaluation based on the changing market conditions. In particular, 
given the scale of the financial crisis, the 2008 Banking Communication enabled Member 
States to swiftly put rescue guarantee and recapitalisation schemes in place, also for large 
entities, while not excluding the availability of ad hoc interventions, thereby succeeding 
in  averting  panic  and  restoring  market  confidence.  Subsequently,  the  2013  Banking 
Communication  allowed  Member  States  to  continue  putting  schemes  and  individual 
interventions  in  place,  while,  however,  tightening  the  conditions  for  their  approval, 
having regard to the evolution of the market conditions and the lower need for structural 
rescue measures granted on an emergency basis (see above Section 1.1).158 Interestingly, 
the  Study  finds  that  the  administrative  efforts  related  to  State  aid  activities  did  not 
increase further with the introduction of the CMDI framework, which introduced further 
conditions for the provision of support to banks in difficulties, the compliance of which 
were  also  checked,  together  with  compliance  of  the  relevant  State  aid  rules,  under  the 
Commission’s decisions covered by the evaluation.  

to  24, 

A  significant  number  of  stakeholders  (between  21 
including  business 
organisations/associations  and  some  public  authorities)  in  the  targeted  consultation 
chose  not  to  express  any  opinion  on  the  question  whether  aid  schemes  reduced  the 
administrative burden. As regards the neutral and positive replies, 5 concerned liquidity 
and  liquidation  aid  schemes  (vs  respectively  1  and  4  negative  replies)  and  4 
recapitalisation and restructuring schemes (vs 4 negative replies) (see Figure 20). In this 
respect,  the  qualitative  replies  provided  by  3  public  authorities  confirmed  that  aid 
schemes  contributed  to  administrative  simplification  and  reduced  the  administrative 
burden  for  both  authorities  and  banks  and  opined  that  aid  schemes  reduced  the 
uncertainty  and  extra  coordination  when  managing  a  crisis  in  a  bank  which  eases  the 
process.  In  relation  to  the  negative  views  expressed  by  respondents,  certain  replies 
pointed  to  overlaps  between  State  aid  schemes  and  CMDI  provisions  which  could 
possibly lead to more administrative burden for national administrations and aided banks.     

158  

See, for instance, in this sense, paras. 22-23 of the 2013 Banking Communication.  

61 

 
 
Figure  20:  Consultations’  replies  on  the  extent  to  which  aid  schemes  have 
contributed to administrative simplification and reduced the administrative burden 

Source: European Commission 

neutral 

respondents  were 

As  regards  administrative  efficiency,  it  should  be  further  recalled  that  the  efficiency  of 
the  rules  is  also  linked  to  their  clarity.  In  this  respect,  the  2020  ECA  Special  Report 
observed  that  the  rules  under  evaluation  are  well  drafted,  clear  and  largely  consistent 
with  each  other159.  The  replies  to  the  consultations  point  to  some  room  for 
improvement.  6  respondents  (4  public  authorities,  1  business  organisation  and  1  EU 
citizen) highlighted that the Commission communications were easy to understand, while 
12 
business 
organisations/associations,  3  public  authorities,  3  EU  citizens,  2  non-governmental 
organisations  and  1  trade  union).  In  the  targeted  consultation,  22  respondents  also 
considered  that  certain  aspects  or  concepts  related  to  the  State  aid  rules  for  banks  in 
difficulty  could  have  been  further  clarified  or  defined  more  precisely,  whereas  7  were 
neutral.  Many  stakeholders  (20  to  be  precise,  including  9  public  authorities,  6  business 
organisation/associations, 2 non-governmental organisations, 1 trade union, 1 EU citizen) 
have  also  emphasised  that  the  existence  of  multiple  communications  applying 
simultaneously  makes  it  difficult  to  have  a  clear  overview  of  all  applicable  rules. 
Furthermore,  15 respondents  were of the view that better predictability of the State aid 
rules would be beneficial for the framework.  

(including 

negative 

and 

18 

9 

The stakeholders commented in their replies that they would also welcome clarification, 
including  through cross-references,  with  regard to the interaction between the State  aid 
rules and the CMDI framework as well as with respect to the criteria for the classification 
of  support  to  banks  as  State  aid,  for  instance  in  the  case  of  alternative  financing  by 
statutory  deposit  guarantee  schemes  and/or  other  industry  funds.    The  latter,  however, 
relates to the notion of aid which is an objective concept (see Section 2.1) and, as such, is 
not  dealt  with  under  the  State  aid  rules  under  evaluation  which  only  concern  the 
assessment of the compatibility of aid measures.   

The  analysis,  thus,  concludes  that  the  State  aid  rules  for  banks  in  difficulty  have,  to  a 
reasonable extent, facilitated the containment of the administrative burden, particularly in 

159  

See footnote 15, p. 33.  

62 

  12202221213220124222105101520253035Liquidity aid schemesRecapitalisation and restructuring schemesLiquidation aid schemesNot at allRather notNeutralTo a certain extentA lotI don't know / No opinion 
 
 
the wake of the financial crisis, when measures had to be processed swiftly to contain the 
effects of the crisis. There still seems to be some room for improvement with regard to 
the  consolidation  of  the  rules  and  the  clarification  of  certain  aspects,  in  particular  the 
interaction between the  State aid  rules under  evaluation  and the CMDI  framework (see 
also Section 4.1.3 below).  

4.1.2.2.  Efficiency of State expenditure  

The  E.CA  study  has  carried  out  a  descriptive  benchmarking  analysis,  comparing  the 
long-term  effects  of  the  financial  crisis  that  started  in  2008  on  the  economy  of  the  EU 
Member States against the effects of banking crises in countries that are members of the 
World Trade Organisation excluding the EU Member States (‘WTO countries’) and other 
countries.  However, the Commission has chosen not to draw conclusions on the basis of 
this analysis given the insufficient comparability of the different crisis episodes (covering 
several decades) and jurisdictions. 

Stakeholders in the public and targeted consultation were divided on the question on 
whether the State aid rules for banks in difficulty have ensured that Member States used 
State  expenditure  efficiently  when  providing  aid  to  banks  in  difficulty:  while  14 
respondents agreed or were neutral as regards this statement, 13 had a negative view (see 
Figure  21).  In  their  qualitative  answers,  certain  stakeholders  referred  in  this  regard  to 
cases  in  which  a  bank  received  restructuring  aid  but  turned  out  to  be  non-viable. 
However, other stakeholders considered that the State aid rules have, in general, ensured 
an efficient public expenditure.    

Figure 21: Consultations’ replies on the question on whether State aid rules for banks in 
difficulty  have  ensured  that  Member  States  used  State  expenditure  efficiently  when 
providing aid to banks in difficulty 

Source: European Commission 

4.1.2.3.  Overall balance of costs and benefits 

The  State  aid  expenditures  were  assessed  both  in  terms  of  their  effectiveness  (i.e., 
whether  they  achieved  their  objectives  in  the  respective  areas  of  assessment),  and  in 
terms  of 
themselves)  were 
commensurate and proportionate to the benefits (i.e., achieved results)).  

their  efficiency  (i.e.,  whether  costs  (expenditures 

The  available  evidence  in  the  present  evaluation  suggests,  to  the  extent  possible  and 
despite the impossibility of an  exact quantification of all the elements, that the benefits 
associated  with  the  intervention  under  evaluation  have  generally  been  proportionate  to 
the costs they have generated. Moreover, the findings of the E.CA study and the results 

63 

 
 
of the public and targeted consultations provide some indications that the State aid rules 
governing the intervention have possibly contributed to limit the costs and hence to the 
efficiency of the intervention.    

The following take-aways can be drawn from this analysis; 

–  The use of schemes, particularly in the wake of the financial crisis, has resulted 
in smaller administrative effort and thereby efficiency gains. With the benefit of 
hindsight,  maintaining  schemes  mostly  for  liquidity  and  liquidation  aid,  while 
favouring  individual  notifications  for  restructuring  aid,  following  the  wake  of 
crisis,  largely  struck  the  right  balance  between  effectiveness  and  efficiency, 
considering that restructuring aid has a larger potential of distorting competition 
than  liquidity  and  liquidation  aid,  while  individual  aid  decisions  (through  the 
commitments  attached  to  them)  are  more  effective  in  minimising  competition 
distortions than schemes (see Section 4.1.1.3). 

–  The  introduction  of  the  CMDI  framework  has  contributed  to  minimise  the 
amount  of  State  aid,  without  having  caused  any  significant  increase  in  the 
administrative  burden.  However,  some  stakeholders  pointed  out  that  a  further 
reduction of the administrative costs could have been achieved by more clarity on 
the interaction between  State aid  and the CMDI  frameworks  and possibly from 
the consolidation of the applicable State aid rules in one single communication. 

4.1.3.  Coherence 

This Section evaluates the coherence of the  State aid rules  for banks in  difficulty. As a 
first  step,  it  examines  the  so-called  ‘internal’  coherence,  namely,  whether  the  State  aid 
rules  in  question  are  coherent  with  each  other.  As  a  second  step,  it  examines  the 
‘external’ coherence, i.e. whether the State aid rules in question are coherent with other 
EU policies/legislation.  

As set out in more detail below, the analysis indicates that, as regards internal coherence, 
the State aid rules for banks in difficulty are coherent among themselves and operate 
well together to achieve their objectives. As regards external coherence, however, there is 
a  need  for  stronger  coherence  between  the  rules  under  evaluation  and  other  EU 
policies and legislation. It appears that the rules do not reflect more recent developments 
which  occurred  after  their  adoption,  such  as  the  CMDI  framework.  Adjustments  of  the 
State aid rules for banks in difficulty would therefore seem warranted in this regard.  

As  to  internal  coherence,  the  Commission’s  case  practice  shows  that  the  six 
Communications (currently in force) setting out the State aid rules for banks in difficulty 
are  overall  coherent  with  each  other.  For  the  purposes  of  the  evaluation,  the 
Commission’s  case  practice  has  been  analysed.  The  assessment  of  the  cases  adopted 
under  the  State  aid  rules  for  banks  in  difficulty  did  not  reveal  any  indications  that  the 
rules would lack coherence with each other. Stakeholders were asked whether the State 
aid  rules for banks  in  difficulty  are  coherent  with  each other. While a  relative majority 
chose not to answer this question, most of those stakeholders who expressed an opinion 
said that the rules are coherent at least to some extent, while the rest of the respondents 
remained  neutral.  None  of  the  respondents,  however,  identified  any  instance  of 
incoherence within the State aid rules under evaluation when asked for explanation in the 
follow-up  question.  In  conclusion,  we  have  no  indication  from  the  Commission’s  case 
memory or from the consultation that the State aid rules for banks in difficulty would not 
be coherent with each other. 

With regard to external coherence, the Commission’s case practise and the stakeholder 
consultation  suggest  that  the  State  aid  rules  for  banks  in  difficulty  are  overall  coherent 
with other competition rules, such as the 2020 Temporary Framework and the EU merger 

64 

 
control  rules.  As  pointed  out  in  the  reply  of  a  stakeholder  in  respect  of  the  2020 
Temporary Framework, the latter included specific provisions cross-referring to the State 
aid rules for banks in difficulty and the principles underlying the assessment of support to 
banks or support through banks in that context. None of the stakeholders stated that the 
rules  under  evaluation  are  not  coherent  at  all  with  the  above-mentioned  competition 
rules160.  

However,  the  analysis  also  shows  that  the  State  aid  rules  for  banks  in  difficulty  are 
only partially coherent with other EU policies and legislation, specifically the CMDI 
framework.  The  term  “crisis  management  and  deposit  insurance”  (CMDI)  captures  the 
EU  bank  restructuring  and  resolution  legislation  (BRRD,  SRMR)  and  the  EU  deposit 
insurance rules (DGSD). It refers to both of these closely interlinked frameworks at the 
same time. Naturally, the State aid rules do not fully reflect the legislative developments 
that  occurred  after  their  last  amendment.  Only  a  small  fraction  of  respondents  to  the 
targeted  consultation  thinks  that  the  State  aid  rules  for  banks  in  difficulty  are  coherent 
with these other acts. The need to improve coherence between the State aid rules and the 
CMDI  framework  was  also  noted  in  the  2020  ECA  Special  Report.  As  pointed  out 
therein, since the entry into force of the CMDI framework, State aid rules and the CMDI 
framework  apply  in  parallel.  The  text  of  the  instruments  of  the  CMDI  framework 
(BRRD/SRMR/DGSD)  makes  direct  reference  to  the  State  aid  rules  for  banks  in 
difficulty. The rules under evaluation, in turn, do not refer to the CMDI framework and 
do not identify clearly which rules apply to the CMDI interventions that could qualify as 
State aid.161  

While the State aid rules, due to their earlier adoption and amendments, are almost silent 
on  the  existence  of  the  CMDI  framework162,  the  Commission  assesses  the  CMDI 
requirements in each of its State aid decisions on banks as provisions that are intrinsically 
linked to the compatibility of State aid.  

Since  the  evaluated  State  aid  rules  were  designed  before  the  introduction  of  the  CMDI 
and are founded on another legal basis, they follow a different structure. Consistent with 
the Commission’s Treaty mandate to mitigate competition distortions, the State aid rules 
distinguish more distortive restructuring aid, where a bank stays on the market, from less 
distortive  liquidation  aid,  where  a  bank  exits  the  market.  Within  these  two  categories, 
more distortive  capital  aid  is  distinguished from  less distortive liquidity  aid.  In  a given 
case,  the  Commission  applies  the  existing  State  aid  rules  bearing  in  mind  the  CMDI 
rules.  The  Commission  verifies  that  a  support  measure  is  foreseen  in  the  CMDI 
framework  and  is  compliant  with  its  requirements,  and  identifies  the  objective  of  the 
measure.  Where  the  aided  bank  is  supposed  to  remain  on  the  market  (precautionary 
measures,  imputable  DGS  measures  to  prevent  the  failure  of  a  bank,  and  the  bail-in 
resolution  tool  if  applied  to  recapitalise  the  bank  and  accompanied  by  aid),  the 
compatibility criteria of restructuring aid are applied. Where the support is provided to a 
bank  that  exits  the  market  (transfer  strategies  in  resolution  –  i.e.,  sale  of  business  and 
bridge  bank  tools,  if  accompanied  by  aid),  liquidation  aid  criteria  are  applied.163  This 
practise  has  allowed  the  State  aid  rules  to  be  interpreted  in  line  with  the  CMDI 

160  
161  
162  

163  

It is recalled that the 2020 Temporary Framework has in the meantime expired.  
See footnote 15, p.35.  
The  2013  Banking  Communication  acknowledges  in  Points  12  and  13  the  upcoming  resolution 
framework and clarifies in Points 63 and 64 that DGS and resolution fund interventions fall under 
the rules.  
Aid  during  wind-up  in  liquidation  is  also  subject  to  the  liquidation  aid  criteria,  but  no  CMDI 
provisions  apply  other  than  requiring  a  negative  public  interest  assessment,  exceptionality  and 
compliance with State aid rules. 

65 

 
 
framework, but the different structure and terminology of the two sets of rules make their 
application complex and are a potential source of inconsistencies. 

The evaluated rules (Point 63 of the 2013 Banking Communication) recognise that DGS 
interventions to restructure a bank, as part of the CMDI framework, may constitute State 
aid  and  are  assessed  under  the  rules.  This  may  apply  to  the  use  of  a  DGS  to  prevent 
failures or to support the wind-up of a bank, if e.g. the DGS intervention is imputable to 
the  State,  is  financed  by  State  resources  and  provides  an  advantage  to  the  beneficiary 
bank. The Tercas judgement164 of the European Court of Justice is of specific relevance 
in the assessment of imputability of a DGS intervention to the State.165 Some respondents 
in  the  consultation  recommended  a  clarification  of  DGS  treatment  in  future  State  aid 
rules. 

Coherence issues of substance occur where the CMDI framework and the State aid rules 
regulate  the  same  requirements  differently,  as  is  the  case  for  burden-sharing.  Burden-
sharing  requirements  under  the  State  aid  rules  for  banks  in  difficulty  require  that,  after 
losses  are  first  absorbed  by  equity,  contributions  by  hybrid  capital  holders  and 
subordinated debt  holders  are  necessary before State aid  is  granted.  Contributions from 
senior debt holders and depositors are not required as a mandatory component of burden-
sharing.  Thus,  in  certain  circumstances,  this  burden-sharing  requirement  can  be  less 
demanding  than  the  corresponding  bail-in  requirements  under  the  bank  resolution 
framework,  which  entail  that  losses  are  absorbed  by  shareholders  and  creditors, 
potentially  including  senior  bondholders  or  depositors  (e.g.  through  bail-in),  for  a 
minimum of 8% of total liabilities including own funds before the resolution fund can be 
accessed. This difference in the scope of burden-sharing results in inconsistent protection 
of  depositors  and  debtholders  depending  on  the  nature  of  the  tool  used  to  address  the 
bank crisis (e.g. resolution or liquidation under national insolvency proceedings).  

This  finding  is  consistent  with  the  findings  set  out  in  the  evaluation  of  the  CMDI 
framework,  which  complemented  the  impact  assessment  accompanying  the  2023 
Commission proposal on the CMDI framework’s reform.166 It is observed therein that the 
coherence  between  the  CMDI  framework  and  the  State  aid  rules  could  be  further 
improved,  for  instance,  as  regards  the  conditions  to  access  funding  to  support  tools 
within and outside resolution.167 Against this background, it could be considered whether 
the State aid rules could entail a progressive approach with different criteria for assessing 
the  compatibility  of  State  aid  in  the  context  of  precautionary/preventive  measures, 
resolution  measures  or  liquidation  outside  resolution  (i.e.  reflecting  the  different 
scenarios resulting from the application of the CMDI framework). 

The CMDI framework is currently under review. The 2023 Commission proposal on the 
CMDI framework reform168 left unaltered the main elements of the framework. The core 
objective of the review proposal is to widen the scope of resolution to smaller banks and 
unlock  additional  resolution  funding  from  deposit  guarantee  schemes  and  resolution 
funds.  This  SWD’s  findings  regarding  the  consistency  of  the  State  aid  rules  with  the 
currently  applicable  (pre-review)  CMDI  framework,  including  as  above  on  burden-
sharing, hence remain applicable to the CMDI review proposal, while taking into account 
the attempt in the Commission CMDI review proposal to closer align the conditions for 
preventive and alternative DGS measures with State aid principles. The outcome of the 

164  
165  
166  
167  
168  

Judgment of 2 March 2021, Commission v Italy et al. (Tercas), C-425/19 P, EU:C:2021:154. 
See Annex IX, Section 4.b for more details on the judgment. 
SWD/2023/225 final, Impact Assessment Report. 
Idem, see Section 7.4.2 of Annex 5 ‘Evaluation’ to the Impact Assessment Report.  
See  further  on  the  Commission’s  proposal  on  the  CMDI  reform  :  Reform  of  bank  crisis 
management and deposit insurance framework - European Commission (europa.eu).  

66 

 
 
review  would  have  to  be  taken  into  account  when  revising  the  evaluated  rules  to 
maximise coherence between the two frameworks.  

Relevant  rules  on  banking  crisis  management  can  also  be  found  in  more  general 
European  banking  legislation  such  as  the  CRR169  and  the  CRD170,  which  lay  down 
minimum capital and liquidity requirements and other prudential requirements that may 
trigger a bank failure in case of breach. They also foresee certain supervisory powers to 
avert  such  failures.  In  cases  in  which  existing  buffers  or  the  use  of  such  supervisory 
powers, like restricting dividend payouts or requesting a capital restoration plan, would 
be  effective  or  sufficient  alternatives  to  State  aid,  the  Commission  would  deny  the 
necessity  of  State  aid  in  its  assessment.  However,  by  the  time  of  adopting  a  State  aid 
decision, capital and liquidity buffers and/or supervisory options are typically exhausted 
or insufficient. 

With regard to coherence of the State aid rules with banking supervision, the stakeholder 
consultation and this SWD (Section 4.1.1.2) recognise a trade-off between commitments 
to  mitigate  competition  distortions  made  in  the  context  of  a  State  aid  decision  and  the 
return to viability of the aided bank – a main priority of banking supervisors. The SWD 
presents the related views gathered during the consultation. 

4.2. 

How did the EU intervention make a difference and to whom? 

This Section seeks to assess the added value resulting from the fact that the Commission 
has adopted State aid rules for banks in difficulty, compared to what could have resulted 
in the absence of such rules.  

Overall,  the  analysis  indicates  that  the  State  aid  rules  for  banks  in  difficulty 
provided a clear EU added value compared to a situation without such rules, since 
they  allowed  for  a  swift  treatment,  increased  predictability,  and  legal  certainty  in 
the  context  of  the  assessment  of  the  relevant  State  aid  measures  to  the  banking 
sector by the Commission.  

As  explained  above  in  Section  2.1,  the  provisions  on  State  aid,  as  part  of  competition 
policy,  are  enshrined  in  the  TFEU.  Competition  policy  represents  an  area  of  exclusive 
EU  competence  pursuant  to  Article  3(b)  TFEU  and  therefore  the  subsidiarity  principle 
does  not  apply.  The  rules  covered  by  the  current  evaluation,  i.e.  the  State  aid  rules  for 
banks in difficulty, belong to the field of State aid law, an area where the TFEU gives the 
Union exclusive competence. Only the EU can act in this area.  

Even  though  it  was  not  possible  to  separate  and  quantify  an  isolated  effect  and 
contribution  of the application of state aid rules for banks in difficulty to resolving the  
global financial crisis due to methodological constraint of impossibility of separating an 
impact of a multiplicity of contributing factors being concurrently in play in addressing 
the  crisis  (e.g.,  such  as  monetary  policy  measures)171,  undoubtedly,  in  terms  of  size, 
impact,  and  frequency  of  the  interventions,  the  analysed  state  aid  measures  granted  by 
Members States and approved by the Commission under the rules in question, were one 
of the biggest contributing factors that helped to resolve the crisis.  

In  the  absence  of  the  State  aid  rules  for  banks  in  difficulty,  dedicated  rules  taking  into 
account the specificities of the banking sector and allowing for swift action would have 
been  lacking.  The  relevant  State  aid  measures  would  have  had  to  be  notified  to  the 
Commission  individually  by  Member  States  and  the  Commission  would  have  had  to 

169  
170  
171  

See footnote 9. 
See footnote 10. 
For a more detailed description on the methodology used and its constrains, see Annex II.  

67 

 
 
assess  them  directly  under  Article  107  TFEU  and  take  individual  decisions  on  each  of 
them,  since  the  Rescue  and  Restructuring  Guidelines  for  non-financial  firms  were  not 
tailored  to  address  the  urgent  needs  of  the  banking  sector.  The  mere  existence  of  such 
State  aid  rules  thus  intrinsically  reduced  the  administrative  burden  and  ensured  a  swift 
treatment,  which  was  crucial,  particularly  in  the  early  years  of  the  financial  crisis.  In 
addition,  the  existence  of  the  State  aid  rules  for  banks  in  difficulty  allowed  Member 
States and potential beneficiaries to know ex ante the rules that the Commission would 
use to  assess the compatibility  with  the internal market  of the aid  measures notified by 
Member States for the banking sector. This guaranteed predictability and increased legal 
certainty.  

The application of the State aid rules for banks in difficulty also contributes to the 
objectives  of  the  EU’s  competition  policy,  enhancing  the  competitiveness  of  EU 
companies.  Box  5  presents  an  analysis  based  on  Section  4.1.1  on  effectiveness  and 
Section 4.1.2 on efficiency, indicating the benefits on EU competitiveness as a result of 
applying the rules. 

Box 5: State aid rules for banks in difficulty and EU competitiveness 

The  State  aid  rules  contribute  to  the  objectives  of  the  EU’s  competition  policy, 
supporting  a  resilient  and  functional  single  market,  which  in  turn  enhances  the 
competitiveness of EU companies. With specific regard to the banking sector, it should 
be  acknowledged  that  the  rules  applying  to  banks  are  not  only  a  matter  of  sectorial 
policy,  since  75%172  of  corporate  borrowing  is  still  provided  by  EU  banks  and  the 
dependence on bank financing is even higher for SMEs. Hence, a fundamentally sound 
and  competitive  banking  sector  is  instrumental  for  the  EU’s  economic  resilience  and 
competitiveness. 

The State aid rules for banks in difficulty have played a role in restoring the viability of 
the distressed banks, in mitigating competition distortions of State aid interventions and 
in  ensuring  market  discipline  via  the  application  of  burden-sharing  measures  (see 
Sections  4.1.1.2  to  4.1.1.4).  More  concretely,  as  regards  the  restoration  of  banks’ 
viability, the E.CA study finds convergence of financial indicators between aided and 
non-aided  banks.  The  restoration  of  banks’  viability  and  the  resulting  existence  of 
healthier  banks  in  the  EU  can  be  associated  with  the  provision  of  lending  to  more 
productive  companies  and  innovative  sectors.  In  terms  of  mitigations  of  competition 
distortions,  the  E.CA  study  does  not  identify  any  lasting  signs  of  increased  market 
power  of  the  aided  banks,  nor  an  improved  competitive  position  of  these  banks 
compared to unaided banks, suggesting that the application of State aid  measures has 
ensured  a  level  playing  field  between banks in  the EU. Finally, the E.CA study finds 
that market discipline was reflected on the part of large banks categorised as too big to 
fail via a convergence of deposit pricing and overall liability pricing towards small and 
medium-sized  banks,  suggesting  closer  scrutiny  of  investors  and  liability  holders.  In 
summary,  in  parallel  with  the  enhancing  of  supervisory  measures  and  the  creation  of 
the  Banking  Union,  the  effectiveness  of  the  State  aid  interventions  and  linked 
conditionality measures contribute to the existence of healthier banks in the EU, which 

172  

Long-term  competitiveness  of 
the  EU: 
https://commission.europa.eu/system/files/2023-03/Communication_Long-term-
competitiveness.pdf   

looking  beyond  2030,  COM(2023)  168  final:  

68 

 
 
help to achieve a resilient EU economy. 

As further explained in Section 4.1.1.1, the State aid rules for banks in difficulty also 
contributed to ensuring financial stability both in the short-term and, by contributing to 
a  healthier  banking  sector,  in  the  medium-term.  As  a  result,  these  State  aid  rules 
facilitated  the  availability  of  financing  to  EU  large  companies  and  to  SMEs  via  EU 
banks  while  progress  occurred  towards  the  creation  of  a  Capital  Markets  Union.173 
Even though many factors are to be accounted for, the application of the State aid rules 
for  banks  in  difficulty  has  been  accompanied  by  a  facilitation  of  banks’  loan  supply 
conditions to corporates and by increases in lending to the real  economy  by financial 
institutions during the evaluation period (see Figures 9 and 10 in Section 4.1.1.1). The 
descriptive  assessment reflected in  Section 4.1.1.1 is  also  confirmed by the empirical 
analysis, as the E.CA study finds a slight decrease of the cost of banks’ lending to non-
financial  corporations  following  the  application  of  the  State  aid  rules  for  banks  in 
difficulty.  The  application  of  State  aid  measures  positively  contributed  to  the  overall 
competitiveness  in  the  EU  as  one  of  the  factors  that  ensured  that  financing  was 
available for EU companies, including in the context of the global financial crisis.  

Overall,  reaching  the  twin  objective  of  the  State  aid  rules  for  banks  in  difficulty, 
namely  preserving  financial  stability  and  mitigating  competition  distortions,  has 
contributed  to  the  existence  of  more  competitive  EU  banks  that  benefit  higher 
competitiveness in the EU in the form of available financing to EU companies.  

In  order  to  evaluate  the  EU  added  value  of  the  framework  under  consideration, 
stakeholders in the targeted consultation were asked whether the State aid rules for banks 
in difficulty provided an added value in comparison to a situation without such rules, in 
which  case  each  individual  State  aid  measure  would  have  to  be  dealt  with  separately, 
directly  applying  the  TFEU.  In  the  targeted  consultation,  respondents,  including  a 
certain  number  of  public  authorities  and  a  business  association,  highlighted  in  their 
replies the benefits  in  terms  of the increased transparency, predictability and ultimately 
enhanced  legal  certainty  and  noted  that  the  existence  of  the  rules  allowed  the 
Commission  to  assess  the  State  aid  measures  in  question  in  a  more  uniform  and 
expeditious manner and increased the legal certainty for the relevant national authorities, 
as well as the banks concerned, while allowing for the necessary flexibility.    

At the same time, stakeholders indicated that the added value of the rules could increase, 
if the rules were updated having regard to the CMDI framework.   

4.3. 

Is the intervention still relevant? 

This Section assesses whether the objectives of the State aid rules for banks in difficulty 
still correspond to the needs within the EU.  

In a first step, it examines whether the overall objectives were appropriate and whether 
they are still appropriate in the light of potentially changing needs, and therefore whether 
the  action  as  set  out  in  the  intervention  logic  described  in  Section  2.1  continues  to  be 
justified.  In  a  second  step,  it  examines  how  well  adapted  these  rules  are  to  subsequent 
market developments and policy developments. 

173  

Commission 

European 
https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/capital-markets-
union/what-capital-markets-union_en  

Capital  Markets 

dedicated 

site 

the 

on 

Union: 

69 

 
 
The  analysis  suggests  that  the  twin  objectives  of  the  State  aid  rules  for  banks  in 
difficulty – i.e. ensuring financial stability while minimising competition distortions 
–  have  been  to  a  large  extent  appropriate  for  meeting  the  needs  within  the  EU  so 
far. In addition, there seems to still be a need for a State aid regime tailored to the 
specificities  of  the  banking  sector.  However,  the  current  rules  do  not  fully  reflect 
more recent EU policy developments, in particular the CMDI framework, and the 
evolution of market conditions.  
In particular, as evidenced by the findings of the 2020 ECA Special Report174 and of the 
E.CA  study,  the  replies  to  the  public  and  targeted  consultations  and  bilateral  meetings 
with EU and Member States authorities, the rules under evaluation corresponded to the 
needs within the EU and enabled swift and appropriate action in the years since the start 
of the financial crisis, which was followed by the sovereign debt crisis.  

Initially,  the  State  aid  rules  under  evaluation  had  been  specifically  designed  to  address 
the  effects  of  the  most  serious  financial  crisis  faced  by  the  European  Union  since  its 
creation and to safeguard the internal market, following calls by the European Council, 
who  had  expressly  stated  its  support  for  the  Commission’s  approach  on  the  State  aid 
rules “to be implemented in a way that meets the need for speedy and flexible action”.175 
The  State  aid  rules  for  banks  in  difficulty  provided  an  effective  policy  response,  while 
being regularly updated and adapted, taking into account market realities. 

As evidenced also by the findings in Section 4.1.1, following the implementation of the 
CMDI framework since its various provisions entered into force, the uniform application 
of  State  aid  control  continued  to  contribute  to  safeguarding  financial  stability  and  to 
making the EU banking sector more robust through the instigation of deep restructuring 
and the market exit of the least efficient players. It has also preserved fair competition by 
requiring aided banks to implement measures to mitigate competition distortions and has 
required private loss-sharing by the aided banks’ shareholders and subordinated creditors. 

However,  while  the  State  aid  rules  for  banks  in  difficulty  have  overall  met  the  EU’s 
needs  throughout  the  period  under  evaluation,  they  do  not  fully  reflect  EU  policy  and 
legislative developments that took  place since they were last revised,  even though  they 
have  been  applied  consistently  with  such  developments.  In  particular,  the  rules  are  not 
fully  reflecting  the  structure  of  the  CMDI  framework  or  the  creation  of  the  Banking 
Union. These developments have impacted the context in which the State aid rules under 
evaluation  operate,  by  making  a  distinction  between  different  types  of  interventions 
specific  to  the  banking  sector,  which  are  undertaken  by  different  actors  (e.g.  DGS,  a 
resolution  authority  etc.)  and  are  governed  by  specific  underlying  considerations  (e.g. 
precautionary  support  measures  prior  to  a  bank’s  failing-or-likely-to-fail  (FOLF) 
determination,  aid  in  resolution  after  a  bank  has  been  declared  FOLF,  etc.).  They  also 
introduced  a  division  of  roles  and  responsibilities  in  the  regulatory  environment  that 
should be taken into account when assessing State aid control in the banking sector (see 
in further detail Section 3.4 and Section 4.1.3).  

With the introduction of the CMDI framework, bank resolution replaced State aid as the 
primary crisis management tool for banks. This stemmed from the decision of the EU co-
legislators  to  have  shareholders  and  creditors  bear  losses  through  ‘bail-in’,  to  rely  on 
industry-funded  safety  nets  as  a  second  line  of  defence  and  to  avoid  using  taxpayer 
money (‘bail-outs’) unless as last resort. Nevertheless, the CMDI framework continues to 
recognise  the  necessity  for  State  aid  in  exceptional  situations  and  distinguishes  three 

174  
175  

See footnote 15, p.33-34. 
See  Presidency  Conclusions  of  the  Brussels  European  Council  of  15  and  16  October  2008, 
available at: https://data.consilium.europa.eu/doc/document/ST-14368-2008-INIT/en/pdf.  

70 

 
 
possible time periods of aid: (i) aid to prevent failure before it occurs (i.e., in the form of 
precautionary  recapitalisation  or  liquidity  from  the  State,  as  well  as  through  DGS 
measures176),  (ii)  in  resolution  while  the  bank  is  failing  or  risks  to  fail  (i.e.,  resolution 
fund  aid,  DGS  contribution  or  aid  from  the  State  budget  through  the  government 
stabilisation  tools  that  Member  States  may  use  according  to  Articles  56-58  BRRD),  or 
(iii) during wind-up after resolution  has been rejected as not  in  the public interest  (i.e., 
DGS alternative measures or ‘traditional’ State aid from the State budget177).  

For all stages, the CMDI framework explicitly refers to and continues to rely on the State 
aid rules. The CMDI framework itself does not include rules on the assessment of State 
aid and has therefore not replaced the State aid rules for banks in difficulty.  

Thus, the CMDI framework has  not  replaced State aid  rules  but  has introduced a crisis 
management  approach  that  primarily  relies  on  burden  sharing  by  the  shareholders  and 
creditors of the bank. It allows State, resolution fund or DGS support only in exceptional 
and  clearly  ringfenced  situations.  While  it  stipulates  the  criteria  under  which  so-called 
‘extraordinary  public  financial  support’  can  be  granted  without  causing  the  failure  of  a 
bank, it leaves the State aid compatibility assessment to the Commission and its State aid 
framework. 

The  State  aid  rules  for  banks  therefore  continue  to  be  of  relevance  and  are  needed  to 
provide  a  harmonised  framework  offering  transparency  to  market  participants  and 
supporting  an  enhanced  level  playing  field.  Against  this  background,  as  the  2020  ECA 
Special Report also notes, it should be kept in mind that State aid control might have to 
play  a  key  role  in  the  future  and  the  Commission’s  role  continues  to  be  crucial  and 
challenging at the same time.178  

The  above  findings  as  regards  the  current  relevance  of  the  State  aid  rules  for  banks  in 
difficulty are also supported by the outcome of the public and targeted consultations, 
as well as the views expressed in bilateral meetings with Member States’ authorities. 
The replies to the public and targeted consultations show support for maintaining a set of 
State aid rules tailored to the specificities and sensitivities of the banking sector. In their 
replies,  Stakeholders  underlined  the  pivotal  role  of  the  banking  sector  for  financial 
stability  and  the  real  economy,  as  well  as  its  structural  interconnectedness,  by  contrast 
with other economic sectors.  

Furthermore, the consultations have shown that additional clarifications in the State aid 
rules would be appreciated by market participants. Abandoning targeted rules and relying 
solely on the Treaty  or the general  2014  Rescue  and Restructuring  Guidelines for non-
financial undertakings in difficulty179 would contrast with that wish, ignore the specific 
circumstances of the banking sector described in the SWD, and the specific requirements 
of  the  CMDI  framework  for  State  aid  for  banks.  Creating  such  a  gap  in  the  State  aid 
rules, which are organised by sector, would reduce clarity and efficiency for all involved 
parties  and  would  likely  impede  the  effectiveness  of  State  aid  control  in  the  banking 
sector. 

The  replies  to  the  targeted  consultation  and  the  views  expressed  in  bilateral  meetings 
with  Member  States’  authorities  also  show  support  for  the  fundamental  concepts  that 

176  
177  

178  
179  

Referred to as ‘preventive measures’ in the CMDI review proposals. 
As  previously  clarified,  the  CMDI  does  not  govern  wind-up  aid  by  State  budgets,  other  than 
requiring  a  negative  public  interest  assessment,  exceptionality  and  compliance  with  State  aid 
rules. 
See footnote 15, p. 14. 
Communication from the Commission  — Guidelines on State aid for rescuing and restructuring 
non-financial undertakings in difficulty, OJ C 249, 31.7.2014, p. 1–28. 

71 

 
 
underpin the State aid rules under evaluation, namely the three main compatibility pillars 
(i.e.  minimisation  of  competition  distortions,  burden-sharing,  restoration  of  long-term 
viability or market exit), which they still deem relevant and appropriate, though there is 
no clear agreement on the exact balance to be drawn between them. However, it has been 
emphasised  that  regulatory  developments,  particularly  the  CMDI,  and  the  evolution  of 
the 
macroeconomic  circumstances, 
macroeconomic conditions since the global financial crisis180, need to be reflected in the 
State aid rules. 

improvement  of 

the  observed 

including 

With the gradual phaseout of the financial and sovereign debt crises in Europe, and the 
broader  macro-economic  support  during  the  Covid  and  Ukraine  crises,  in  particular 
facilitated  through  the  Commission’s  temporary  State  aid  frameworks  and  many  other 
initiatives,  bank  failures  have  become  less  frequent.  The  State  aid  rules  remain 
nevertheless relevant whenever a bank failure occurs or is prevented with public help, or 
whenever  approved  aid  measures  from  the  past  have  to  be  amended.  The  last  decision 
under these rules was adopted in November 2023. 181 Depending on the outcome of the 
CMDI  review  process,  access  to  funding  in  resolution  from  DGS  and  resolution  funds 
might  become  easier,  so  that  State  aid  control  within  resolution  proceedings  might 
become more important. Whether it is to prevent failure, facilitate resolution or ensure an 
orderly wind-up through DGS alternative measures, State aid rules will remain relevant 
to govern the exceptional public support tools recognised by the CMDI framework. State 
aid  rules  will  also  continue  to  play  a  role  for  wind-up  aid  from  the  State  budget,  in 
particular as the CMDI framework does not contain conditions on that form of support. 
The CMDI review proposal  recognises wind-up  aid  from  the State budget  as a form  of 
support, but only stipulates that it may be granted on an exceptional basis in the context 
of the winding up of an institution (i.e. after a negative public interest assessment) if in 
compliance with the State aid framework (proposed Article 32c BRRD). 

5. 

WHAT ARE THE CONCLUSIONS AND LESSONS LEARNED? 

5.1. 

Conclusions 

The present  evaluation  aims at  assessing  the State aid  rules for banks in  difficulty  as  a 
whole.  

Overall, as regards effectiveness, the evaluation demonstrates that the State aid rules for 
banks  in  difficulty  have  proven  to  be  largely  effective  in  achieving  their  objectives  to 
preserve  financial  stability  while  mitigating  competition  distortions  and  have  surpassed 
the baseline scenario in this regard.  

More precisely, the evaluation suggests that State aid, particularly capital support granted 
under the State aid rules for banks in difficulty, was one of the elements associated with 
an  improvement  of  financial  stability.  While  contributing  to  the  preservation  of 
financial  stability,  State  aid  granted  in  accordance  with  the  rules  under  evaluation  has 
also had a positive impact on the real economy, by supporting the improvement of credit 
institutions’  lending  capabilities,  including  –  to  some  extent  –  to  SMEs.  The  analysis 
further  indicates,  having  regard  to  the  evolution  of  the  performance  indicators  of  aided 
and  non-aided  banks,  that  the  State  aid  rules  for  banks  in  difficulty  were  largely 
successful  in  ensuring  that  banks  that  received  restructuring  aid  returned  to  viability. 
According to the analysis, market discipline has also increased, while the State aid rules 

180  
181   

See also Section Error! Reference source not found..  
SA.109418  (2023/N)  –  Poland  –  Amendment  to  the  liquidation  aid  to  Getin  Noble  S.A.  in 
resolution (SA.100687). 

72 

 
 
under evaluation were, at least to a certain extent, effective as regards containing moral 
hazard,  thus  further  contributing  to  conditions  that  support  medium-  and  long-term 
financial  stability.  The  rules  have  therefore  been  largely  effective  in  contributing  to 
achieving the objective of preserving financial stability and, in turn, have supported the 
efforts to maintain a healthy European banking sector to support the single market. 

As regards the objective of mitigating competition distortions, the analysis did not give 
rise  to  any  findings  of  significant  and  lasting  distortions  of  competition  in  connection 
with  banks  that  received  aid  on  an  individual  basis,  e.g.  in  terms  of  increased  market 
power  or  improved  competitive  position.  It  is  likely  that  this  observation  can  be 
explained  by  the  minimisation  of  the  disbursed  aid,  including  the  effect  of  the  burden-
sharing  measures,  and  the  comprehensive  sets  of  commitments  that  were  implemented 
for the purpose of the authorisation of the aid measures in question by the Commission in 
accordance  with  the  State  aid  rules  under  evaluation.  The  above  demonstrates  that  the 
rules  under  evaluation  have  been  effective  in  reaching  their  objective  to  mitigate 
competition  distortions  that  might  arise  from  the  granting  of  the  aid.  Importantly,  the 
analysis has shown that the burden-sharing measures compulsory in State aid rules since 
2013 and in the CMDI framework since 2015 led to increased market discipline.  

With  regard  to  efficiency,  the  evaluation  suggests  that  the  State  aid  rules  for  banks  in 
difficulty  have  had  a  positive  impact  on  the  reduction  of  the  administrative  burden, 
particularly  in  the  wake  of  the  financial  crisis.  There  could  however  still  be  room  for 
improvement regarding the clarity of rules, in particular with reference to the interactions 
between  the  State  aid  rules  and  the  CMDI  framework,  and/or  the  consolidation  of  the 
rules  in  one  single  communication.  The  evaluation  has  also  indicated  that  the  rules 
contributed  to  ensuring  the  efficiency  of  State  aid  expenditure,  and  that,  overall,  the 
benefits  associated  with  the  implementation  of  the  rules  have  most  likely  outweighed 
their costs.  

With  regard  to  coherence,  the  evaluation  suggests  that  the  State  aid  rules  for  banks  in 
difficulty  are  overall  coherent  with  each  other  as  well  as  with  other  competition  rules, 
such  as  2020  Temporary  Framework  and  the  EU  merger  control  rules.  The  analysis, 
however,  suggests  that  the  State  aid  rules  under  evaluation  are  only  partially  coherent 
with  other  EU  policies  and  legislation.  In  particular,  EU  policies  and  legislation  which 
occurred  after  the  adoption  of  the  rules  under  evaluation,  specifically  the  CMDI 
framework,  are  not  yet  fully  reflected  therein;  hence,  there  appears  to  be  a  need  to 
enhance  the  coherence  between  the  rules  under  evaluation  and  such  recent  EU 
legislation, in particular the CMDI framework, which is also currently subject to review. 
In the absence of consistency, there could be a risk of regulatory arbitrage between the 
different frameworks.  

Overall,  the  State  aid  rules  for  banks  in  difficulty  provide  an  EU  added  value  that  is 
acknowledged by stakeholders.  According to  the available  evidence, the  State aid  rules 
for  banks  in  difficulty  guaranteed  predictability  and  increased  legal  certainty  for  the 
relevant  public  authorities  and  the  banks  concerned  while  allowing  for  sufficient 
flexibility. Furthermore, the existence of the rules allowed for a more uniform and swift 
assessment of aid measures by the Commission. At the same time, updating the State aid 
rules would improve their added value, insofar as it would allow the provision of State 
aid to the banking sector, where appropriate, having regard to transparent and consistent 
rules. 

As to the relevance of the rules, the evaluation indicated that the objectives of the rules 
have  been  to  a  large  extent  appropriate  for  meeting  the  needs  within  the  EU  so  far.  A 
State aid regime tailored to the specificities of the banking sector has been and remains of 
relevance. However, the current rules do not fully reflect recent EU policy and legislative 

73 

 
developments.  In  particular,  they  do  not  take  account  of  the  updated  EU  regulatory 
banking framework and its particular institutional and substantive structure.  

Thus, the analysis suggests that further adjustments of the rules could be considered; the 
State aid rules under evaluation would have to be adapted to fully meet the current needs 
within  the  EU,  having  regard  to  the  ongoing  development  of  the  policy  and  regulatory 
framework and the evolution of market realities.     

5.2. 

Lessons learned 

The evaluation indicates that there are some lessons to be learned from the past years of 
application of the State aid rules under evaluation.  

Overall, the State aid rules for banks in difficulty have been broadly fit for purpose. The 
rules seem to have been largely effective in reaching their twin objectives, i.e. preserving 
financial stability while mitigating distortions to competition.   

However, the State aid rules for banks in difficulty need to be updated to reflect the 
latest legislative developments and market developments. The review of certain rules 
and/or  the  update  of  certain  concepts  appear  to  be  necessary  to  further  clarify  the 
interactions between the State aid rules for banks in difficulty and the CMDI framework, 
and to take into account the institutional and regulatory setting introduced in the EU legal 
order since the last revision of the rules. For instance, the State aid  rules  could entail a 
progressive approach with different criteria for assessing the compatibility of State aid in 
the  context  of  preventive  measures,  resolution  measures  or  liquidation  aid  outside 
resolution. It could also be assessed how, in the scenario of a revised CMDI framework 
allowing for easier access to industry-funded safety nets, the State aid rules could further 
facilitate a more effective use of resolution. 

This  would  allow  the  rules  to  be  exploited  to  their  full  potential  and  would  help  to 
ensure,  inter  alia,  that  stakeholders  are  provided  with  the  legal  certainty  that  they  are 
looking for.  

The  evaluation  also  indicated  room  for  further  clarification  of  the  rules,  as  well  as 
further streamlining and simplification, for instance, by means of consolidation of the 
rules,  which  are  currently  set  out  in  various  separate  communications,  in  one  single 
Communication. 

74 

 
ANNEX I: PROCEDURAL INFORMATION  

1.  Lead DG, Decide Planning/CWP references 

Commission Directorate-General for Competition (DG Competition). 

2.  Organisation and timing 

In the second half of 2021, the Commission services announced to the Member States at 
the  High-level  Working  Group  of  the  Council  its  intention  to  launch  an  evaluation 
exercise, the purpose of which was to  evaluate the application of the State aid rules for 
banks in difficulty since the entry into force of the 2008 Banking Communication. 

The Call for Evidence for the evaluation was published on 17 March 2022 and set out the 
context,  purpose  and  scope  of  the  evaluation  exercise,  as  well  as  its  Better  Regulation 
aspects  (consultation  of  citizens  and  stakeholders,  data  collection  and  methodology). 
Stakeholders  had  the  opportunity  to  provide  their  feedback  concerning  the  Call  for 
Evidence until 15 July 2022. 

An  Inter-Service  Steering  Group  (ISSG)  was  set  up  which  met  for  the  first  time  on  26 
January  2022  and  gathered  representatives  from  the  Commission’s  Secretariat  General 
(SG),  the  Legal  Service  (LS),  and  Directorates-General:  FISMA,  ECFIN,  GROW, 
REFORM,  JUST,  JRC.  The  ISSG  was  consulted  on  the  scope  of  the  evaluation  of  the 
State aid rules for banks in difficulty and the evaluation to be carried out. 

The second ISSG meeting was held on 17 February 2023 to discuss the exact scope of the 
tasks and objectives to be addressed by the external study. The third ISSG met on 30 May 
2023 to discuss the replies and contributions to the public and the targeted consultation 
that  are  included  as  an  annex  to  the  SWD.  The  fourth  ISSG  meeting  was  held  on  7 
February 2024 to discuss the draft version of the present SWD. The fifth ISSG meeting 
took  place  on  6  March  2024  and  focused  on  how  the  other  services’  comments  on  the 
draft  version  of  the  SWD  had  been  addressed.  On  that  basis,  all  services  agreed  in 
principle  with  the  revised  version  of  the  present  SWD  and  its  submission  to  the 
Regulatory Scrutiny Board (RSB). 

A  public  consultation  was  open  from  17  March  2022  to  15  July  2022  on  the  Better 
Regulation  Portal.  During  the  same  period,  DG  Competition  launched  a  targeted 
consultation addressed to the main stakeholders on selected issues related to the evaluated 
rules. Both consultations were in the form of online questionnaires (EU Survey tool). The 
factual  summary  report  of  replies  and  contributions  to  the  public  consultations  was 
published on 11 October 2022, and their extensive summary is included herein as Annex 
V. 

The evaluation was also supported by a study on the impact of State aid rules for banks in 
difficulty.  The  Study  was  procured  in  the  framework  of  a  tender  under  the  reference 
number  COMP/2022/OP/0003  published  on  1  July  2022  and  the  contract  started  on  24 
January 2023. The Study was carried out to assess the application of the State aid rules 
for banks in difficulty, in particular their: (i) impact on financial stability, (ii) impact on 
competition,  (iii)  impact  on  long-term  viability  of  aided  banks,  (iv)  impact  on  market 
discipline,  and  (v)  efficiency.  It  was  undertaken  to  analyse  the  available  specialised 
literature  and  market  data  in  detail  and  provide  an  independent  quantitative  and 
qualitative  assessment  of  the  above-mentioned  aspects  in  terms  of  effectiveness  and 
efficiency. The analyses were supported by thorough collection of evidence with respect 

75 

 
 
 
to  EU  Member  States  and  State  aid  decisions  during  the  evaluation  period,  from  2008 
until  March  2022.  The  final  version  of  the  Study  was  submitted  to  DG  COMP  on  24 
November 2023. 

Between  May  and  June  2023,  targeted  consultations  were  also  carried  out  by  way  of 
bilateral  dialogues  with  selected  Member  States  most  relevant  in  terms  of  the  past 
experience  with  the  application  of  the  evaluated  rules.  Two  additional  European 
regulatory authorities were also consulted on bilateral basis.  

Agenda Overview  

Date 
26 January 2022 
16 February 2022 
17 March 2022 - 15 
July 2022 
10 October 2022 

24 January 2023 

30 May 2023 
24 November 2023 
7 February 2024 
6 March 2024 
24 April 2024 

Description 
1st ISSG meeting 
2nd ISSG meeting 
Call for Evidence/Public consultations 

Factual  summary  report  of  replies  and 
contributions to the public consultation  
Award  of  the  contract  on  the  Study  on  the 
Impact  of  State  Aid  Rules  for  Banks  in 
Difficulty 
3rd ISSG meeting 
Final draft of the Study 
4th ISSG meeting 
5th ISSG meeting 
Regulatory Scrutiny Board meeting 

3.  Exceptions to the Better Regulation Guidelines 
No exceptions were made to the Better Regulation Guidelines1 during this evaluation. 

4.  Consultation of the RSB  

The draft Staff Working Document was sent to the RSB on 22 March 2024 and the hearing 
took place on 24 April 2024. The RSB issued a positive opinion on 26 April 2024.  

5.  Evidence, sources and quality 
The  evaluation  was  supported  by  the  external  study2  described  above.  Primary  data 
sources  included  the  State  aid  Scoreboard3,  which  comprises  aid  expenditure  made  by 
Member States falling under the scope of Article 107(1) TFEU. Also, additional available 
statistical  data  on  the  banking  industry  as  well  as  the  Commission’s  extensive  case 
practice experience (including internal data aggregation) were used. In addition, relevant 
insights from the evaluation of the bank crisis management framework conducted in the 
first half of 2021 (in particular, feedback to its public and targeted consultation, part of 
the ongoing review of the crisis management and deposit insurance framework) was also 
used.  The  Commission  services  also  used  responses  collected  during  the  public 

1  
2  
3  

https://ec.europa.eu/info/better-regulation-guidelines-and-toolbox_en. 
https://etendering.ted.europa.eu/cft/cft-display.html?cftId=10963. 
https://ec.europa.eu/competition/state_aid/scoreboard/index_en.html#what. 

76 

 
 
 
 
 
 
consultations  as  well  as  targeted  consultations  conducted  by  way  of  several  bilateral 
meetings with relevant Member States and two European regulatory authorities.  

77 

 
 
 
ANNEX II: METHODOLOGY AND ANALYTICAL MODELS USED 

The current Evaluation was based on a wide range of data sources/inputs. 

As  already  mentioned  in  this  SWD,  the  evaluation  involved  both  internal  analyses  by 
the Commission services and an expert study prepared by an external consultant. 

Moreover, the Commission services also used the results of the public consultation and 
the  targeted  stakeholder  consultation,  as  well  as  already  existing,  publicly  available 
studies and evaluation reports published by the Commission services, internal statistics, 
and the State aid Scoreboard. The Evaluation also benefitted from the relevant insights 
and  observations  resulting  from  the  Commission  services’  application  experience  and 
the  Commission  services’  own  case  practice,  as  well  as  from  the  results  of  the 
Commission’s evaluation of the current bank crisis management and deposit insurance 
framework.  

1.  CONSULTATION ACTIVITIES 

1.1.  Public consultation 

The  open  public  consultation  on  the  evaluation  of  the  State  aid  rules  for  banks  in 
difficulty took place between 17 March 2022 to 15 July 2022 on the Better Regulation 
Portal. 

The  objective  of  this  public  consultation  was  to  obtain  the  views  of  citizens,  public 
authorities  and  other  relevant  stakeholders  on  the  effectiveness,  efficiency,  coherence, 
relevance  and  EU  added  value  of  the  currently  applicable  State  aid  rules  for  banks  in 
difficulty. 

The  public  consultation  took  the  form  of  an  online  survey,  with  a  mix  of  closed  and 
open questions. Participants were able to reply in any of the EU’s official languages. 

This  public  consultation  was  also  promoted 
through  Twitter  (now  X),  DG 
Competition’s  State  aid  Newsletter  and  DG  Competition’s  website.  The  statistics 
computed  in  this  summary  are  based  only  on  contributions  to  the  public  consultation 
submitted  through  the  online  questionnaire.  The  input  has  been  analysed  using  a  data 
analysis tool, complemented by manual analysis. 

The factual summary of the answers is available in Annex V. 

1.2.  Targeted consultation 

At the same time of the public consultation, (i.e., also between 17 March 2022 and 15 
July 2022), the Commission launched a targeted consultation, addressed to stakeholders 
with  specific  expertise  and  Member  States  directly  impacted  by  State  aid  rules  for 
banks in difficulty. The targeted survey was an extension of the survey submitted for the 
public  consultation.  However, 
included  additional,  more  detailed  questions 
specifically  targeted  to  the  experience  of  Member  States  with  the  State  aid  rules  for 
banks  in  difficulty.  Given  that  it  is  the  Member  States  which  grant  the  State  aid  and 
apply the State aid rules, their responses are of particular relevance to the Evaluation. 

it 

The factual summary of the answers is also available in Annex V. 

78 

 
 
 
2.  EXPERT STUDY1 

The Commission services commissioned an external study with the specific aims of (i) 
producing  quantitative  and  qualitative  evidence  on  the  effectiveness  and  efficiency  of 
measures  to  mitigate  competition  distortions  and  restore  the  long-term  viability  of 
fundamentally viable aided banks, and on the effectiveness of burden-sharing measures 
to strengthen market discipline and fight moral hazard; and (ii) assessing the evolution 
of indicators on financial stability in selected EU countries and at aggregate EU level, 
and  performing  a  quantitative  and  qualitative  analysis  of  the  extent  to  which  such 
indicators  were  influenced  and/or  correlated  with  the  State  aid  control  for  banks  in 
difficulty over the evaluation period.  

The  Study  was  conducted  by  E.CA  Economics  and  its  academic  partners  and  is 
published together with this SWD. It was carried out in the course of 2023. The Study is 
‘backward-looking’, focusing on the period following the entry into force of the 2008 
Banking  Communication  through  all  the  relevant  changes  thereof,  as  well  as  the 
adoption  of  the  applicable  EU  resolution  framework  and  its  interaction  with  State  aid 
rules,  until  the  end  of  2022.  To  the  extent  that  it  uses  its  insights  in  the  report,  the 
Commission 
the  corresponding 
methodology and analysis. 

the  Study,  agreeing  with 

takes  ownership  of 

The  Study  evaluates  the  impact  of  State  aid  for  banks  in  difficulty  in  five  areas  of 
assessment:  (i)  financial  stability,  (ii)  competition,  (iii)  banks’  viability,  (iv)  market 
discipline  and  moral  hazard,  and  (v)  efficiency  of  State  aid  rules.  Based  on  a  unique 
dataset combining European bank-level data between 2007 and 2021 with information 
on State aid from the Commission, the Study compared relevant outcome indicators for 
aided  banks  and  their  matched  non-aided  control  banks  via  difference-in-differences 
regression  analyses  at  the  bank  level.  Additional  descriptive  insights  resulted  from 
regressions at the Member State level.  

The Study was based on a number of data collection tools. It derived data from several 
databases, covering banks from all EU Member States and the United Kingdom, State aid 
decisions for banks adopted from 2007 until the end of 2022 and numerous public data 
sources. The key data sources among them were: (i) the Decision database which contains 
all relevant State aid procedures along with their timelines, decisions issued under these 
procedures,  and  additional  information  about  characteristics  of  these  decisions;  (ii)  the 
Bank database, which includes relevant bank-level information on a yearly basis for the 
period between 2005 and 2022 in relation to banks across Member States. In addition, it 
features  information  regarding  which  banks  received  State  aid,  in  which  years,  and  to 
what extent, collected from confidential files provided by the Commission; (iii) the Bank-
decision  database,  which  brings  together  information  about  aid  beneficiaries  from  the 
Bank database and connects it with the Commission’s decisions in the Decision database, 
particularly for banks aided in individual procedures where such match is possible based 
on the identity of the beneficiaries; and (iv) the Member State (MS) database, which is the 
core panel dataset for the MS and EU-level analysis, as it is a source of information at the 
MS level on a yearly (quarterly) basis, covering the period between 2005 and 2022. 

In order to assess the impact of State aid to banks in difficulty at Member State-level, the 
Study compares several indicators (of financial stability and competition) and aid amounts 

1  

This description reuses parts (most notably Section 4) of the Study performed by E.CA and its academic 
partners. 

79 

 
 
 
 
(standardized using Member States’ pre-crisis GDP) across different Member States. The 
development  of  relevant  indicators  over  time  is  presented.  In  order  to  obtain  deeper 
insights into the Member State and EU level associations between the State aid granted 
and the relevant outcome variables, simple regressions holding other explanatory factors 
constant were used. This regression analysis allows to disentangle how several different 
“explanatory  variables”  (in  the  case  at  hand  State  aid,  but  also  other  factors  that  are 
independent from State aid such as GDP growth influence one “dependent variable” (in 
the case at hand the outcome variables in the assessment of financial stability and in the 
assessment of competition where the Member State assessment is performed). 

Furthermore, to assess the impact of State aid to banks in difficulty at the bank level, the 
Bank  database  was  used.  A  descriptive  analysis  describing  how  the  economic  outcome 
indicators  and  the  characteristics  of  the  banks  have  developed  over  time  and  how  they 
differed between the aided and non-aided banks is provided. It sheds light on the possible 
differences between the aided and non-aided banks, which would indicate a selection on 
observable characteristics that can be accounted for by a matching procedure.  

The  descriptive  analysis  is  followed  by  a  thorough  econometric  analysis  that  aims  at 
estimating  the  causal  impact  of  the  provided  State  aid.  In  a  setting  where  part  of  a 
population is treated by  a policy  intervention (i.e., State aid rules)  and the rest is not,  a 
difference-in-differences strategy was used, i.e. the outcomes of the group of aided banks 
before  and  after  the  intervention  were  compared  with  the  corresponding  outcomes  of  a 
group  of  non-aided  banks.  Since  treated  banks  received  State  aid  at  different  points  in 
time,  the  Study  has  relied  on  stacked  dynamic  difference-in-differences  models 
(“dynamic  DiD"),  in  combination  with  a  matching  approach  (see  below)  to  identify 
control  banks.  This  allows  to  zoom  in  and  investigate  whether  and  how  the  effects  of 
receiving State aid have developed over time and across banks. It also allows to explicitly 
model  the  possibility  that  the  effect  of  aid  may  take  time  to  materialise.  For  all  aided 
banks, an “event window” is defined to study aid effects. The event is the first inflow of 
aid. The window goes back three years before and lasts until several years after the first 
inflow. The exact end date depends on the specific focus of the assessments. 

To deal with the observed differences in the characteristics of aided and non-aided banks 
(e.g.,  aided  banks  being  significantly  larger  on  average),  a  matching  approach  is  used 
before  performing the difference-in-differences regressions.  In particular, the propensity 
score matching methodology finds for each aided bank one or more banks with (1) similar 
probability  of  getting  aided  based  on  pre-intervention  characteristics  and  (2)  with  very 
similar  pre-intervention  in  their  characteristics.  In  this  way,  the  treatment  and  control 
groups  are  not  different  from  each  other  conditional  on  observed  characteristics.  The 
matched  non-aided  banks  serve  hence  as  relevant  counterfactuals  to  which  the  aided 
banks are compared. It allows to compare banks that were similarly exposed to the crisis 
but had similar observable characteristics before the arrival of the financial crisis.  

The  search  for  the  best  match  is  carried  out  in  the  year  2006  where  banks  and  their 
matching  covariates  were  expected  to  perform  “normally”.  Knowing  that  both  sets  of 
banks  were  similar  in  their  “healthy”  state  enables  a  more  accurate  assessment  of  the 
impact of the aid, while also controlling for the development of non-aided banks during 
the  financial  crisis. The  set of  matching criteria includes variables  capturing the size of 
banks along various dimensions (total assets, total deposits, and total loans), profitability 
of banks (return on assets) and variables reflecting the business model, product portfolios 
and operational strategies (overheads to asset  ratio, net loans to assets ratio, net interest 
margin). There is no requirement for the aided and non-aided banks to operate in the same 

80 

 
 
 
Member  State,  since  this  is  too  restrictive  in  the  context  of  this  study  and  would  even 
render  analysis  of  banks  from  some  Member  States  impossible.  In  the  matching 
procedure, some aided banks are lost, most notably due to the requirement that a specific 
treated bank is active before the financial crisis in 2006, or simply due to the inability of 
the  procedure  to  find  a  reasonably  good  match.  Before  matching,  aided  and  non-aided 
banks  were  very  different  from  each  other.  After  matching,  the  distributions  for  both 
aided  and  the  matched  non-aided  banks  show  a  similar  propensity  for  receiving  aid, 
indicating  that  the  selected  control  banks  resemble  the  aided  banks  in  terms  of  their 
characteristics.  The  absolute  differences  in  means  are  substantially  smaller  for  the 
matched  sample  than  the  unmatched  sample.  The  matched  sample  means  are  also 
statistically indistinguishable from each other.  

3.  OTHER DATA SOURCES 

DG  Competition  has  also  conducted  its  own  internal  assessment  of  the  application  of 
the  State  aid  rules  derived  from  the  adopted  State  aid  decisions.  Internal  Commission 
data  used  for  the  internal  assessment  include  for  instance  monitoring  results  and  the 
State Aid Scoreboard.  

Court  judgments,  desk  research,  literature  review  and  internal  statistics  have 
additionally played a role in data gathering. DG Competition used several other publicly 
available reports and data such as data from EUROSTAT and the OECD. 

Finally,  bilateral  meetings  were  held  with  selected  stakeholders  –  Member  States,  the 
Single Supervisory Mechanism of the ECB, and the Single Resolution Board as deemed 
relevant by DG Competition.  

4.  LIMITATIONS AND CHALLENGES OF THE EVALUATION 

One obvious limitation of the evaluation stems from the fact that the observable data are 
a  result  of  a  complex  concurrent  interaction  of  a  multitude  of  variables  which  are 
difficult  to  disentangle  even  when  applying  the  methodology  described  above.  Along 
with  the  provision  of  State  aid  to  concrete  banks,  several  other  measures  have  been 
applied  or  introduced  that  simultaneously  contributed  to  avoiding  systemic  financial 
collapse,  calming  down  financial  markets  and  gradually  reestablishing  financial 
stability, as well as confidence in soundness and stability of the financial situation. Such 
complex  social  phenomena  are  never  the  result  of  a  change  in  a  single  factor  or  a 
variable, be it State aid, or any other. Even when observing a correlation of relevant data 
sets  within  relevant  confidence  intervals,  the  causality  between  the  observed  sets  of 
variables are not  easy to establish when other fast moving and changing  factors are at 
play concurrently, which is inevitably the setting of a financial crisis. 

A concrete shortcoming of the descriptive EU and Member State analysis is that it does 
not  measure  causal  relationships,  as  there  might  be  several  unobserved  factors  that 
cannot  be  accounted  for,  and  could  be  the  drivers  of  the  observed  correlations. 
However, the patterns developed in such analysis can help to guide the understanding of 
the context of the evaluation and provide a basis for the more sophisticated analyses. 

While  the  difference-in-difference  approach  is  more  sophisticated  than  a  descriptive 
analysis, its validity to measure a causal effect of the treatment (i.e., receiving State aid) 
relies on the key assumption of random assignment to the treatment group. In the present 
setting, this means that whether a bank is being aided should be randomly assigned. This 
is very unlikely to hold when comparing aided banks to all other non-aided banks. In fact, 

81 

 
 
 
it is an endogenous decision by the Member State to grant aid to a bank in difficulty. In 
addition, also other decision-makers play a role in deciding whether the aid is granted or 
not. Earlier research also suggests that worse performing viable banks were more likely to 
have received State aid which would mean there is a negative selection problem. Also the 
Study found significant differences between the aided and non-aided banks in the sample. 
In cases like these, the random-treatment assumption can be partially replaced by the less 
demanding assumption of parallel trends. The parallel trend assumption requires that the 
counterfactual  outcomes  of  the  aided  banks  absent  intervention  should  have  moved  in 
parallel to non-aided banks before the intervention. If this holds, then non-treated banks – 
or  at  least  a  selected  subsample  of  them  –  can  be  seen  as  reasonable  counterfactual  to 
treated ones. To achieve this, “conditional independence” is assumed. This suggests that 
the selection of being aided or not could be as good as random conditional on observable 
variables. To ensure this is practice, one widely used strategy is to “match” aided banks 
with  non-aided  banks  (as  explained  in  section  1.2  of  this  Annex).  By  doing  so,  aided 
banks  should  be  similar  enough  to  the  matched  non-aided  banks,  at  least  in  terms  of 
observed characteristics and, therefore, be considered as a good counterfactual. While this 
approach  allows  capturing  the  underlying  observed  differences  between  the  aided  and 
non-aided banks, it cannot exclude that unobserved factors are correlated with whether a 
given  bank  is  aided.  Although,  the  inclusion  of  bank  fixed  effects  can  further  capture 
some  time-invariant  bank-specific  factors,  there  might  still  be  some  unobserved  time-
varying  factors  that  are  correlated  with  the  selection  of  treatment  and  that  also  affect 
banks' post-treatment performance. Yet, while one should be careful in claiming that the 
estimates  fully  capture  the  causal  effect  of  State  aid  on  bank  performance,  the  research 
design (combining dynamic DiD with propensity score matching and bank fixed effects) 
addresses  some  of  the  issues  in  causal  analysis  to  the  extent  possible  and  is  suitable  to 
answer the main questions of this evaluation. 

For the dynamic DiD approach, the choice of the first aid inflow as an event was the most 
natural  as  a  bank  receives  aid  for  the  first  time  shortly  after  it  has  started  to  face 
difficulties.  This  definition  of  a  window  is  largely  unproblematic  for  banks  aided  only 
once. However, when banks have been aided repeatedly for longer periods, the major aid 
amounts  and  their  effects  might  have  come  later  than  at  the  time  the  aid  was  first 
identified.  Hence,  it  is  possible  that  the  measured  effect  of  the  first  aid  for  these  banks 
does not capture the effect of all State aid to the full extent. 

Another  major  limitation  stems  from  the  fact  that  in  some  areas  the  data  are  not 
available or there are insufficient observations to draw strong conclusions on their basis 
– be it due to the low number of cases involved, low number of banks in question, etc. 
In other areas, the available data  are not sufficiently granular in order to enable a full 
analysis of all types of aid. It also  has to be recalled that in some cases, limited ex ante 
information relevant for assessing the impact of the measure in question is available.  

The  assessment  of  the  potential  roles  of  the  different  legal  frameworks  (i.e.  up  to  the 
2013 Banking Communication, up to the CMDI framework, and as from the entry into 
force  of  the  CMDI  framework)  at  the  bank  level  is  complex.  A  bank  could  have 
received  aid  inflows  multiple  times  in  several  years,  possibly  spanning  several 
regulatory  periods.  In  addition,  as  explained  earlier,  the  various  elements  of  the  2015 
CMDI framework do not have a unified application date. In addition, there are only  8 
banks in the matched sample aided under the 2013 Banking Communication prior to the 
entry  into  force  of  the  2015  CMDI  framework  and  11  banks  in  the  matched  sample 
aided after the entry into force of the 2015 CMDI framework, limiting the explanatory 
power of the regression analysis. Several other factors strongly correlate with these two 

82 

 
 
 
frameworks.  Banks  that  were  aided  at  later  points  (particularly  2015  and  beyond) 
possibly  had  different  structural  problems  that  led  them  to  requiring  aid  at  this  point, 
which in turn may require lower average aid and thereby have different impact on the 
economy. This selection problem (arising from the fact that cases falling under different 
frameworks  can  be  inherently  different)  limits  not  only  the  explanatory  power,  but 
mainly the ability of the analysis to identify causal effects. 

Furthermore,  despite  DG  Competition’s  efforts  to  make  stakeholders  aware  of  the 
public  consultation  (including  extending  the  deadline  to  reply  and  making  the 
consultation available in all official languages of the EU),  the  total  number  of  replies 
was  limited.  The public consultation generated only a limited number of replies,  which 
is  very  small  compared  to  the  reference  population  of  citizens,  companies  and 
public authorities potentially affected by the rules in question. 

The evaluation does not assess and compare different legal regimes resulting from the 
various  amendments  to  the  Basel  regulatory  framework,  since  the  Basel  standards 
continue to evolve. These standards were adopted at international level in their current 
form  only  after  the  2008  financial  crisis  (in  the  EU  by  way  of  adopting  in  2013  the 
Capital  Requirements  Regulation  (EU)  No.  575/2013  and  Capital  Requirements 
Directive  IV  No.  2013/36/EU)  and  they  are  being  implemented  by  different  countries 
continuously  at  different  stages  with  varying  degrees  of  compliance.  This  makes  a 
comparison  between  individual  non-EU  countries  and  Member  States  on  this  basis 
particularly  challenging.  Various  continuous  substantive  amendments  following  the 
adoption of the so-called Basel III standards do not allow to separate the impact of these 
individual  regulatory  changes  on  the  performance  and  soundness  of  banks  (whether 
aided or non-aided). 

Finally, this SWD does not directly assess the impact of the COVID-19 crisis and of the 
Russian  war  of  aggression  against  Ukraine,  which  are  unprecedented  and  unique 
situations, and were therefore deliberately not made part of the evaluation. For the same 
reasons,  the  Expert  Study  also  did  not  take  into  account  the  COVID-19  crisis  and  the 
Russian war of aggression against Ukraine. 

5.  METHOD OF THE EVALUATION 

An evaluation needs an appropriate point of comparison to be able to assess the change 
that  the  EU  action  has  brought  over  time.  In  general,  the  main  baseline  (or 
counterfactual) is a situation in the absence of EU intervention. 
In  the  current  situation,  the  EU  intervention  is  the  adoption  of  the  2008  Banking 
Communications  and  subsequent  Communications  setting  out  rules  for  State  aid  for 
banks in difficulty.  

The evaluation questions and criteria are presented in Annex III below. 

83 

 
 
 
ANNEX III: EVALUATION MATRIX 

Effectiveness 

•  To what extent have the rules achieved their objectives (financial stability and 
mitigation of competition distortions between banks and across countries)?  

•  To  what  extent  have  they  contributed  to  reinforcing  market  discipline  and 
through  adequate  burden-sharing 

in  particular 

tackling  moral  hazard, 
measures?  

•  To what extent have they helped restructure banks in difficulty and restore their 
long-term  viability,  or helped the market  exit of unviable banks in  an orderly 
fashion? 

•  Have  there  been  any  unexpected  results  or  unintended  consequences  of 

implementing the rules? 

Efficiency 

•  Have the benefits achieved been in proportion to the incurred costs? 

•  To what extent have the requirements under the rules been proportionate to the 

cost of complying, e.g. regarding burden-sharing?  

•  Have the rules been clear over time? 

•  Has  the  existence  of  aid  schemes  under  these  rules  helped  simplify  the 

administration? 

Relevance 

•  To  what  extent  have  the  rules  remained  relevant  over  time,  against  the 

background of macroeconomic, market and regulatory changes? 

Coherence 

•  To what extent do the different Commission communications setting out these 

rules complement each other, rather than leading to contradictions?  

•  To what  extent are the rules consistent with other EU policies and legislation 
that apply to failing banks, especially the bank crisis management framework?  

EU added value 

•  To what extent have the rules ensured EU added value for stakeholders?  

•  To  what  extent  have  the  rules  ensured  a  coordinated  policy  response  by  EU 

countries to the financial crisis. 

84 

 
 
 
 
 
 
 
 
 
ANNEX IV: EXTERNAL FACTORS AND POLICY INITIATIVES OVER THE EVALUATION 
PERIOD 

Years  Major financial stability and macroeconomic 

Major Policy Initiatives 

events 

Ex-EU 

EU  

Ex-EU  

EU 

Bear  Stearns  and  BNP  Paribas 
from 
suspend 
hedge  funds 
to  U.S. 
subprime mortgage. 

redemptions 
linked 

Northern  Rock 
(GBP  100  bn 
assets)  faces  a 
bank run. 

U.S.  Federal  Reserve  (FED)  and  the  ECB 
agree  on  providing  U.S.  dollar 
liquidity 
against euro-denominated collateral. 

2007 

2008 
(Jan-
Sep) 

2008 
(Oct-
Dec) 

U.S.  distressed  institutions  are 
taken  over  (e.g.  Bear  Sterns, 
Merrill  Lynch)  or  fail  (e.g. 
Lehman Brothers).  

Three  main 
Icelandic 
banks 
lose 
market access. 

UK RBS (GBP 2,200 bn assets) 
and HBOS (GBP 700 bn assets) 
banks 
plunge;  most 
experience  deeply 
impaired 
market access. 

Irish 

Northern 
nationalised. 

Rock 

is 

Adoption  of  EU  State 
aid  rules  for  banks  in 
difficulty 
and 
Temporary  Framework 
for  the  real  economy; 
EU MSs start providing 
to  banks;  ECB 
aid 
introduces 
“non-
standard” operations.iii 

Adoption of the Capital 
Requirement  Directive 
IIv. 
(CRD) 
ECB 
launches  its  1st  covered 
purchase 
bonds 
programme.vi 

Set  up  of  the  EFSFix; 
ECB  launches  the  SMPx 
purchase 
programme; 
Adoption of CRD IIIxi. 

U.S.  Treasury  bails-
out 
Fannie  Mae, 
Freddie  Mac,  AIG; 
U.S.  Federal  Deposit 
Corp 
Insurance 
(FDIC) 
seizes 
Washington  Mutual 
and  guarantees  bank 
senior  debt;  U.S.  Fed 
launches  TALFi  and 
1st 
its 
announces 
assets 
purchase 
programme.ii 

U.S. 
launches TARPiv. 

Treasury 

Basel III rules text.vii 

U.S.  Fed  starts  its 
2nd  assets  purchase 
programme.viii 

  Adoption of the Six-Packxii; EBA conducts 
first  EU  wide  stress  test.xiii  ECB  launches 
2nd 
its 
purchase 
programme.xiv 

covered 

bonds 

2009 

Global  GDP 
falls  by  ca. 
1.5% 

Euro  area  (EA)  GDP  falls  by 
ca.  4.5%;  upward  revision  of 
the  Greek  public  deficit  and 
debt. 

2010 

Ireland  and  Greece 
lose  market  access; 
upward revision of the Portuguese public debt. 

2011 

  Portugal and Cyprus lose market access. 

2012 

  EA GDP shrinks by ca. 1%; private investors 
agree to write off 53.5% of the nominal value 
of their Greek government bonds.  

U.S.  Fed  launches 
3rd 
its 
assets 
purchase 
programmexv 

Set-up  of  the  ESMxvi; 
ECB  announces 
the 
OMTxvii.  Commission 
proposes 
the  BRRD 
and the SSMR. xviii 

2013 

  Cypriot  bank’s  closures  and  capital  control. 

EA GDP is flat. 

85 

  Adoption  of  CRD  IVxix  and  the  Capital 
(CRR)xx. 

Requirement 
Commission proposes the SRMR. xxi 

Regulation 

 
 
 
 
 
 
 
Years  Major financial stability and macroeconomic 

Major Policy Initiatives 

events 

2014 

2015 

Paris Agreement on Climate Change.xxv  

China  devalues  its 
currency. 

A referendum results in the 
conditions  for  a  renewed 
financial 
to 
assistance 
Greece being rejected. 

2016 

In  a  referendum,  the  majority  of  UK  voters 
chose to leave the EU.  

2017 

  UK triggers the Treaty article to withdraw its 

EU membership. 

2018-
19 

2020 

All major economies impose lockdown to reduce 
contagion from COVID-19 pandemics. Oil price 
tanks. Global GDP falls by ca. 3% 

2021 

Approved vaccines for COVID-19 pave the way 
for the re-opening in the major world economies. 

2022 

Russia  launches  an  unprovoked  and  unjustified 
military aggression against Ukraine. 

2023 

U.S.  Silicon  Valley  Bank,  Signature  Bank  and 
later  First  Republic  fail.  Credit  Suisse  is  taken 
over by UBS. 

  ECB launched the APPxxii. The BRRD and 
DGSD  are  adopted. 
single 
resolution and supervisory mechanisms are 
set up. xxiv 

xxiii  The 

  EU  Commission 

launches 

Framework” 
launches 

the 
economic 

EU” 

the  “2020 
xxvi. 
EU 
“Next 
support 

Temporary 
Commission 
Generation 
package. xxvii 

U.S.  administration 
launches 
the 
American  Families 
Plan 
Jobs 
and 
Plan.xxviii 

Congress 
U.S. 
approves 
the 
Inflation  Reduction 
Act.xxix    U.S.  Fed 
starts  increasing  its 
official rates.  

Commission 
EU 
“2022 
the 
adopts 
Temporary 
Crisis 
Framework”  xxx.  ECB 
starts 
its 
official rates. 

increasing 

  The  Commission  proposes  a review  of  the 

CMDI framework.xxxi 

i  

Term Asset-Backed Securities Loan Facility. Through ad hoc lending by the USD Fed and equity support 
by the U.S. Treasury, it enabled the issuance of asset-backed securities (ABS) backed by student loans, 
auto loans, credit card loans, etc. 

ii   U.S. FED announced a program to purchase mortgage-backed securities (MBS) by Fannie Mae, Freddie 
Mac, and Ginnie Mae. The program was extended and expanded in scope in March 2009. By its end, in 
March 2010, the Fed had bought USD 1.25 trillion in MBS, USD 175 billion in federal agency debt, and 
USD 300 billion in U.S. Treasury securities. 

iii  

It  included  the  “enhanced  credit  support”,  i.e.  the  increase in  the  maturity  of  the  long-term  refinancing 
operations (LTROs), the “fixed rate full allotment” and the enlargement of the scope of the assets eligible 

86 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
for  collateral  in  those  operations.  See  “The  ECB’s  response  to  the  financial  crisis”,  ECB,  Monthly 
Bulletin, October 2010 

iv   Troubled Asset Relief Program. It resulted in State’s disbursements amounting to USD 443.5 billion. 

v   Directive 2009/111/EC of the European Parliament and of the Council of 16 September 2009 amending 
Directives  2006/48/EC,  2006/49/EC  and  2007/64/EC  as  regards  banks  affiliated  to  central  institutions, 
certain own funds items, large exposures, supervisory arrangements, and crisis management. 

vi   Covered bond purchase programme (CBPP), for a total amount of EUR 60 billion by June 2010. 

vii  

viii  

In  December  2010,  the  Basel  Committee  issued  the  Basel  III  rules  text,  presenting  global  regulatory 
standards on bank capital adequacy and liquidity. Additional details on the phases of the agreement could 
be found here.  
It consisted of purchases of USD 600 billion in Treasury securities, from Nov 2010 to June 2011. 

ix   The European Financial Stability Facility was created as a temporary crisis resolution mechanism in June 

2010. It has provided financial assistance to Ireland, Portugal and Greece. 

x  

Securities  Market  Programme.  Under  this  programme,  the  ECB  acquired  assets  normally  accepted  as 
collateral in its official refinancing operations. The maximum amount of securities (EUR 208.7 billion in 
book value), held by the ECB as a result of this programme, was reached in 2012  

xi   Directive  2010/76/EU  of  the European  Parliament  and of  the  Council  of  24  November 2010  amending 
Directives 2006/48/EC and 2006/49/EC as regards capital requirements for the trading book and for re-
securitisations, and the supervisory review of remuneration. 

xii  

xiii  

In December 2011, the reinforced Stability and Growth Pact (SGP) entered into force with a new set of 
rules for fiscal and economic surveillance, introducing the Macroeconomic Imbalance Procedure (MIP). 
These measures are made of five regulations and one directive, commonly referred to as "Six-Pack". 

In July 2011, EBA published the results of the first EU wide stress test, assessing the resilience of a large 
sample  of  banks  in  the  EU  against  an  adverse  scenario.  In  December  2011,  EBA  recommended  the 
creation and supervisory oversight of temporary capital buffers. 

xiv   CBPP 2, for a total nominal amount of EUR 16.4 billion, by its end in October 2012. 

xv  

It called for monthly purchases of USD 40 billion in MBS and USD 45 billion in U.S. Treasury securities. 
More details on its detailed implementation are available here.  

xvi   The European Stability Mechanism is part of the EU strategy designed to safeguard financial stability in 
the  euro  area,  providing  financial  assistance  to  euro  area  countries  experiencing  or  threatened  by 
financing difficulties. It provided assistance to Spain, Cyprus and Greece. 

xvii   Outright  Monetary  Transactions  are  Eurosystem’s  outright  transactions  of  sovereign  bonds  of  Member 
States  subject  to  a  EFSF/ESM  programme.  The  announcement  of  the  ECB’s  plan  to  work  on  such 
programme had significant reassuring effects and the programme was ultimately never implemented.  

xviii   Namely,  the  Banking  Recovery  and  Resolution  Regulation  and  the  Single  Supervisory  Mechanism 

Regulation.   

xix   See footnote 10 in Section Error! Reference source not found. of the SWD. 

xx   See footnote 9 in Section Error! Reference source not found. of the SWD. 

xxi   Namely, the Single Resolution Mechanism Regulation.   

xxii   Asset Purchase Programmes (APP). This is the largest purchase programme by the ECB, still in place.  

xxiii   See footnotes 58 and 60 in Section 3.4 of the SWD.  

xxiv   See footnotes 59 and 61 in Section 3.4 of the SWD.  

xxv   The  Paris  Agreement  is  a  legally  binding  international  treaty  on  climate  change.  It  was  adopted  by  196 

Parties at the UN Climate Change Conference (COP21) in Paris, France, on 12 December 2015. 

xxvi   See footnote 19 in Section 1.3 of the evaluation report. 

87 

 
 
 
 
 
xxvii   The  NextgenerationEU  consists  of  a  support  package  of  ca.  EUR  800  billion  to  support  the  post-

COVID19 recovery and the green and digital transition. 

xxviii   The two packages are respectively worth US dollar 2 trillion and US dollar 2.3 trillion. 

xxix   The Inflation Reduction Act authorised USD 891 billion in total spending, including $783 billion on energy 

and climate change. 

xxx    See footnote 20 in Section 1.3 of the SWD. 

xxxi   See footnote 11 in Section Error! Reference source not found. of the SWD. 

88 

 
 
 
 
 
89 

 
 
 
ANNEX V: OVERVIEW OF BENEFITS AND COSTS AND TABLE ON SIMPLIFICATION AND BURDEN REDUCTION 

Table 1. Overview of costs and benefits identified in the evaluation 

Citizens/Consumers  

Businesses 

Administrations 

Broader Economy 

Quantitative  

Comment 

Quantitative  

Comment 

Quantitative 

Comment  

Quantitative 

Comment 

It is not possible to quantify the costs and benefits listed in this table other than those that are quantified 

Direct 
Costs 

- State aid (ca. EUR 
650-900 fiscal 
costs for EU 
Member States for 
rescuing and 
restructuring their 
banking sectors).1 

State aid is funded 
from public 
budgets 
(“taxpayer 
money”) or within 
State control. 

(all one-
off for 
any given 
aid 
measure) 

- Administrative 
costs  

The aided 
banks bear 
compliance 
costs (e.g. legal 
representation). 

- Administrative 
costs (ca. EUR 
25 million for 
the 
Commission2) 

National 
authorities have to 
notify the aid and 
adopt certain 
commitments to 
ensure its 
compatibility. 

The 
Commission’s 
services carry out 
the compatibility 
assessment of the 
aid. A monitoring 
trustee is tasked 
with the 
monitoring of the 
implementation of 
the commitments. 

1  

2  

This is not equivalent to the amount of used State aid (EUR 2 904 billion) during the period under evaluation, nor to an exact estimation of the fiscal costs entailed by such 
used aid. For additional details on these two concepts and on the limitations of the estimates see Box 2 in Section 3.2 and footnote 155 in Section 4.1.2 of the SWD.  
For additional details on the construction and limitation of this estimate, see footnote 152 in section 4.1.2 of the SWD.  

90 

 
 
 
                        
 
 
 
 
 
 
Indirect 
Costs  

(one-off 
with 
recurrent 
effects) 

Protection 
of 
deposits  and  of  the 
(critical) 
functions 
of the banks directly 
benefitting 
consumers. 

(one-off 
with 
recurrent 
effects) 

Direct 
benefits 

Restructuring 
costs 

aided 
are 
to 

The 
banks 
required 
adopt 
competition 
measures,  such 
as  behavioural 
bans 
(e.g. 
acquisitions, 
dividend 
payments)  and 
measures 
to 
restore 
viability 
closures 
loss-making 
parts 
business). 

(e.g. 
of 

of 

State  aid  to  the 
(the 
banks 
economic  benefit 
for 
is 
banks 
however 
not 
exactly  the  same 
as the cost for the 
State, 
as 
quantified above) 

Continuous access 
deposits, 
to 
beyond  the  levels 
protected  by  the 
DGS  and  without 
the  delay  of  a 
payout, 
DGS 
thanks to State aid 
that  prevents  a 
disorderly 
In 
liquidation. 
lending 
addition, 
and 
payment 
services  were  also 
preserved. 

The State aid is 
directed toward 
beneficiary 
banks  enabled 
to 
restore 
viability  or  be 
liquidated in an 
orderly 
manner, 
preserving 
their  functions 
and/or 
their 
value  (net  of 
“own 
contribution”). 

91 

Competition 
distortions 

supporting 

By 
certain 
beneficiaries,  State 
aid has the power to 
produce 
competition 
distortions,  which 
however, 
are, 
the 
minimised  by 
State aid control.  

Value 
preservation 
across 
value chain. 

the 

By  enabling  a  bank 
to return to viability 
or  to  be  liquidated 
orderly,  State  aid 
its 
protected 
suppliers 
and 
employees,  hence 
preserving 
employment 
skills.  

and 

 
 
 
 
 
 
 
 
 
 
 
 
Indirect 
benefits  

(one-off 
with 
recurrent 
effects) 

Preservation  of 
Financial 
Stability  

in 

State  aid  to  banks 
contributed  to  the 
the 
stability 
period  of 
crisis, 
enabling  continued 
flow  of  credit  to 
both 
the 
government and the 
real 
economy, 
hence    minimising 
the  output  loss  (i.e. 
supporting 
economic growth) 

92 

 
 
 
 
 
 
 
 
 
 
 
 
 
TABLE 2:  Simplification and burden reduction (savings already achieved)  

Citizens/Consumers/Workers  Businesses 

Administrations 

Quantitative  

Comment 

Quantitative  

Comment 

Quantitative 

Comment  

Direct compliance cost savings (for example adjustment cost savings, administrative cost savings, savings from regulatory charges)  

Type:  one-off  for  any  given  aid 
measure 

Administrative 
costs 
(not 
quantifiable) 

Administrative  costs 
(not quantifiable) 

to 

Administrative  costs  have  been 
reduced 
the 
thanks 
introduction of a dedicated set of 
rules  to  the  banks  in  difficulties 
as  opposed 
the  previous 
to 
situation where the compatibility 
could only have been assessed on 
the  basis  of  the  Treaty  and/or  of 
the  Guidelines  on  State  aid  for 
rescuing  and  restructuring  non-
financial 
in 
difficulty. 

undertakings 

to 

Administrative  costs  have  been 
reduced 
the 
thanks 
introduction of a dedicated set of 
rules  to  the  banks  in  difficulties 
as  opposed 
the  previous 
to 
situation where the compatibility 
could  only  have  been  assessed 
on the basis of the Treaty and/or 
of the Guidelines on State aid for 
rescuing  and  restructuring  non-
financial 
in 
difficulty. 

undertakings 

Further potential simplification and savings that could be achieved with a view to make the initiative more effective and efficient without prejudice to its policy objectives3. 

PART II: II Potential simplification and burden reduction (savings) 

Citizens/Consumers/Worker
s 

Businesses 

Administrations 

Quantitative  

Comment 

Quantitative  

Comment 

Quantitative 

Comment  

Direct compliance cost savings (for example adjustment cost savings, administrative cost savings, savings from regulatory charges) 

Type:    one-off  for  any  given  aid 
measure 

Administrative 
(not 
costs 

Administrative  costs  could  be 
further reduced by: 

Administrative  costs 
(not quantifiable) 

Administrative  costs  could  be 
further reduced by: 

3 This assessment is without prejudice to a possible future Impact Assessment. 

93 

 
 
 
               
 
 
 
 
 
 
 
 
 
quantifiable) 

(i)  Reorganizing the set of rules 
that  are  currently  spread 
different 
across 
communications 
a 
into 
single communication. 

(ii)  Ensuring 

consistency 
between  the  State  aid  rules 
for  banks  in  difficulty  and 
the CMDI framework.  

(i)  Reorganizing the set of rules 
that  are  currently  spread 
different 
across 
communications 
a 
into 
single communication. 

(ii)  Ensuring 

consistency 
between  the  State  aid  rules 
for  banks  in  difficulty  and 
the CMDI framework. 

94 

 
  
 
ANNEX VI: REPLIES AND CONTRIBUTIONS TO THE PUBLIC AND TARGETED CONSULTATION 

As  part  of  the  evaluation,  the  Commission  sought  the  views  of  stakeholders  on  the 
effectiveness, efficiency, relevance, coherence, and EU added value of the State aid rules for 
banks in difficulty. To this end, both a public consultation and a targeted consultation were 
organised in parallel. The results of these consultations serve as input for the evaluation.  

The public and targeted consultations were open for 17 weeks until 15 July 2022, and replies 
could be provided in all 24 official EU languages. The public consultation contained 13 high-
level questions, which were also included in the targeted consultation. The latter incorporated 
additional technical enquiries, with a total number of questions of 45. The issues raised in the 
public  and  targeted  consultations  were  grouped  by  the  five  evaluation  criteria  under 
consideration,  namely  the  effectiveness,  efficiency,  relevance,  coherence,  and  EU  added 
value of the State aid rules for banks in difficulty.  

Due  to  originally  low  number  of  responses  received  in  the  public  consultation,  the 
the  representativeness  and 
Commission  undertook  a  number  of  steps 
meaningfulness of the responses. Firstly, to complement the results of the public consultation, 
the Commission conducted in parallel a targeted consultation as well. The deadline to reply to 
both  consultations  had  been  prolonged  by  five  weeks  and,  to  ensure  maximal  accessibility, 
the questions had been translated into all official languages. The Commission also informed 
State  aid  representatives  of  all  Member  States  of  the  organisation  and  prolongation  of  the 
consultation. Such initiative led to an increase of the number of replies. 

increase 

to 

In  addition,  in  order  to  further  strengthen  the  relevance  of  the  opinions  of  the  relevant 
stakeholders,  between  May  2023  and  December  2023  the  Commission  also  conducted  a 
series of bilateral meetings with representatives of the Single Supervisory Mechanism of the 
ECB,  the  Single  Resolution  Board,  and  the  authorities  of  some  Member  States  selected  in 
light of the high amounts of State aid authorised and granted during the period covered by the 
evaluation, the relevance of some of their national State aid cases for the Commission’s case 
practice  and/or  the  significance  of  the  national  beneficiary  banks  and  related  restructuring 
processes.  

1. 

OVERVIEW OF RESPONDENTS 

In total, the Commission received 48 official responses, of which 18 and 30 were respectively 
provided to the public and targeted consultation. Stakeholders from 22 countries participated 
to  the  consultations.  All  but  two  respondents  (1  from  Australia  and  1  from  China)  were 
stakeholders from the EU. Respondents are notably based in Belgium (7), Germany (6), Italy 
(6), Spain (4), France (3), Czech Republic (2), Denmark (2) and Greece (2) (see Figure 22).  

95 

 
 
 
 
Figure 22: Participation per country and type of consultation 

Responses  received  were  from  a  variety  of  stakeholders  representing,  in  particular,  public 
authorities  (18),  companies  and  business  organisations  (7),  as  well  as  business  associations 
(6), which replied mainly to the targeted consultation, whereas EU citizens (6) only provided 
input to the public consultation (see Figure 23). 

Figure 23: Participation per category of stakeholders and type of consultation 

The  main  field  of  activity  of  respondents  notably  encompasses  bank  associations  (12), 
Finance Ministries (7), retail bank consumers (5) and consumer associations (4) (see  Figure 
24). 

96 

 
 
 
 
 
 
Figure 24: Main field of activity or sector by type of consultation 

2. 

SUMMARY OF KEY MESSAGES 

This  document  aims  to  provide  a  summary  of  the  responses  received  in  the  public  and 
targeted  consultations,  including  statistical  information  and  respondents’  comments.  Each 
subsection  contains  a  brief  synopsis  of  responses  received  for  a  specific  topic  under  both 
consultations, with dedicated developments on the replies provided to the technical questions 
raised  in  the  targeted  consultation.  The  statistical  data  provided  in  this  section  are  notably 
expressed in number of respondents and cover, where relevant, the answers provided both to 
the public and targeted consultation. The number of respondents who did not provide answers 
to the questions and those who chose the option “don’t know/no opinion” answers were not 
reflected, unless significant, when explaining the participants’ views.  

2.1. 

Effectiveness 

17 respondents supported the statement according to which the State aid rules for banks in 
difficulty  have  been  successful  in  achieving  the  objective  of  contributing  to  the 
preservation of financial stability by enabling the continued smooth functioning of individual 
banks and the banking sector. By contrast, only 8 respondents were positive (while 10 were 
neutral  and  18  negative)  on  State  aid  rules’  ability  to  minimise  competition  distortions 
between  aided  and  non-aided  banks  and  only  9  agreed  (while  13  were  neutral  and  17 
disagreed)  that  State  aid  rules  achieved  the  objective  to  limit  the  amounts  of  aid  given  to 
banks to the minimum necessary (see Figure 25). 

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Figure  25:  To  which  extent  have  the  State  aid  rules  for  banks  in  difficulty  been 
successful in achieving the following objectives? 

As  regards  the  negative  opinions  on  State  Aid  rules’  ability  in  minimising  competition 
distortions between aided and non-aided banks, a respondent highlighted that there is a trade-
off  between  the  objectives  of  minimising  competition  distortions  (e.g.  banks’  compulsory 
divestments  of  potentially  profitable  entities  that  can  undermine  bank’s  return  to  viability) 
and  the  principle  of  safeguarding  financial  stability  and/or  minimising  the  use  of  public 
funds. Respondents also  expressed concerns as regards existing incentives to address issues 
with small and medium sized banks in difficulty at national level, in a way that has prevented 
their market exit, either at the cost of the banking sector or at the expense of public money. 
Other  replies  further  referred  to  concerns  for  consumer  protection  as  opposed  to 
considerations for financial stability. 

In  terms  of  results  achieved,  12  respondents  considered  that  State  aid  rules  allowed 
addressing the temporary funding problems of banks (via the granting of liquidity aid), while 
16 were neutral and 6 opined that State aid was not successful in addressing such problems. 
In  the  same  vein,  13  respondents  were  of  the  view  that  State  aid  rules  ensured  the  orderly 
market exit of unviable banks (via the granting of liquidation aid), while 11 opined negatively 
and  10  were  neutral  on  these  achievements.  Differently,  only  7  respondents  were  of  the 
opinion that the State aid rules related to restructuring aid contributed to restoring the long-
term viability of banks, whereas 14 considered that they were not successful in achieving this 
result (see Figure 26). 

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Figure  26:  To  which  extent  have  the  State  aid  rules  for  banks  in  difficulty  been 
successful in achieving the following results? 

In  this  last  regard,  several  respondents  referred  to  cases  of  State  aid  where,  while  financial 
stability  was  preserved  because  of  the  granting  of  State  aid,  the  long-term  viability  of  the 
relevant banks was not restored. A respondent was also of the view that the effectiveness of 
liquidity aid in tackling temporary funding problems has been mixed insofar as liquidity runs 
can degrade the liquidity position of a distressed bank at a fast pace. 

While most respondents were not able to assess the long-term impact of State aid rules, some 
of  them  agreed  that  State  aid  rules  have  been  successful  in  contributing  to  the  long-term 
impacts  of  ensuring  that  creditworthy  enterprises  were  able  to  get  the  bank  loans  or  other 
forms  of  credit  they  needed,  with  no  significant  differentiation  between  households,  small 
and medium-sized and large enterprises. A minority of respondents (6 out of 48) agreed that 
State aid rules contributed, in the long run, to the cross-border integration of banks in the EU 
and  supported  the  enhancement  of  EU  banks’  competition  through  the  offer  of  better  and 
more  innovative  products.  As  regards  State  aid  rules’  successfulness  in  contributing  to 
restoring trust in banks in the EU, views were split as 9 respondents had a positive opinion 
whereas 11 were negative and 10 were neutral (see Figure 27). 

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Figure  27:  To  which  extent  have  the  State  aid  rules  for  banks  in  difficulty  been 
successful in contributing to the following long-term impacts? 

With  respect  to  the  long-term  impact  on  banks’  cross-border  integration  in  the  EU, 
respondents were of the view that State Aid rules are not the appropriate tool to address such 
an  objective,  given  the  role  played  by  other  factors,  including  the  regulatory  framework 
applying to banks, the features of banks’ services to retail consumers, as well as the lack of a 
harmonised  tax  regime  in  the  EU  and  the  incomplete  nature  of  the  Banking  Union.  Some 
respondents also pointed to the recourse, over the period under review, to national insolvency 
procedures,  which  remain  widely  fragmented.  As  regards  banks’  competitiveness, 
respondents reiterated their concerns on the maintenance in the market of banks which were 
the recipient of multiple public support measures, therefore presenting a risk of distortion of 
competition for the European banking sector. Some respondents pointed out that, in countries 
characterized  by  a  broader  restructuring  of  the  banking  sector,  certain  aspects  of  State  aid 
rules  for  banks  in  difficulty  may  have  limited  the  ability  of  banks  to  finance  the  real 
economy, especially SMEs. 

The targeted consultation included questions on the extent to which the application of State 
Aid measures to reinforce market discipline and tackle moral hazard on behalf of bank 

100 

 
 
management, shareholders and investors have been effective over the period under review. 
An important number of respondents, namely between 14 and 25, did not provide any opinion 
on  the  effectiveness  of  these  measures.  Among  those  who  provided  a  reply,  the  majority 
expressed  a  positive  or  neutral  view  on  the  measures.  Some  respondents  had  notably  a 
favourable opinion as regards the effectiveness of measures implying burden-sharing by bank 
shareholders (10), burden-sharing by hybrid capital holders, ban on paying out dividends and 
the management replacement (8). Respondents also had a positive view on the effectiveness 
of  the  management  remuneration  cap  (7),  the  ban  on  paying  out  discretionary  coupons,  the 
burden-sharing by junior bondholders (6) and the obligation to divest certain subsidiaries or 
activities (5) (see Figure 28). 

Figure 28: To which extent have the following measures  – applied to reinforce market 
discipline  and  tackle  moral  hazard  on  behalf  of  bank  management,  shareholders  and 
investors – been effective? 

More  specifically,  several  respondents  opined  on  the  need  to  limit  the  scope  of  burden-
sharing measures vis-à-vis retail investors in order to take into account the lessons learnt from 
the mis-selling practices of banks’ debt instruments. A respondent was also of the view that 
burden-sharing measures should be calibrated along the proportionality principle, depending 
for  instance  on  whether  the  bank  is  going  concern  or  gone  concern.  Another  respondent 
raised concerns regarding the increasing number of State measures authorized in accordance 
with the market economy operator principle, which do not necessarily imply burden-sharing 
measures and do not therefore contribute to the market discipline. 

As  regards  management  remuneration  cap  measures,  a  respondent  was  of  the  view  that 
although useful to  limit  the amounts of aid,  such measure may affect  the identification and 
selection of the best professionals to be entrusted with the management of the bank in crisis. 

101 

 
 
A reply also pointed out that in order to effectively prevent banks from excessive risk taking, 
it is important to strengthen the measures against those directly responsible for the crisis. 

In addition to the measures referred to in the questionnaire, a respondent also mentioned Fit 
and proper assessments and prudential measures which should be applied to reinforce market 
discipline and tackle moral hazard. 

22  respondents  also  considered  that  the  application  of  the  State  aid  rules  for  banks  in 
difficulty  had  unexpected  or  unintended  consequences.  Discrepancies  in  national 
insolvency proceedings were referred to as a contributing factor to the uneven playing field 
across  Member  States.  Respondents  also  mentioned  incentives  to  address  bank  failures 
outside  the  CMDI  framework,  due  to  a  perceived  lack  of  alignment  with  the  CMDI 
framework.  As  regards  in  particular  precautionary  measures  for  banks  in  difficulty, 
respondents expressed concerns relating to the support of banks that may have been unviable. 

In the targeted questionnaire, in response to the question on the extent to which the burden-
sharing requirements in the State aid rules for banks in difficulty have been successful 
in ensuring that an aided bank’s shareholders contribute to cover the losses (e.g. through the 
write-down  of  shares,  dilution,  etc.),  an  important  number  of  respondents  (12)  replied 
positively for the period starting after the introduction of the 2013 Banking Communication, 
while 4 were neutral and 3 replied negatively. As regards the period running before 2013, 6 
respondents  considered  that  the  aforementioned  objectives  were  successfully  achieved, 
whereas 7 were neutral and 4 had a negative opinion (see Figure 29). 

Figure 29: To which extent have the burden-sharing requirements in the State aid rules 
for  banks  in  difficulty  been  successful  in  ensuring  that  an  aided  bank’s  shareholders 
contribute to cover the losses (e.g. through the write-down of shares, dilution, etc.) 

More specifically, a respondent referred to the importance to introduce safeguards for retail 
investors  to  address  mis-selling  practices  of  hybrid  participation  through  preferred  shares. 
Another  respondent  believed  the  possibility  to  waive  the  bank’s  shareholders’  and 
debtholders’  contribution,  as  foreseen  by  point  45  of  the  Banking  Communication, 
contravenes  market  discipline  objectives  and  should  only  be  used  in  exceptional  cases. 
Furthermore,  banks’  losses  should  be  better  assessed,  for  instance  through  stress  tests.  The 
methodologies for asset quality reviews should also be coordinated between the Commission 
and  the  resolution  authorities.  The  respondent  also  pointed  out  that  the  creditors/debtors 
under State aid in liquidation benefitted from a more favourable treatment than in resolution. 

the 

In 
the  burden-sharing 
requirements  have  not  been  successful  in  ensuring  that  an  aided  bank’s  junior 

targeted  consultation,  7  respondents  considered 

that 

102 

 
 
bondholders  contribute  to  cover  the  losses,  as  opposed  to  only  4  with  a  positive 
assessment. The response was similar for the period before and after the adoption of the 2013 
Banking Communication. Interestingly, most respondents took a neutral view or were unable 
to comment (see Figure 30). 

Figure 30: To which extent have the burden-sharing requirements in the State aid rules 
for  banks  in  difficulty  been  successful  in  ensuring  that  an  aided  bank’s  junior 
bondholders  contribute  to  cover  the  losses  (e.g.  through  the  conversion  and  or  write-
down of bonds, the cancellation of an aided bank’s shareholders contribute to cover the 
losses (e.g. through the write-down of shares, dilution, etc.)? 

More  specifically,  a  respondent  highlighted  that  junior  bondholders  should  not  have  been 
targeted  by  burden-sharing  measures,  which  should  only  apply  to  shareholders  given  their 
impact  on  the  decision-making  process.  Another  reply  pointed  out  that  in  some  Member 
States, banks’ junior bondholders’ contribution is now considered as a serious risk in case of 
State aid, therefore discouraging potential buyers of such financial instruments, with potential 
detrimental financial impact on many small and medium sized banks. 

In the targeted consultation, in response to the question on the extent to which the measures 
applied to mitigate the competition distortions stemming from aid to banks in difficulty 
have been effective, most of respondents, namely between 16 and 19, did not know or did 
not  have  an  opinion  on  this  matter  in  relation  to  the  specific  measures  put  forward  in  the 
questionnaire.  As  regards  those  who  provided  a  response,  replies  were  split  on  the 
effectiveness of these measures (see Figure 31). 

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Figure  31:  To  which  extent  have  the  following  measures  –  applied  to  mitigate  the 
competition distortions stemming from aid to banks in difficulty – been effective? 

More  specifically,  several  respondents  highlighted  that  despite  the  relative  effectiveness  of 
the  measures  to  mitigate  competition  distortions,  when  such  measures  are  applied  too 
conservatively,  these  may  also  prevent  the  aided  banks  from  restoring  their  viability.  In 
relation to liquidation aid, a respondent was of the view that the market exit of the non-viable 
entity removes the risk of undue competition distortions resulting from the aid. A broader set 
of respondents considered, however, that such measures were not consistently applied across 
Member  States  and  banks,  one  reply  mentioning  the  possibility  to  enshrine  the  related 
Banking  Communication  principles  in  the  BRRD  for  legal  certainty.  Furthermore,  several 
replies  highlighted  that  aggressive  commercial  practices  are  difficult  to  translate  into 
operational requirements and restrictions on pricing policies can be difficult to monitor. 

In  the  targeted  consultation,  5  respondents  highlighted  that  they  were  aware  of  other 
effective measures  to  mitigate the competition distortions  stemming from the granting 
of  aid  to  banks  in  difficulty  (while  4  responded  negatively  and  21  had  no  opinion)  (see 
Figure 32). 

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Figure  32:  Are  you  aware  of  other  effective  measures  to  mitigate  the  competition 
distortions stemming from the granting of aid to banks in difficulty? 

More specifically, a respondent referred to the need to enhance the predictability of State aid 
rules  to  address  distortion  of  competition  concerns,  in  the  wake  of  the  European  Court  of 
Justice  ruling  on  the  Tercas  case  and  including  on  when  the  granted  support  can  be 
considered to be market conform. Another respondent considered that the effective use of the 
bank  resolution  framework  mitigates  competition  distortions  whereas  another  reply 
underscored  that,  when  a  bank  receives  liquidation  aid  and  is  in  the  process  of  exiting  the 
market, it is important that market exit in such circumstances is time-bound. 

In  the  targeted  consultation,  in  response  to  the  question  on  whether  the  contents  of  the 
restructuring  plan  model  –  as  set  out  in  the  Annex  of  the  2009  Restructuring 
Communication  –  was  appropriate  for  an  adequate  assessment  of  a  bank’s  long-term 
viability,  while  20  respondents  did  not  express  any  views,  the  remaining  10  were  split 
between a positive and a negative opinion (see Figure 33). 

Figure  33:  Are  the  contents  of  the  model  of  the  restructuring  plan  –  as  set  out  in  the 
Annex  of  the  2009  Restructuring  Communication  –  appropriate  for  an  adequate 
assessment  of  a  bank’s  long-term  viability  (e.g.  data  requested,  scenarios  to  be 
simulated, time horizon to be considered, etc.)? 

The elements put forward in the negative replies included the need, for the Commission, to 
check  restructuring  plans’  consistency  with  relevant  guidelines  adopted  subsequently  to  the 
2009  Commission  Communication,  in  particular  the  EBA  guidelines  on  the  Business 

105 

 
 
 
Reorganisation Plan and on banks’ Supervisory Review and Evaluation Process. Respondents 
also considered that the requirement to draw up restructuring plans needs to be strengthened 
to ensure that these plans allow a return to long-term viability, contrary to what has happened 
in various recent cases. 

In the targeted consultation, in response to the question on whether  the appointment of an 
independent monitoring trustee to verify the  compliance of the Member State and aid 
beneficiary  with  the  relevant  State  aid  commitments  (i.e.  conditions  which  reflect  the 
applicable compatibility criteria) was an effective way to ensure the enforcement of the 
State aid rules for banks in difficulty,  while 20 respondents  did  not  express  any opinion, 
the remaining 10 were split between a positive and a negative opinion (see Figure 34). 

Figure  34:  Are  the  contents  of  the  model  of  the  restructuring  plan  –  as  set  out  in  the 
Annex  of  the  2009  Restructuring  Communication  –  appropriate  for  an  adequate 
assessment  of  a  bank’s  long-term  viability  (e.g.  data  requested,  scenarios  to  be 
simulated, time horizon to be considered, etc.)? 

In the targeted consultation, 18 respondents did not have any opinion on the effectiveness of 
the State aid related measures to restore the long-term viability of banks. 9 respondents 
considered  de-risking  the  balance-sheet  (e.g.  disposal  of  non-performing  assets,  risk 
protection),  reforming  internal  risk  management  policy  and  corporate  governance,  and 
divestment  or  termination  of  less  profitable  or  loss-making  activities  as  effective  measures. 
Some  respondents  supported  the  measures  to  reduce  complexity  and  the  measures  and/or 
quantitative targets to reduce operating costs. A limited number of respondents considered as 
effective  investments  (e.g.  IT  infrastructure)  to  improve  operational  performance  and 
measures  and/or quantitative targets  to  improve revenue-generating potential  were effective 
(see Figure 35). 

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Figure 35: To which extent have the following measures applied to restore the long-term 
viability of banks been effective? 

The replies highlighted that the achievement of revenue targets may not be under the bank’s 
strict  control,  especially  in  the  event  of  significant  changes  in  the  macroeconomic  scenario 
(e.g.  Covid-19  pandemic,  Russian  war  against  Ukraine).  Consequently,  more  flexibility, 
through a review mechanism, could be introduced in the restructuring plan. A respondent also 
underlined  that  de-risking  measures,  although  effective  in  restoring  long-term  viability,  can 
potentially undermine the seller’s position, particularly in case of a fixed timeline to complete 
such  de-risking.  A  reply  also  referred  to  the  relevance  of  IT  investments  as  a  means  to 
improve  banks’  cost-income  ratio  in  the  medium  term.  More  broadly,  some  respondents 
considered  that  State  aid  measures  should  be  reassessed  in  light  of  the  EU  bank  resolution 
framework,  in  relation  notably  to  the  business  reorganisation  plans’  requirements  which 
apply when the bail-in tool is used. 

In the targeted consultation, in response to the question on whether respondents are aware of 
other  effective  measures  to  restore  the  long-term  viability  of  banks,  while  19  did  not 
express  any  views,  6  replied  positively  and  5  negatively.  As  regards  the  positive  replies, 
respondents suggested to subject part of the management’s remuneration to the achievement 
of  the  restructuring  plan’s  objectives  and  to  strengthen  the  requirement  to  draw-up  a 
restructuring plan. Other respondents were of the view that additional time should be granted 
to  the  bank  in  difficulty  (to  avoid  a  forced  sales  process  which  can  have  an  impact  on 
profitability), particularly when the entire financial and economic environment requires it. 

In the targeted consultation, in response to the question on the extent to which the State aid 
rules  for  banks  in  difficulty  have  been  successful  in  ensuring  that  the  market  exit  of 
unviable banks minimised moral hazard, 7 respondents expressed a positive opinion (vs 4 
negative and 3 neutral replies). 5 respondents considered that liquidation aid did not result in 
aid to the buyer of the defunct bank  (vs 5 neutral and 3 negative replies). Opinions were also 
divided  on  whether  the  market  exit  of  unviable  banks  took  longer  than  the  period  strictly 
necessary  for  the  orderly  liquidation  or  whether  the  liquidation  aid  was  limited  to  the 
minimum necessary (See Figure 36). 

107 

 
 
Figure  36:  To  which  extent  have  the  State  aid  rules  for  banks  in  difficulty  been 
successful in ensuring that the market exit of unviable banks (which was supported with 
liquidation aid)…? 

Respondents  referred  to  cases  of  banks  in  difficulty  that  received  State  aid  and  which  still 
operate  in  the  market,  despite  their  low  profitability,  triggering  possible  competition 
distortion  issues.  In  this  respect,  a  respondent  supported  clearer  criteria  and  improved 
transparency  as  regards  the  orderly  exit  of  failing  banks.  Respondents  also  expressed 
concerns as regards the divergence of national liquidation practices and the risk of regulatory 
arbitrage. A respondent suggested setting up of a public ex post diagnosis of cases of banks in 
difficulty  which  received  public  support  in  relation  to  the  actions  taken,  the  funds  made 
available, origin of the funds etc. An alignment of burden-sharing rules alongside the CMDI 
review  was  also  referred  to  as  a  means  of  closing  any  loopholes  of  EU  rules  dealing  with 
banks in difficulty. More broadly, the review of the CMDI was also considered as possibly 
implying a reduction of the amounts of State aid granted for liquidation purposes. 

As  regards  the  selling  processes,  a  respondent  raised  concerns  as  regards  the  (usual)  very 
limited number of buyers of banks in difficulty, implying a risk of aid to the buyers. 

In  the  targeted  consultation,  in  response  to  the  question  on  the  extent  to  which  the  entry 
into  force  of  the  CMDI  framework  in  2015  influenced  –  positively  or  negatively  – 
whether the objectives of the State aid rules for banks in difficulty have been achieved, 
respectively 12 and 8 respondents answered that the CMDI framework contributed positively 
to  preserving  the  financial  stability  and  the  level  playing  field  in  the  EU  by  coordinating 
Member States’ response to the financial crisis (vs respectively 6 and 9 neutral and 4 and 5 
negative  responses).  8  respondents  also  considered  that  the  establishment  of  the  CMDI 
framework  contributed  to  reinforcing  market  discipline  and  tackling  moral  hazard  (vs  10 
neutral opinions and 3 negative). Differently, 9 respondents were of the view that the CMDI 

108 

 
 
framework did not contribute to limiting the aid amounts given to banks in difficulty to the 
minimum necessary (vs 7 neutral opinions and 6 positive) (see Figure 37). 

Figure 37: To which extent has the entry into force of the EU bank crisis management 
and deposit insurance (CMDI) framework in 2015 influenced – positively or negatively 
– whether the following objectives of the State aid rules for banks in difficulty have been 
achieved? In other words, to which extent could the achievement (or non-achievement) 
of  the  following  general  objectives  of  the  State  aid  rules  for  banks  in  difficulty  be 
attributed to the entry into force of the CMDI framework in 2015? 

More  specifically,  several  respondents  reiterated  the  need  to  review  the  CMDI  framework 
and the State aid rules hand in hand to ensure consistency and reduce the risk of regulatory 
arbitrage  across  Member  States  and  an  unlevel  playing  field  between  banks.  In  this  last 
regard, some replies referred to (overly) important recourse to national insolvency procedures 
compared  to  resolution  cases  over  the  period  under  review,  implying  State  aid  with 
insufficient consistency and less far-reaching safeguards, particularly for medium and small 
sized  banks.  Furthermore,  a  respondent  expressed  concerns  regarding  the  limitations 
surrounding  the  access  and  use  of  Resolution  Funds  which  contributed  to  the  granting  of 
national public support. Another reply also pleaded in favour of further clarity in the use of 
deposit  guarantee  scheme  (DGS)  funds  and  the  Single  Resolution  Fund.  Additional 
comments on the CMDI framework were also related to failing-or-likely-to-fail declarations 
and the issues surrounding the set-up of Asset Management Companies to deal with banks’ 
Non-Performing  Loans.  A  respondent  also  pointed  out  the  complexity  of  the  interlinkages 
between the CMDI and the State aid frameworks. 

In the targeted consultation, on the question on the extent to which other important drivers 
have – positively or negatively – influenced whether the objectives of the State aid rules 
for banks in difficulty have been achieved, respondents were split (see Figure 38). 

109 

 
 
Figure 38: To which extent have other important drivers (e.g. market trends, economic 
developments,  policies  other  than  the  EU  bank  crisis  management  and  deposit 
insurance  (CMDI)  framework)  influenced  –  positively  or  negatively  –  whether  the 
following objectives of the State aid rules for banks in difficulty have been achieved? 

As  regards  the  resilience  of  the  banking  sector  and  the  preservation  of  financial  stability, 
respondents  referred  to  drivers  such  as  the  set-up  of  the  Banking  Union  and  the 
implementation of the Capital Requirements Directive (CRD) package, the establishment of a 
macro-prudential framework as well as the accommodative monetary policy conducted by the 
ECB,  the  latter  contributing  to  the  normalisation  of  economic  activities  after  2013.  Large 
State aid schemes (to support the real economy) approved in the pandemic context were also 
considered as alleviating the economic impact of the Covid-19 crisis. 

As for which objectives should be given priority in the application of the State aid rules 
to banks, respondents’ views were relatively split between, on the one hand, the preservation 
of financial stability and, on the other hand, the need to give more weight to the objective of 
protecting  taxpayers  (by  minimising  aid).  An  important  number  of  respondents  (18  and  17 
respectively) agreed that State aid rules for banks in difficulty ensured an appropriate trade-
off between preserving financial stability vs tackling moral hazard or mitigating competition 
distortions (even if this would have implied the granting of less State aid or granting of State 
aid under more stringent conditions) (see Figure 39). 

110 

 
 
Figure 39: Have the State aid rules for banks in difficulty ensured an appropriate trade-
off between the following policy objectives? 

22  respondents  also  considered  that  the  application  of  State  aid  rules  for  banks  in 
difficulty  had  unexpected  or  unintended  consequences.  Discrepancies  in  national 
insolvency proceedings were referred to as a contributing factor to the uneven playing field 
across  Member  States.  Respondents  also  mentioned  incentives  to  address  bank  failures 
outside  the  CMDI  framework,  due  to  a  perceived  lack  of  alignment  with  the  CMDI 
framework  (in  particular  as  regards  burden-sharing  requirements).  With  respect  to 
precautionary measures for banks in difficulty, respondents expressed concerns regarding the 
support of banks that may have been unviable. 

2.2. 

Efficiency 

15 respondents were of the view that the Commission communications containing the State 
aid rules for banks in difficulty were easy to find (while an equal number of respondents were 
neutral). However, only 7 respondents considered that the communications  were formulated 
in  a  way  which  is  likely  to  lead  to  a  predictable  Commission  assessment  (while  11 
respondents were neutral and 15 expressed a negative opinion). Similarly, only 6 respondents 
highlighted  that  the  Commission  communications  were  easy  to  understand,  while  12 
respondents  were  neutral  and  18  were  negative.  Most  respondents  (20)  were  in  favour  of  a 
single  communication.  As  regards  the  clarity  of  the  rules,  respondents  expressed  concerns 
with respect to the lack of alignment with other pieces of EU legislation, such as the CMDI 
framework.  Respondents  emphasized  the  importance  of  ensuring  consistency  as  regards 
concepts  such  as  bail-in,  write-down  and  conversion  as  well  as  burden-sharing  (see  Figure 
40). 

111 

 
 
Figure 40: To which extent do you agree with the following general statements? 

A  number  of  respondents  supported  further  clarification  of  the  existing  rules  in  order  to 
enhance  their  predictability  in  light  of  the  European  Court  of  Justice  jurisprudence  and  the 
individual Commission decisions, which could be directly referred to in a single Commission 
Communication. Some respondents were also of the view that a simplified framework would 
be consistent with an alignment of the duration of the Commission decision-making process, 
with the need of smooth and swift management of bank failures. 

In  the  targeted  consultation,  22  respondents  considered  that  certain  aspects  or  concepts 
related to the State aid rules for banks in difficulty could have been further clarified or 
could have been defined more precisely, whereas 7 were neutral and 1 respondent replied 
negatively (see Figure 41). 

112 

 
 
 
 
 
Figure 41: Are there certain aspects or concepts related to the State aid rules for banks 
in difficulty that could have been further clarified or that could have been defined more 
precisely? 

In  the  targeted  consultation,  respondents  were  asked  whether  specific  key  concepts  in  the 
State aid rules  were understandable and their responses were very much split. For instance, 
11 respondents considered that the determination of whether a measure constitutes State aid 
(including the criteria for public support to  be considered market-conform) was not  easy to 
understand (vs 3 neutral and 7 positive opinions) (see Figure 42). 

Figure 42: To which extent have the following aspects of the control  of State aid rules 
for banks in difficulty been easy to understand? 

More specifically, many respondents were of the view that State aid qualification should be 
clarified  as  regards  the  use  of  DGS  funds  following  the  European  Court  of  Justice  Tercas 
judgment. Respondents also pointed to the need to have more guidance on when a measure is 
considered as market conform. The concrete application of liquidity aid was also referred to 

113 

 
 
 
as  deserving  further  delineation.  Several  respondents  also  considered  that  the  approval 
process  of  restructuring  aid  was  overly  complex  and,  content  wise,  consistency  is  needed 
with  the  BRRD  requirements  on  business  reorganisation  plans  that  are  required  when  the 
bail-in  tool  is  used.  More  broadly,  replies  supported  a  harmonisation  with  the  CMDI 
framework, including through a consolidated State Aid Banking Communication. 

In the targeted consultation, the vast majority of respondents, namely 23, considered that the 
interaction between, on the one hand, the State aid rules for banks in difficulty and, on 
the other hand, the CMDI framework (since its entry into force in 2015) has not been easy 
to understand (vs 5 neutral opinions and 2 positive) (see Figure 43). 

Figure 43: Has the interaction between, on the one hand, the State aid rules for banks in 
difficulty and, on the other hand, the crisis management and deposit insurance (CMDI) 
framework (since its entry into force in 2015) been easy to understand? 

Respondents  mentioned  the  need  for  further  consistency  and  possible  cross-references 
between  the  State  aid  rules  for  banks  in  difficulty  and  the  CMDI  framework.  The  lack  of 
clarity as regards the use of DGS funds following the Tercas judgment of the European Court 
of  Justice  and  divergences  of  views  between  authorities,  with  respect,  for  instance,  to  the 
public interest assessment, were referred to by respondents. 

Respondents  were  divided  on  the  question  on  whether  the  State  aid  rules  for  banks  in 
difficulty  have  ensured  that  Member  States  used  State  expenditure  efficiently  when 
providing aid to banks in difficulty: while 14 respondents agreed or were neutral as regards 
this  statement,  13  had  a  negative  view  (see  Figure  44).  On  the  negative  side,  respondents 
referred to the public support of banks, which eventually turned out to be unviable. 

114 

 
 
Figure 44: To which extent do you agree that State aid rules for banks in difficulty have 
ensured  that  Member  States  used  State  expenditure  efficiently  when  providing  aid  to 
banks in difficulty? 

In the targeted consultation, 22 respondents had a neutral view on the administrative burden 
created  by  the  application  of  the  State  aid  rules  for  banks  in  difficulty  and  only  5 
respondents considered that the burden was disproportionate (see Figure 45). 

Figure 45: Has the application of the State aid rules for banks in difficulty created any 
disproportionate administrative burden? 

More specifically, a respondent highlighted that the uncertainty related to the use of DGS in 
preventive  measures,  especially  when  operating  under  private  arrangements,  created 
additional  administrative  burden.  A  reply  also  underlined  that  in  some  cases  the  process  to 
meet the documentation requirements set out by the Commission when applying for a State 
aid  approval  may  be  burdensome,  as  opposed  to  the  reliance  on  the  information  already 
available  within  the  Member  State.  A  respondent  was  also  of  the  view  that  as  regards 
resolution,  given  the  importance  of  timely  application  of  any  tool  or  power,  broader 
possibilities for schemes or exemptions to speed up the process could be considered, such as 
increasing  the  limits  for  liquidation  aid  regimes  or  imposing  less  strict  conditions  for 
precautionary recapitalization under Article 32(4) of BRRD. 

In  the  targeted  consultation,  most  respondents  did  not  express  any  opinion  on  whether  aid 

115 

 
 
 
 
schemes reduced the administrative burden. As regards the neutral and positive replies, 5 
concerned liquidity and liquidation aid schemes (vs respectively 1 and 4 negative replies) and 
4 recapitalisation and restructuring schemes (vs 4 negative replies) (see Figure 46). 

Figure  46:  To  which  extent  have  aid  schemes  contributed  to  administrative 
simplification and reduced the administrative burden? 

Liquidation aid schemes

2

2

2

2

1

Recapitalisation and restructuring
schemes

2

2

1

3

0

21

22

Liquidity aid schemes

2
0
1

1

2

24

0

5

10

15

20

25

30

35

Not at all

Neutral

A lot

Rather not

To a certain extent

I don't know / No opinion

More  specifically,  one  respondent  considered  that  contrary  to  liquidity  aid  schemes,  which 
could  be  justified  to  swiftly  address  a  liquidity  crisis,  restructuring  and  liquidation  aid 
schemes  can  undermine  market  discipline  by  providing  an  implicit  guarantee  to  eligible 
banks.  Differently,  another  respondent  welcomed  pre-approved  schemes  insofar  as  they 
reduce uncertainty and extra coordination. Furthermore, a respondent pointed to the overlap 
between  recapitalization  and  restructuring  schemes  and  the  CMDI  provisions,  leading  to 
possible administrative burden. 

In the targeted consultation, 8 respondents were of the view that  the benefits (advantages) 
achieved  by  the  control  of  State  aid  to  banks in  difficulty  outweigh  the  incurred  costs 
(disadvantages),  whereas  4  respondents  considered  that  the  costs  always  outweigh  the 
benefits (see Figure 47). 

116 

 
 
 
 
 
Figure  47:  Generally  speaking,  to  which  extent  do  you  consider  that  the  achieved 
benefits  (advantages)  of  the  control  of  State  aid  to  banks  in  difficulty  outweigh  the 
incurred costs (disadvantages)? 

More  specifically,  according  to  one  respondent,  when  applying  the  State  aid  rules  to  the 
banking  sector,  given  the  sectors’  peculiarities  and  the  overall  specific  severe  legislation 
applicable,  the  pivotal  objective  of  financial  stability  should  be  taken  into  account  more 
strongly over the classical competition concerns. 

In  the  targeted  consultation,  in  response  to  the  question  on  the  extent  to  which  the  costs 
(disadvantages) incurred by specific stakeholder groups have been proportional, taking 
into  account  the  distribution  of  the  benefits  (advantages)  achieved  by  the  control  of 
State aid to banks in difficulty, most respondents were unable to make an assessment (see 
Figure 48). 

Figure 48: To which extent do you consider that the costs (disadvantages) incurred by 
the  following  stakeholder  groups  have  been  proportional,  taking  into  account  the 
distribution of the benefits (advantages) achieved by the control of State aid to banks in 
difficulty? 

More  specifically,  one  respondent  considered  that  as  regards  burden-sharing  measures,  in 
case of retail creditors among the concerned investors, a dedicated compensation scheme to 
avoid  loss  of  confidence  in  the  banking  sector  may  be  necessary.  Another  respondent  was 
also of the view that taxpayers are less well protected as public support may not always be 

117 

 
 
 
 
considered as State aid and insofar as burden-sharing rules are less stringent under the State 
aid  framework  than  under  resolution.  Respondents  also  underlined  that  as  regards 
restructuring  plans,  a  right  balance  should  be  found  between  the  objectives  of  long-term 
viability of the bank and the minimisation of competition distortions. 

Respondents  further  considered  that  in  order  to  properly  answer  the  question,  it  would  be 
necessary  to  distinguish,  on  a  case-by-case  basis,  what  is  charged  to  taxpayers  (national 
Government),  to  the  banks  that  contribute  to  the  DGS  (banks  at  national  level)  or  to  the 
resolution fund (banks at European level). 

In the targeted consultation, in response to the question on the extent to which the measures 
applied to reinforce market discipline and tackle moral hazard have been proportionate 
to the operational and administrative cost and burden to implement them, 8 respondents 
expressed a positive opinion on the ban on paying out discretionary coupons and dividends, 
management  remuneration  cap  and  on  burden-sharing  of  bank  shareholders  (vs  3  neutral 
opinions).  7  respondents  supported  the  burden-sharing  by  hybrid  capital  holders  and  junior 
bondholders  (vs  respectively  4  and  3  neutral  opinions  and  0  and  1  negative)  and  4  the 
obligation to divest certain subsidiaries and activities (vs 4 neutral and 2 negative opinions) 
(see Figure 49). 

Figure  49:  To  which  extent  have  the  following  applied  measures  to  reinforce  market 
discipline and tackle moral hazard on the side of bank management, shareholders and 
investors been proportionate to the operational and administrative cost and burden to 
implement them? 

More specifically, one respondent highlighted that structural remedies, such as divestments, 
constitute a useful and appropriate tool from a distortion of competition standpoint. However, 
depressed market conditions and limited investment appetite may in certain cases hinder the 
implementation of restructuring commitments in the pre-specified deadlines. Forced sales and 
pending  transactions  may  indeed  have  hindered  the  profitability  of  the  banks  and  created 
more administrative burden for them. 

In the targeted consultation, in response to the question on the extent to which measures to 
mitigate  the  competition  distortions  have  been  proportionate  to  the  operational  and 
administrative cost, 8 respondents expressed a positive opinion as regards the obligation to 
exit the market (in case of liquidation aid) and acquisition bans. 7 respondents also supported 

118 

 
 
 
 
 
 
constraints on the competitive pricing of banking products  (e.g. loans, deposits) and ban on 
aggressive commercial practices, 6 the obligation to reduce balance sheet total (vs 1 negative 
opinion) and 4 the obligation to divest certain activities (vs 2 negative opinions) (see Figure 
50). 

Figure  50:  To  which  extent  have  the  following  applied  measures  to  mitigate  the 
competition  distortions  stemming  from  the  granting  of  aid  to  banks  in  difficulty  been 
proportionate  to  the  operational  and  administrative  cost  and  burden  to  implement 
them? 

In the targeted consultation, in response to the question on the extent to which measures to 
restore the long-term viability of banks have been proportionate to the operational and 
administrative cost, 6 respondents had a positive opinion as regards the measure to de-risk 
the  balance-sheet,  divestment  or  termination  of  less  profitable  or  loss-making  activities, 
measures to reduce complexity, the reform of internal risk management policy and corporate 
governance and measures and/or quantitative targets to reduce operating costs. Furthermore, 
4  respondents  supported  investments’  measures  to  improve  operational  performance  (vs  2 
negative opinions) and 3 measures and/or quantitative targets to improve revenue-generating 
potential (vs 2 negative opinions) (see Figure 51). 

119 

 
 
 
 
Figure 51: To which extent have the following applied measures to restore the long-term 
viability  of  banks  been  proportionate  to  the  operational  and  administrative  cost  and 
burden to implement them? 

In  the  targeted  consultation,  in  response  to  the  question  on  the  extent  to  which  the 
application  of  the  requirements  to  restore  the  long-term  viability  of  banks  been 
proportionate  to  the  operational  and  administrative  costs,  6  respondents  supported  the 
preparation  of  a  restructuring  plan  (vs  2  neutral  and  2  negative  opinions)  as  well  as  the 
independent  monitoring  trustee  (vs  4  neutral  opinions).  However,  a  significant  number  of 
respondents, namely 20, did not express any views on these subjects (see Figure 52). 

Figure 52: To which extent has the application of the following requirements to restore 
the 
long-term  viability  of  banks  been  proportionate  to  the  operational  and 
administrative costs and burden to implement them? 

More specifically, respondents referred to the need to ensure that restructuring plans pursue 
the  bank’s  long-term  viability  goal,  despite  the  usually  significant  burden  to  the  involved 
counterparties, especially for the applicant bank. Some respondents also pointed to the need 
for restructuring plans to rely on credible assumptions, in coherence with the EBA guidelines 
and  the  resolution  framework.  Several  replies  further  praised  the  appointment  of  an 
independent monitoring trustee, notwithstanding possible room for improvement concerning 
the monitoring per se. 

In  the  targeted  consultation,  in  response  to  the  question  on  the  conditions  for 

120 

 
 
 
 
 
 
recapitalisation  and  restructuring  aid  schemes  for  small  institutions,  5  respondents 
considered  that  the  limitation  in  terms  of  the  balance-sheets  of  the  banks  that  receive  aid 
under  a  recapitalisation  and  restructuring  scheme  is  not  adequate  (vs  1  positive  opinion).  6 
respondents voiced concerns as regards the cap of an eligible bank at EUR 100 million (vs 1 
positive  opinion)  and  7  regarding  the  limitation  of  the  recapitalization  and  restructuring 
schemes to 6 months (vs 2 neutral opinions and 1 positive). 2 respondents concurred with the 
requirements to report to the Commission, on a six-monthly basis, the MS implementation of 
a recapitalisation and restructuring scheme (vs 5 neutral opinions and 3 negative) (see Figure 
53). 

Figure  53:  To  which  extent  are  the  following  conditions  for  recapitalisation  and 
restructuring  schemes  for  small  institutions  in  the  2013  Banking  Communication 
proportionate to mitigate competition distortions and limit the administrative burden? 

Some  respondents  were  of  the  view  that  the  criteria  for  recapitalisation  and  restructuring 
schemes are too  limiting when compared to  the  size and number of institutions that can be 
concerned. A respondent also highlighted that the six-month limit may not be fully justified, 
considering notably the market needs and the longer timeline for implementing the State aid. 
One reply also underlined the need to ensure coherence with the BRRD, with reference to the 
public interest assessment. 

In  the  targeted  consultation,  in  response  to  the  question  on  the  conditions  for  orderly 
liquidation  schemes  for  small  institutions,  8  respondents  expressed  a  neutral  opinion  as 
regards the MS reporting requirements on a six-monthly basis to the Commission on the use 
of the orderly liquidation scheme (vs 4 positive and 2 negative opinions). 6 respondents were 
also neutral as regards the cap at EUR 3 billion of the balance-sheet total of an eligible bank 
(vs 4 negative opinions and 3 positive) (see Figure 54). 

121 

 
 
 
 
 
Figure 54: To which extent are the following conditions for orderly liquidation schemes 
for  small  institutions  in  the  2013  Banking  Communication  proportionate  to  mitigate 
competition distortions and limit the administrative burden? 

More  specifically,  some  respondents  welcomed  the  setting  of  a  quantitative  eligibility 
requirement for orderly liquidation schemes as they introduce a derogation regime for small 
institutions, pointing out however the need for some flexibility in specific cases to also reflect 
the local features of the banking sector. As regards the possible increase of the balance-sheet 
threshold,  a  reply  mentioned  the  possibility  to  align  it  with  that  referred  to  in  the  Capital 
Requirements  Regulation,  namely  EUR  5  billion,  as  regards  the  definition  of  small 
institutions. 

By contrast however, another respondent considered that such schemes lead to distortion of 
competition given the implicit State guarantee provided to eligible banks. Another respondent 
also concurred with the SRB recommendation that the six months deadline for aid schemes 
should be adhered more strictly. 

2.3. 

Relevance 

19  respondents  agreed  that  State  aid  rules  for  banks  in  difficulty  took  into  account  the 
changes in the overall macroeconomic and financial stability context between 2008 and 
2013 (including in relation to the government debt crisis in some Member States), whereas 8 
were neutral and 6 disagreed. By contrast, only 2 respondents considered that other relevant 
factors should have been taken into account by the State aid rules for banks in difficulty (vs 5 
neutral and 4 negative opinions) (see Figure 55). 

122 

 
 
 
 
 
Figure  55:  To  which  extent  did  the  State  aid  rules  for  banks  in  difficulty,  and  their 
changes over time, take into account the following factors? 

In  particular,  some  respondents  agreed  that  State  aid  rules  should  be  tailored  to  the 
specificities  and  sensitivities  of  the  banking  sector,  including  in  terms  of  differentiated 
situations  among  MS,  compared  to  other  economic  sectors.  In  contrast,  some  respondents 
were  of  the  view  that  the  normalization  of  the  economic  environment  does  not  plead  for  a 
permanent  specific  State  aid  treatment  of  the  banking  sector.  Respondents  also  raised 
questions  regarding  the  relevance  of  State  aid  rules  following  the  entry  into  force  of  the 
CMDI framework and expressed concerns that State aid rules may benefit banks that are no 
longer viable whereas consumer rights may not be sufficiently taken into account.  

financial 

In  the  targeted  consultation,  12  respondents  were  of  the  view  that  changes  in  the  overall 
macroeconomic  and 
the  relevance  and 
appropriateness of the State aid rules for banks in difficulty over time (vs 4 neutral and 1 
negative  opinion).  Furthermore,  9  respondents  considered  that  changes  in  banking  sector 
regulation  (other  than  the  introduction  of  the  CMDI  framework  in  2015)  affected  the 
relevance and appropriateness of such rules (vs 5 neutral and 1 negative opinion) (see Figure 
56). 

stability  context  affected 

123 

 
 
 
 
Figure  56:  To  what  extent  have  the  following  factors  affected  the  relevance  and 
appropriateness of the State aid rules for banks in difficulty over time?  

More specifically, some respondents highlighted that the improvement of the macroeconomic 
conditions  after  the  global  financial  crisis  contributed  to  strengthening  the  banking  sector, 
taking also into account the enhancement of bank supervision through the set-up of the Single 
Rulebook and the Banking Union. A respondent also referred to the ECB’s role as lender of 
last resort and provider of large liquidity  to preserve financial stability  and prevent  a credit 
crunch. According to several respondents, these developments call into question the current 
State aid rules applying to banks in difficulty, as also mirrored by the Tercas judgment of the 
European  Court  of  Justice  and  the  broader  need  to  ensure  consistency  with  the  CMDI 
framework and to address unlevel playing field issues. Replies also supported the flexibility 
of the recent Temporary Framework which allowed the Commission to swiftly approve State 
aid to the real economy to deal with the COVID-19 pandemic.  

In  the  targeted  consultation,  in  response  to  the  question  on  the  extent  to  which  the 
compatibility  pillars  underlying  the  State  aid  rules  for  banks  in  difficulty  are  still 
relevant and appropriate since the entry into force of the CMDI framework in 2015, 13 
respondents conveyed a positive view with respect to restoring  a bank’s long-term viability 
(vs 7 neutral and 2 negative opinions) and the absorption of losses by a bank, its shareholders 
and  creditors  (the  so-called  “burden-sharing”)  (vs  5  neutral  and  5  negative  opinions).  11 
respondents  also  supported  the  minimisation  of  distortions  of  competition  following  the 
granting of aid to preserve fair competition to a maximum extent (vs 7 neutral and 4 negative 
opinions) (see Figure 57). 

124 

 
 
 
 
Figure 57: To which extent are the following compatibility pillars underlying the State 
aid rules for banks in difficulty still relevant and appropriate since the entry into force 
of the crisis management and deposit insurance (CMDI) framework in 2015? 

More specifically, a respondent highlighted some parallelisms between these pillars and the 
objectives  of  resolution  foreseen  in  Article  14  SRMR.  The  reply  also  referred  to  the 
complementarity  between  both  frameworks,  State  aid  rules  being  more  focused  on  the 
competition  perspective,  while  the  resolution  rules  focus  more  on  financial  stability. 
Respondents  also  highlighted the need to  ensure consistency of the State aid  rules with  the 
CMDI  framework.  Replies  further  pointed  out  the  need  that  the  aforementioned  State  aid 
compatibility  pillars  should  not  prevent  an  effective  implementation  of  the  resolution 
framework.  Respondents  further  noted  that  a  harmonised  framework  aimed  at  ensuring  the 
orderly exit of small and medium sized banks from the market is still missing. 

In response to the question on the extent to which it has been necessary to have State aid 
rules  tailored  to  the  specificities  and  sensitivities  of  the  banking  sector,  compared  to 
other economic sectors, many respondents underlined the pivotal role of the banking sector 
for  financial  stability  and  the  real  economy,  as  well  as  its  structural  interconnectedness,  in 
contrast with the other economic sectors. These elements support the maintenance of specific 
State aid rules for the banking sector. 

In  the  targeted  consultation,  4  respondents  were  of  the  view  that  the  State  aid  rules  for 
banks  in  difficulty  have  been  adequate  to  be  applied  mutatis  mutandis  to  non-bank 
financial  institutions  as  well  (for  instance  insurance  companies),  whereas  3  replied 
negatively and 23 did not express any opinion in this respect (see Figure 58). 

125 

 
 
 
 
 
Figure  58:  Have  the  State  aid  rules  for  banks  in  difficulty  been  adequate  to  also  be 
applied  mutatis  mutandis  to  non-bank  financial  institutions  (for  instance  insurance 
companies)? 

More  specifically,  respondents  underlined  that  that  each  sector  should  have  its  own  set  of 
rules, adapted to the respective activities (e.g. life/non-life insurers, reinsurers) and financial 
structures (e.g. importance of technical provisions for the insurance sector etc.). A respondent 
also referred to the specific developments at Council level in respect of the insurance sector 
and the recovery and resolution of insurance entities, as well as policy holder protection.  

In the targeted consultation, 16 respondents were of the view that since 2008, the likelihood 
that difficulties at one or several banks lead to a serious disturbance in the economy of a 
Member State – thereby potentially warranting the granting of State aid to such bank(s) 
– has changed (vs 2 negative responses) (see Figure 59). 

Figure 59: Do you think that since 2008 the likelihood that difficulties at one or several 
banks  lead  to  a  serious  disturbance  in  the  economy  of  a  Member  State  –  thereby 
potentially warranting the granting of State aid to such bank(s) – has changed? 

More specifically, respondents underlined that the setup of the Banking Union as well as the 
Single Rulebook and the CMDI framework (with a specific reference to the build-up of bail-
inable buffers) have contributed to a substantial improvement in the soundness of the banking 
sector,  therefore  reducing  the  probability  of  a  systemic  crisis.  In  some  Member  States,  the 
restructuring  of  the  sector  was  also  fostered  by  the  implementation  of  adequate  State  aid 
support. 

126 

 
 
 
 
 
2.4. 

Coherence 

In  the  targeted  consultation,  10  respondents  considered  that  State  aid  rules  for  banks  in 
difficulty  are  internally  coherent,  whereas  6  respondents  expressed  a  neutral  view  in  this 
regard (see Figure 60). 

Figure  60:  To  which  extent  are  State  aid  rules  for  banks  in  difficulty  internally 
coherent? 

More  specifically,  as  regards  the  potential  lack  of  internal  coherence  of  the  State  aid  rules, 
some respondents referred to differentiated national situations (with respect to the availability 
of funding on the market) not fully taken into consideration in the application of such rules.  
Respondents had split views on whether State aid rules for banks in difficulty ensured an 
appropriate  trade-off  between  restoring  the  viability  of  banks  and  mitigating 
competition  distortions.  11  respondents  disagreed  while  10  and  4  respondents  were, 
respectively, neutral or in agreement with this statement (see Figure 61). 

127 

 
 
 
 
 
Figure 61: To which extent have the State aid rules for banks in difficulty ensured an 
appropriate trade-off between restoring the long-term viability of banks and mitigating 
competition distortions stemming from the aid granted to those banks? 

More specifically, many respondents pointed out the need to strike the right balance, in terms 
of objectives pursued, between mitigating competition distortions and ensuring the long-term 
viability  of  banks.  In  this  respect,  a  respondent  highlighted  that  such  a  balance  should  be 
ensured not only at the time the State aid is granted but also during the implementation of the 
restructuring  plan,  taking  into  account  relevant  (macroeconomic)  developments.  Several 
replies  also  pointed  out  that  due  attention  should  be  paid  to  measures  that  actually  risk 
limiting banks’ long-term viability, such as requirements to divest profitable subsidiaries or 
the  lack  of  consideration  of  the  local  market  features.  A  good  coordination  between  the 
Commission and the resolution authorities was also deemed important. 

In the targeted consultation, in response to the question on the extent to which the State aid 
rules  for  banks  in  difficulty  are  coherent  with  other  EU  policies  and  legislation,  8 
respondents  had  a  positive  opinion  as  regards  the  Temporary  Framework  for  State  aid 
measures to support the economy in the current  COVID-19 outbreak (vs 9 neutral opinions 
and  2  negative).  However  only  6  respondents  replied  positively  with  respect  to  the  bank 
resolution  rules  (BRRD/SRMR)  (vs  12  negative  responses  and  6  neutral),  5  as  regards  the 
rules applicable to deposit guarantee schemes (DGSD) (vs 15 negative answers and 6 neutral) 
and 2 as regards the EU merger control rules (vs 10 neutral) (see Figure 62). 

128 

 
 
 
 
Figure 62: To which extent are the State aid rules for banks in difficulty coherent with 
the following other EU policies and legislation? 

More  specifically,  respondents  provided  extensive  qualitative  elements  supporting  in 
particular further coherence between the State aid rules for banks in difficulty and the CMDI 
framework, as regards issues such as burden-sharing. Some respondents also underlined the 
need  for  a  parallel  review  of  both  frameworks  insofar  as  the  resolution  framework  is  not 
meant to apply to small and medium sized banks. Furthermore, respondents also  mentioned 
the need to apply State aid rules in case DGS funds are used for support measures. 

In the public consultation, between 12 and 13 respondents were neutral or did not express an 
opinion  regarding  the  extent  to  which  State  aid  rules  for  banks  in  difficulty  were 
coherent  with  the  EU  CMDI  framework  and  other  EU  policies  and  legislation  (see 
Figure 63). In this respect and as regards respondents who raised concerns in relation to the 
lack of coherence, respondents highlighted the risk of applying the less stringent rule(s) due 
to  the  prevailing  inconsistencies  between  State  aid  rules  and  the  CMDI  framework.  EU 
Consumer Protection legislation was also referred to as deserving further attention. 

129 

 
 
 
Figure 63: To which extent are the State aid rules for banks in difficulty coherent with 
the following other EU policies and legislation? 

2.5. 

EU added value 

15 respondents  were positive (or were neutral) on  the extent to which State aid rules  for 
banks in difficulty have ensured a coordinated approach to the financial support given 
by  Member  States  (with  different  budgetary  capacities)  to  their  respective  banking 
sectors (see Figure 64). 

Figure  64:  To  which  extent  have  the  State  aid  rules  for  banks  in  difficulty  ensured  a 
coordinated approach to the financial support given by Member States (with different 
budgetary capacities) to their respective banking sectors? 

In the targeted consultation, 14 respondents provided a reply to the question on whether the 
State aid rules for banks in difficulty have provided an added value in comparison to a 
situation without such guidelines, in which case each individual measure would have to 
be  dealt  with  separately,  directly  applying  the  TFEU.  In  this  respect,  respondents 

130 

 
 
 
welcomed the increased  predictability and legal  certainty allowed by the  State aid  rules for 
banks in difficulty as regards the compatibility assessment performed by the Commission  

2.6. 

Other 

4 respondents provided additional feedback aside from the public consultation questionnaire 
with  a  series  of  comments  falling  outside  the  current  objective  of  assessing  the  past 
implementation of the State aid rules for banks in difficulty. 

3. 

CONCLUSION 

The European Commission will duly consider the views collected in the public and targeted 
consultations in the evaluation of the State aid rules for banks in difficulty.  

131 

 
ANNEX VII. OVERVIEW OF THE STATE AID RULES FOR BANKS IN DIFFICULTY SUBJECT TO THE EVALUATION 

State aid rules for banks in 
difficulty under the   Evaluation 

Entry into 
force 

Expiry/Review  clause 

OJ reference 

Objective 

from 
on 

the 
Communication 
Commission 
the 
application,  from  1  August 
2013  ,  of  State  aid  rules  to 
support  measures  in  favour  of 
banks  in  the  context  of  the 
‘2013 
crisis 
financial 
Banking Communication’ ) 

( 

from 
on 

the 
Communication 
Commission 
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 
Communication 
the 
Commission 
application,  from  1  January 
2011,  of  State  aid  rules  to 
support  measures  in  favour  of 
banks  in  the  context  of  the 
financial crisis 

from 
on 

Commission 
communication 
on  the  return  to  viability  and 
the assessment of restructuring 
in 
measures 
financial 
sector 
the  current  crisis 
in 
under the State aid rules 

the 

1 August 
2013 

1 January 
2012 

The  Commission  will 
this 
review 
Communication 
as 
deemed  appropriate, 
in  particular  so  as  to 
cater  for  changes  in 
market  conditions  or 
in 
regulatory 
environment  which 
may affect the rules it 
sets out. 
N/A 

the 

OJ C 216, 30.7.2013, p. 1 

The  Communication  sets  out  the  updated  EU  crisis  rules  for 
state  aid  to  banks  during  the  crisis  from  1st  August  2013.  It 
replaces  the  2008  Banking  Communication  and  supplements 
the remaining crisis rules. Together, they define the common 
EU conditions under which Member States can support banks 
with  funding  guarantees,  recapitalisations  or  asset  relief  and 
the requirements for a restructuring plan. 

OJ C 356, 6.12.2011, p. 7 

This  Communication  sets  out  the  necessary  amendments  to 
the parameters for the compatibility of crisis-related State aid 
to banks as from 1 January 2012.  

1 January 
2011 

N/A 

OJ C 329, 7.12.2010, p. 7   This  Communication  sets  out 

the 
temporary acceptability of crisis-related assistance to banks as 
from 1 January 2011 

the  parameters  for 

to 

Commission 
The 
its 
review 
may 
content  and  duration 
the 
according 
development 
of 
conditions, 
market 
experience 
the 
gathered 
the 
treatment  of  cases 

in 

OJ C 195, 19.8.2009, p. 9 
. 

This  Communication  explains  how  the  Commission  will 
examine aid for the restructuring of banks in the current crisis, 
taking into account the need to modulate  past practice in the 
light  of  the  nature  and  the  global  scale  of  the  crisis,  the 
systemic  role  of  the  banking  sector  for  the  whole  economy, 
and the systemic effects which may arise  from the need of a 
number of banks to restructure within the same period: 

132 

 
 
 
 
 
 
 
 
the  overriding 
in 
of 

and 
interest 
maintenance 
financial stability 

25  February 
2009 

    N/A 

OJ C 72, 26.3.2009, p. 1 

from 

Communication 
the 
Commission  on  the  treatment 
of 
the 
impaired  assets 
Community banking sector 

in 

   N/A 

OJ C 10, 15.1.2009, p. 2 

from 
— 

the 
Communication 
The 
Commission 
financial 
recapitalisation  of 
institutions 
the  current 
in 
financial  crisis:  limitation  of 
aid  to  the  minimum  necessary 
and  safeguards  against  undue 
distortions of competition 

This  Communication  focuses  on  issues  to  be  addressed  by 
Member  States  in  considering,  designing  and  implementing 
asset relief measures. At a general level, those issues include 
the  rationale  for  asset  relief  as  a  measure  to  safeguard 
financial stability and underpin bank lending, the longer-term 
considerations  of  banking-sector  viability  and  budgetary 
sustainability to be taken into account when considering asset 
relief measures and the need for a common and co-ordinated 
Community approach to asset relief, notably to ensure a level 
playing field. 
The  Communication 
recapitalisation  schemes  and  opens 
adjustment of existing recapitalisation schemes. 

new 
for 
the  possibility  for 

guidance 

provides 

from 
— 

the 
Communication 
The 
Commission 
application of State aid rules to 
measures  taken  in  relation  to 
financial 
the 
institutions 
context  of  the  current  global 
financial crisis 
(repealed) 

in 

  N/A 

OJ C 270, 25.10.2008, p. 8  The  Communication  provides  guidance  as  to  the  broad 
framework  within  which  the  State  aid  compatibility  of 
recapitalisation  and  guarantee  schemes,  and  cases  of 
application of such schemes, could be rapidly assessed. 

133 

 
 
 
 
 
 
ANNEX VIII. RELEVANT LEGAL PROVISIONS IN THE TFEU 

ARTICLE 107 TFEU 

1.  Save  as  otherwise  provided  in  the  Treaties,  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. 

2.  The following shall be compatible with the internal market: 

(a) aid  having  a  social  character,  granted  to  individual  consumers,  provided  that  such 
aid is granted without discrimination related to the origin of the products concerned; 

(b) aid to make good the damage caused by natural disasters or exceptional occurrences; 

(c) aid  granted  to  the  economy  of  certain  areas  of  the  Federal  Republic  of  Germany 
affected  by  the  division  of  Germany,  in  so  far  as  such  aid  is  required  in  order  to 
compensate  for  the  economic  disadvantages  caused  by  that  division.  Five  years  after 
the entry into force of the Treaty of Lisbon, the Council, acting on a proposal from the 
Commission, may adopt a decision repealing this point. 

3.  The following may be considered to be compatible with the internal market: 

(a)  aid  to  promote  the  economic  development  of  areas  where  the  standard  of  living  is 
abnormally low or where there is serious underemployment, and of the regions referred 
to in Article 349, in view of their structural, economic and social situation; 

(b) aid to promote the execution of an important project of common European interest or 

to remedy a serious disturbance in the economy of a Member State; 

(c) aid to facilitate the development of certain economic activities or of certain economic 
areas, where such aid does not adversely affect trading conditions to an extent contrary 
to the common interest; 

(d)  aid  to  promote  culture  and  heritage  conservation  where  such  aid  does  not  affect 
trading  conditions  and  competition  in  the  Union  to  an  extent  that  is  contrary  to  the 
common interest; 

(e) such  other  categories  of  aid  as  may  be  specified  by  decision  of  the  Council  on  a 

proposal from the Commission. 

ARTICLE 108 TFEU 

1.  The  Commission  shall,  in  cooperation  with  Member  States,  keep  under  constant 
review  all  systems  of  aid  existing  in  those  States.  It  shall  propose  to  the  latter  any 
appropriate measures required by the progressive development or by the functioning of 
the internal market. 

2.  If,  after  giving  notice  to  the  parties  concerned  to  submit  their  comments,  the 
Commission  finds  that  aid  granted  by  a  State  or  through  State  resources  is  not 

134 

 
 
 
compatible  with  the  internal  market  having  regard  to  Article  107,  or  that  such  aid  is 
being  misused,  it  shall  decide  that  the  State  concerned  shall  abolish  or  alter  such  aid 
within a period of time to be determined by the Commission. 

If the State concerned does not comply with this decision within the prescribed time, the 
Commission  or  any  other  interested  State  may,  in  derogation  from  the  provisions  of 
Articles  258  and  259,  refer  the  matter  to  the  Court  of  Justice  of  the  European  Union 
direct. 

If, after giving notice to the parties concerned to submit their comments, the Commission 
finds that aid granted by a State or through State resources is not compatible with the 
internal market having regard to Article 107, or that such aid is being misused, it shall 
decide that the State concerned shall abolish or alter such aid within a period of time to 
be determined by the Commission. 

If the State concerned does not comply with this decision within the prescribed time, the 
Commission  or  any  other  interested  State  may,  in  derogation  from  the  provisions  of 
Articles  258  and  259,  refer  the  matter  to  the  Court  of  Justice  of  the  European  Union 
direct. 

On application by a Member State, the Council may, acting unanimously, decide that aid 
which that State is granting or intends to grant shall be considered to be compatible with 
the  internal  market,  in  derogation  from  the  provisions  of  Article  107  or  from  the 
regulations  provided  for  in  Article  109,  if  such  a  decision  is  justified  by  exceptional 
circumstances. If, as regards the aid in question, the Commission has already initiated 
the procedure provided for in the first subparagraph of this paragraph, the fact that the 
State  concerned  has  made  its  application  to  the  Council  shall  have  the  effect  of 
suspending that procedure until the Council has made its attitude known. 

If, however, the Council has not made its attitude known within three months of the said 
application being made, the Commission shall give its decision on the case. 

3.  The  Commission  shall  be  informed,  in  sufficient  time  to  enable  it  to  submit  its 
comments,  of  any  plans  to  grant  or  alter  aid.  If  it  considers  that  any  such  plan  is  not 
compatible with the internal market having regard to Article 107, it shall without delay 
initiate the procedure provided for in paragraph 2. The Member State concerned shall 
not  put  its  proposed  measures  into  effect  until  this  procedure  has  resulted  in  a  final 
decision. 

4.  The Commission may adopt regulations relating to the categories of State aid that the 
Council has, pursuant to Article 109, determined may be exempted from the procedure 
provided for by paragraph 3 of this Article. 

ARTICLE 109 TFEU 

The  Council,  on  a  proposal  from  the  Commission  and  after  consulting  the  European 
Parliament,  may  make  any  appropriate  regulations  for  the  application  of  Articles  107 
and  108  and  may  in  particular  determine  the  conditions  in  which  Article  108(3)  shall 
procedure.
aid 
apply 

categories 

exempted 

from 

and 

this 

the 

of 

135 

 
 
 
ANNEX IX: EUROPEAN COMMISSION CASE PRACTICE ON THE BASIS OF STATE AID RULES 
FOR BANKS IN DIFFICULTY 

European Commission case practice from 2008 to 2022 on (1) liquidity aid, (2) restructuring 
aid,  (3)  liquidation  aid  as  well  as  on  (4)  no  aid,  namely  (a)  market  conform  public 
interventions and (b) measures that are not imputable to the State: 

1.  Liquidity Aid 

In the initial phase of the global financial crisis, the systemic impact on the economies of EU 
Member States led many EU governments to take measures to support financial stability, to 
restore confidence in the financial markets and to minimise the risk of a serious credit crunch. 
In  the  field  of  competition  policy  —  and,  in  particular,  State  aid  control  —  the  role  of  the 
Commission  was  to  support  financial  stability  by  rapidly  giving  legal  certainty  to  the 
measures taken by Member States. The Commission also contributed to maintaining a level 
playing  field  and  to  ensuring  that  national  measures  would  not  simply  export  problems  to 
other Member States. 

The  Commission  approved  a  number  of  individual  cases  in  2008,  which  included  liquidity 
measures in the form of State guarantees on the liabilities of banks such as Bayern LB, Fortis, 
Dexia, Nord  LB and  IKB1. The  measures were found compatible  with Article 87.3.b. (now 
Article 107(3)b of the TFEU) of the EC Treaty for the following reasons. They were limited 
in time and scope to the minimum necessary to restore the financing, namely to cover banks’ 
medium-term  financing  needs  in  the  financial  crisis,  in  light  of  the  prevailing  regulatory 
requirements  and  with  a  view  not  to  restrain  banks’  lending  to  the  real  economy.  The 
measures also required an adequate fee level by referring to market-oriented remuneration of 
the  state  guarantees  in  line  with  the  ECB  recommendations.  Furthermore,  they  provided 
safeguards  to  minimise distortions  of  competition  (e.g.  prohibition  from proprietary  trading 
as a mean to inflate profits with taxpayer's money). 

Between  October  2008  and  31  December  2009,  the  Commission  also  approved  guarantee 
schemes for 12 Member States, namely Denmark, Ireland, Spain, Italy, Cyprus, Netherlands, 
Poland,  Portugal,  Slovenia,  Finland,  Latvia  and  Sweden.  Such  schemes  were  generally 
characterised by non-discriminatory access for all solvent banks. They were limited in terms 
of global budget and individual capped guarantees and participating banks were required to 
pay a market-oriented fee for the guarantee. Moreover, behavioural commitments to avoid an 
abusive  use  of  the  state  support  were  imposed  on  beneficiaries  (e.g.  restriction  of 
beneficiaries'  balance sheet growth with  regard  to  national and  EU  averages, limitations on 
expansion and marketing, strict conditions for staff remuneration or bonus payments). 

During the sovereign debt crisis of the euro area of 2010-2012, Member States continued to 
assist  financial  institutions,  many  of  which  had  to  receive  liquidity  support  from  central 
banks. The worsening of the crisis led also to an agreement between Member States and the 
Commission on a package of measures to strengthen banks' capital and provide guarantees on 
their liabilities (the banking package).  

1  

N  615/2008  Guarantee  and  recapitalisation  for  Bayern  LB,  Germany.  N  574/2008  Measures  in  favour of  Fortis, 
Belgium/Luxembourg/Netherlands.  93  (  )  NN  45-49-50/2008  Guarantee  on  liabilities  of  Dexia,  Belgium,  N 
655/2008 Guarantee for Nord LB, Germany, N 639/2008 Guarantee for IKB, Germany. 

136 

 
 
 
In  the  period  2013-2019,  the  Commission  adopted  several  State  aid  decisions  authorising 
liquidity aid to banks experiencing temporary liquidity problems. The amount of aid used had 
decreased over time.  In  most  cases,  the  aid was  granted in  the  form of  State guarantees on 
newly issued senior liabilities (“government-guaranteed bonds”).  

Over this period, the Commission further refined its case practice, the guiding principle being 
that because of their temporary nature and as liquidity can be given only to banks which are 
not  financially  troubled,  liquidity  measures  are  considered  to  be  the  least  distortive 
instruments from a competition point of view. Only limited measures to mitigate competition 
distortions were therefore required and there was no need to submit a restructuring plan ex-
ante or to implement burden-sharing. 

Specific conditions had to be fulfilled under the new EU bank resolution framework before 
banks could receive liquidity support of a precautionary nature: the beneficiary bank had to 
be  solvent,  the  support  had  to  be  temporary  and  proportionate,  and  it  could  not  be  used  to 
offset incurred or likely losses.2 

In accordance with this framework, the Commission for example authorised Italy to provide 
liquidity aid to some banks facing liquidity stress, thereby helping to stabilise their situation. 
In  all  cases,  the  aid  was  provided  in  the  form  of  State  guarantees  on  newly  issued  senior 
bonds  and  was  considered  precautionary  in  the  context  of  the  BRRD/SRMR.  This  was  the 
case  for  Banca  Monte  dei  Paschi  di  Siena  in  December  2016  (EUR  15  billion)3,  for  Banca 
Popolare di Vicenza and Veneto Banca in the course of 2017 (EUR 10.1 billion in total)4, and 
for Banca Carige in January 2019 (up to EUR 3 billion)5.  

Banks  not  eligible  for  precautionary  liquidity  measures  under  the  BRRD/SRMR  were  still 
able to receive liquidity support in resolution under an open bank bail-in or under the bridge 
bank tool, or in insolvency. For instance, Latvia granted liquidity support to AS Reverta, the 
bad bank in wind-down that resulted from the market exit of the Latvian AS Parex Banka.6 

In  addition,  Member  States  were  allowed  to  implement  liquidity  aid  schemes  to  stabilise  a 
group  of  banks  or  even  the  entire  domestic  banking  sector,  provided  that  the  beneficiary 
banks  do  not  have  a  capital  shortfall.7  The  Commission  authorised  such  a  liquidity  scheme 
for Italian banks8, Bulgarian banks9, Polish banks10, Portuguese banks11 and Greek banks12.  

2  
3  

4  

5  

6  

7  

8  
9  
10  

Article 32(4)(d) BRRD or Article 18(4)(d) SRMR 
The aid was temporarily approved in December 2016 (SA.47081 – Liquidity support to MPS Bank, Commission 
decision of 29 December 2016) and approved in a final way in July 2017, together with the bank’s precautionary 
recapitalisation  (SA.47677  –  New  aid  and  amended  restructuring  plan  of  Banca  Monte  dei  Paschi  di  Siena, 
Commission decision of 4 July 2017) 
SA.47149 – Liquidity support to Banca Popolare di Vicenza, Commission decision of 18 January 2017; SA.47150 
– Liquidity support to Veneto Banca, Commission decision of 18 January 2017; SA.47940 – Additional liquidity 
support to Banca Popolare di Vicenza, Commission decision of 12 April 2017; SA.47941  – Additional liquidity 
support to Veneto Banca, Commission decision of 12 April 2017 
SA.52917 – Liquidity support to Banca Carige – Cassa di Risparmio di Genova e Imperia, Commission decision of 
18 January 2019 
SA.36612 – Aid granted by Latvia to AS Citadele banka and AS Reverta (formerly known as AS Parex Banka) as 
well as misuse of aid, Commission decision of 9 July 2014. 
The  2013  Banking  Communication  defines  the  concept  “capital  shortfall”  as  a  capital  shortfall  established  in  a 
capital  exercise,  stress-test,  asset  quality  review  or  an  equivalent  exercise  at  Union,  euro  area  or  national  level, 
where applicable confirmed by the competent supervisory authority. Liquidity aid to banks with a capital shortfall 
but which are still solvent according to the competent supervisor can still be authorised by the Commission, albeit 
only under an individual notification. 
SA.45753 – Italian bank guarantee scheme, Commission decision of 26 June 2016 
SA.38994 – Liquidity scheme in favour of Bulgarian Banks, Commission decision of 29 June 2014 
SA.52481 – Nineteenth prolongation of the Polish bank guarantee scheme, Commission decision of 6 December 
2018 

137 

 
 
 
2.  Restructuring aid 

Restructuring aid can take the form of capital and/or impaired asset measures. It is generally 
considered to be the most distortive type of aid.  

For  these  reasons,  a  strict  compatibility  assessment  has  been  required  for  restructuring  aid. 
Beneficiary  banks  must  implement  incisive  measures  to  mitigate  the  severe  competition 
distortions stemming from the aid and protect non-aided competitors. To minimise the bill to 
taxpayers  and  discourage  moral  hazard,  ex-ante  burden-sharing  by  the  bank’s  shareholders, 
hybrid  instrument  investors  and  subordinated  bondholders  is  required.  Finally,  before  any 
restructuring  aid  can  be  granted,  a  detailed  restructuring  plan  must  be  submitted, 
demonstrating the bank’s ability to restore long-term viability.  

At the beginning of the  global financial crisis,  competition enforcement  in individual  cases 
remained a top priority for the Commission, which took several dozen banking decisions in 
2008.  These  included  rescue  or  recapitalisation  aid  to  individual  banks,  along  with  general 
aid schemes to support financial stability (guarantee, recapitalisation, purchase and/or holistic 
schemes) in 15 Member States. Subsequently, the Commission supplemented and refined its 
guidance  with  a  new  communication  on  how  Member  States  can  recapitalise  banks  in  the 
current financial crisis.In the period 2008-2012, the restructuring of individual banks was also 
guided  by  the  imperative  of  ensuring  viable  bank  business  models  that  support  the  real 
economy.  

The  significant  amounts  of  emergency  recapitalisations  allowing  beneficiary  banks  to 
preserve their solvency positions were accompanied by the submission of return to viability 
business plans, with a reorientation of the concerned institutions to their least risky activities 
(e.g.  Lloyds  Banking  Group,  Royal  Bank  of  Scotland,  WestLB,  Commerzbank,13,  NordLB, 
BayernLB, CAM and UNNIM). Measures to avoid undue distortions of competition included 
the  requirement  for  banks  to  divest  some  of  their  portfolios  and/or  to  sell  some  of  their 
subsidiaries.  Behavioural  measures  to  prevent  an  abuse  of  the  State  support  were  also 
imposed  (see  e.g.  Anglo  Irish  Bank,  ABN  Amro  Group,  ING)14.  These  encompassed  a 
prohibition of advertising of the aid received, restrictions on the payment of dividends and on 
executives'  remuneration,  nomination  of  public  interest  representatives  to  the  bank's  board 
and  the  submission  of  a  restructuring  plan  within  six  months  for  the  Commission's 
assessment  and  approval.  The  limitation  of  moral  hazard  was  also  ensured  by  a  proper 
remuneration of the State, through notably a dividend payment (e.g. of 8%) at an annual basis 
on the shares (Bank of Ireland)15, to be provided at the discretion of the bank and in priority to 
dividends  on  ordinary  shares.  The  State’s  shares  could  also  carry  out  a  certain  percentage 
(typically 25%) of the voting rights in the bank.  

As part of the economic adjustment programmes for Ireland, Portugal and Greece, State aid 
control  continued  to  contribute  significantly  to  the  restructuring  of  those  countries´  entire 

11  
12  

13  

14  

15  

SA.51042 – 17th Extension of the Portuguese Guarantee Scheme, Commission decision of 9 August 2018 
SA.55767  –  Prolongation  of  the  Greek  State  Guarantee  Scheme  for  banks,  Commission  decision  of  16  January 
2020 (last available prolongation decision) 
N428/2009  -  Restructuring  plan  of  Lloyds  Banking  Group,  Commission  decision  of  18  November  2009; 
N422/2009  and  N621/2009  -  Royal  Bank  of  Scotland,  impaired  asset  relief  measure  and  restructuring  plan, 
Commission decision of 14 December 2009, N244/2009  - Commerzbank capital injection, Commission decision 
of 7 May 2009, C43/2008 - Aid for the restructuring of West LB, Commission decision of 12 May 2009. 
N9/2009  -  Recapitalisation  of  Anglo  Irish  Bank,  Commission  decision  of  14  January  2009,  SA.26674  – 
Restructuring  of  ABN  Amro  Group  Commission  decision  of 15 April  2011,  N528/2008  -  Measure  in  favour of 
ING, Commission decision of 13 November 2008. 
N149/2009 - Recapitalisation of Bank of Ireland, Commission decision of 26 March 2009. 

138 

 
 
 
banking sectors as part of a wider effort involving not only the Commission but also the ECB 
and  the  IMF.  Following  the  approval  of  a  series  of  restructuring  measures,  following  the 
conduct of a comprehensive diagnostic as regards the capital needs of individual banks based 
on  a  comprehensive  asset  quality  review  and  valuation  process,  as  well  as  bank-by-bank 
stress tests, the Spanish banking sector was also fully recapitalised by the end of 201216. The 
restructuring  plans  for  the  concerned  banks  aimed  to  restore  their  viability  and  capacity  to 
provide credit to the real economy, while minimising the cost to taxpayers and limiting to the 
minimum distortions of competition. The restructuring measures included burden-sharing by 
junior  debt  holders,  asset  disposals  by  the  banks  and  the  transfer  of  real  estate  loans  to 
SAREB (Sociedad de Gestión de Activos procedentes de la Reestructuración Bancaria), the 
Asset Management Company set up by the Spanish authorities. 

After 2013, the Commission also authorised a series of significant restructuring measures. 

In  Slovenia,  the  Commission  authorised  restructuring  aid  for  Nova  Ljubljanska  Banka  d.d. 
(NLB), Nova Kreditna Banka Maribor d.d. (NKBM) and Abanka in December 2013. For all 
three  banks,  restructuring  plans  were  submitted  ex-ante,  and  a  full  write-down  of 
shareholders'  equity  and  outstanding  subordinated  debt  took  place  before  the  State  support 
was granted.17 

In Cyprus, the Cooperative Central Bank (CCB) – the country’s second largest bank with a 
very  high  NPL  ratio  –  received  restructuring  aid  in  the  form  of  a  EUR  1.5  billion  capital 
injection in 2014.18 The Commission’s authorisation for this public recapitalisation was based 
on  a  restructuring  plan  featuring  a  major  overhaul  of  the  bank’s  structure  and  commercial 
practices.  In  2018,  it  turned  out  that  the  bank  was  unable  to  return  to  viability,  and 
consequently it exited the market. 

In Greece, the Commission approved at the end of 2015 restructuring aid granted by Greece 
in the form of a precautionary recapitalisation in favour of Piraeus Bank (EUR 2.72 billion) 
and  National  Bank  of  Greece  (NBG)  (EUR  2.71  billion),  based  on  amended  restructuring 
plans and the raising of private means, including through burden-sharing.19 

Similarly, in Italy, the Commission authorised Italy to grant EUR 5.4 billion restructuring aid 
to  Banca  Monte  dei  Paschi  di  Siena  in  the  form  of  a  precautionary  recapitalisation  in  July 
201720.  The  bank’s  shareholders  and  junior  creditors  contributed  EUR  4.3  billion  to  cover 
incurred and likely losses so that the aid was used only to cover unexpected losses, thereby 
fulfilling  the  conditions  for  a  precautionary  measure.  The  bank  had  to  implement  a  far-

16  

17  

18  

19  

20  

Eight banks were recapitalised and restructured or resolved in line with the State aid rules. A first group involved 
banks already controlled by the Spanish authorities: BFA/Bankia, Catalunya Caixa, Nova Caixa Galicia and Banco 
de Valencia. The restructuring plans for those banks were approved on 28 November 2012. For a second group, 
including Banco Mare Nostrum, Banco CEISS, Caja3 and Liberbank, restructuring decisions were adopted on 20 
December 2012. 
SA.33229  –  Restructuring  of  NLB,  Commission  decision  of  18  December  2013;  SA.35709  –  Restructuring  of 
NKBM,  Commission  decision  of  18  December  2013;  SA.37690  –  Rescue  aid  in  favour  of  Abanka  d.d., 
Commission decision of 18 December 2013 
SA. 35334 – Recapitalisation and restructuring of the Cooperative Central Bank Ltd and of the Cooperative Credit 
Institutions, Commission decision of 24 February 2014. In 2015, due to a provisioning shortfall identified by the 
ECB, the bank needed an additional EUR 175 million capital from a newly created Recapitalisation Fund financed 
by levies on the banking sector (SA.43367  – 2015 additional  restructuring aid to the Cooperative Central Bank, 
Commission decision of 18 December 2015) on the basis of commitments to cover potential future capital needs 
with means of private investors. When that failed, the bank had to exit the market. 
SA.43364  –  2015  additional  restructuring  aid  to  Piraeus  Bank,  Commission  decision  of  29  November  2015; 
SA.43365 – Amendment of the restructuring plan approved in 2014 and granting of new aid to National Bank of 
Greece, Commission decision of 4 December 2015 
SA.47677 – New aid and amended restructuring plan of Banca Monte dei Paschi di Siena, Commission decision of 
4 July 2017, as amended by SA.103450. 

139 

 
 
 
reaching restructuring plan to restore long-term viability. In August 2022,21 the Commission 
approved  revised  commitments  by Italy  for MPS, with an  extension of the  deadline  for  the 
State  to  sell  its  stake  in  the  bank  and  for  MPS  to  implement  certain  divestments  and  to 
continue its restructuring. 

3.  Liquidation aid 

During  the  global  financial  crisis  of  2008,  the  Commission  approved  a  certain  number  of 
liquidation aid measures in which it ensured that aid is limited to what is necessary to carry 
out  an  orderly  wind-up  of  the  bank.  The  Commission  also  imposed  measures  to  limit 
potential distortions  of  competition  such as a ban  of any new  activities (where  relevant, on 
the parts of the bank which were not sold), with a merely phase out of the ongoing operations 
(see  e.g.  Liquidation  aid  to  UK  Bradford  &  Bingley22,  to  Anglo  Irish  Bank  and  Irish 
Nationwide Building Society23 and to Danish Eik Bank24, authorised by the Commission  in 
2010 and 2011). 

In  2012,  the  Commission  approved  a  major  liquidation  State  aid  case  by  authorising 
liquidation aid granted by Belgium, France and Luxembourg for the orderly resolution of the 
cross-border  banking  group  Dexia,  with  the  sale  of  its  subsidiary  DMA  (Dexia  Municipal 
Agency)  and  the  restructuring  of  Belfius  (formerly  Dexia  Banque  Belgique)25.  The 
liquidation plan approved by the Commission ensured that the continued market presence of 
some  parts  of  the  Dexia  group  is  justified  and  the  aid  was  limited  to  the  level  strictly 
necessary to carry out the orderly liquidation process. Similar conditions applied also to aid 
for the orderly liquidation of the French mortgage lender Crédit Immobilier de France (CIF)26 
of 2013. 

Following a similar approach, the Commission has in recent years authorised liquidation aid 
to  support  the  orderly  market  exit  of  non-viable  banks.  In  many  cases,  market  exit  was 
realised  through  the  sale  of  the  liquidated  bank  to  and  integration  into  a  competitor  as  an 
alternative to a wind-down (i.e. “sale-or-wind-down decisions”). 

For non-viable entities, the only acceptable aid scenario is an orderly market exit, which can 
take place inside resolution (e.g. sale of business) or outside resolution (national insolvency 
proceedings), if necessary supported by liquidation aid, as repetitive restructuring aid would 
artificially  keep  such  “zombie”  institutions  alive  to  the  detriment  of  more  prudent  or  more 
efficient  competitors.  By  facilitating  market  exit  processes,  liquidation  aid  helps  to 
restructure domestic banking sectors and, in some cases, reduce overcapacity. 

In Slovenia, the  Commission approved liquidation aid for the orderly wind-down of Factor 
Banka  d.d.  and  Probanka  d.d.  in  December  2013,  whereby  distortions  of  competition  were 

21  

22  
23  

24  
25  

26  

A.103450  (2022/N)  –  Italy  Banca  Monte  dei  Paschi  di  Siena  –  Second  amendment  to  the  list  of  commitments 
related to the aid granted to Banca Monte dei Paschi di Siena in 2017, Commission decision of 2 August 2022. 
N194/2009 – Liquidation aid to Bradford & Bingley, Commission decision of 25 January 2010. 
SA.32504  Joint  restructuring  plan  for  Anglo  Irish  Bank  and  Irish  Nationwide  Building  Society,  Commission 
decision of 29 June 2011. 
SA.31945 - Liquidation aid for Eik Banken, Commission decision of 6 June 2011. 
SA.33751,  SA.33760,  SA.33763,  SA.33764  (2011/C)  and  SA.30521  (MC2/2010)  -  Dexia  and  Belfius, 
Commission decision of 28 December 2012. 
SA.37029 - Liquidation of Crédit Immobilier de France, Commission decision of 27 November 2013. 

140 

 
 
 
minimised  through  the  complete  market  exit  of  the  banks  and  the  full  write-down 
shareholders' equity and outstanding subordinated debt.27 

In  Portugal,  Banco  Espírito  Santo  (BES)  was  put  in  resolution  under  the  Portuguese 
resolution framework in 2014. BES’ shareholders and subordinated bondholders contributed 
to the resolution costs, whereas support measures included liquidation aid for the transfer of 
certain BES assets to the bridge bank Novo Banco. In 2017, Portugal sold Novo Banco to a 
private  equity  fund,  which  it  facilitated  by  further  aid  to  complete  the  national  resolution 
process. The buyer committed to implement an ambitious restructuring plan to restore Novo 
Banco’s  long-term  viability,  while  limiting  distortions  of  competition.  This  concluded  the 
resolution process of BES that had started three years earlier.28 

In  Italy,  the  Commission  approved  liquidation  aid  in  2015  under  the  resolution  regime  to 
support  the  orderly  market  exit  of  four  small  Italian  banks  (Banca  delle  Marche,  Banca 
Popolare  dell'Etruria  e  del  Lazio,  Cassa  di  Risparmio  di  Ferrara,  Cassa  di  Risparmio  della 
Provincia di Chieti).29 Four temporary bridge banks were created and capitalised for EUR 3.6 
billion  by  the  newly  created  Italian  resolution  fund  for  the  acquisition  of  all  of  the  banks' 
assets and liabilities, except equity and subordinated debt, which were subjected to burden-
sharing.  In  continuation  of  the  process  that  started  under  national  law  in  2015,  the 
Commission  in  2017  approved  additional  aid  to  facilitate  the  integration  of  the  four  Italian 
bridge banks into viable market participants.30 

Liquidation  aid  under  national  insolvency  proceedings  was  also  authorised  for  Banca 
Popolare di Vicenza and Veneto Banca, two banks plagued by long-standing weaknesses. In 
2017,  the  ECB  declared  both  banks  Failing  or  Likely  to  Fail  (FOLF)  and  the  Single 
Resolution  Board  (SRB)  decided  that  resolution  was  not  in  the  public  interest.31  With 
liquidation  aid,  Italy  facilitated  the  integration  of  some  of  the  banks’  activities  into  Intesa 
Sanpaolo,  while  cushioning  the  negative  impact  on  the  regional  economies  in  which  the 
banks used to be active. Burden-sharing (i.e. a full contribution to losses by shareholders and 
subordinated  bondholders)  was  applied 
liquidated  banks’  shareholders  and 
to 
subordinated creditors – thereby limiting the liquidation cost to taxpayers – and competition 
distortions were mitigated by the acquiring bank’s commitment to significantly downsize the 
integrated  activities.  The  liquidation  aid  amounted  to  around  EUR  4.8  billion  in  capital 
injections, and up to EUR 12 billion in guarantees. 

the 

The Commission also approved liquidation aid that Cyprus decided to grant to CCB in 2018. 
Contrary  to  the  projections  under  its  restructuring  plan  (as  amended  in  2015),  the  bank 
proved to be unable  to  restore its viability, and a first attempt to sell the bank only yielded 
negative  bids.  Consequently,  the  Commission  authorised  Cyprus  to  grant  liquidation  aid  to 

27  

28  

29  

30  

31  

SA.37642  –  Orderly  winding  down  of  Probanka  d.d.,  Commission  decision  of  18  December  2013;  SA.37643  – 
Orderly winding down of Factor Banka d.d., Commission decision of 18 December 2018 
SA.49275 – Sale of Novo Banco with additional aid in the in the context of the 2014 Resolution of Banco Espírito 
Santo, Commission decision of 11 October 2017 
SA.41925 – Aid for the resolution of Carife; SA.39543 – Aid for the resolution of Banca Marche; SA.41134 – Aid 
for the resolution of resolution of Banca Etruria; SA.43547 – Aid for the resolution of Carichieti, all Commission 
decisions of 22 November 2015  
SA.41925  –  Sale of  the  bridge  bank  Nuova  Carife to  BPER,  Commission  decision of  29  June 2017;  SA.39543, 
SA.41134, SA.43547 – Sale of the bridge banks Marche, Etruria and Carichieti to UBI Banca (third amendment to 
the resolution of the banks Marche, Etruria and Carichieti), all three Commission decisions of 30 April 2017 
SA.45664 – Orderly liquidation of Banca Popolare di Vicenza and Veneto Banca  - Liquidation aid, Commission 
decision of 25 June 2017 

141 

 
 
 
support the orderly market exit of CCB, entailing the removal of EUR 6 billion in NPLs from 
the banking sector and the sale of parts of CCB to Hellenic Bank, another Cypriot bank.32 

4.  No aid 

a.  Market conform public interventions 

At  a  number  of  occasions  since  the  entry  into  force  of  the  EU  bank  resolution  framework, 
Member  States  have  designed  measures  in  support  of  the  financial  sector  that  have  been 
assessed by the Commission as not entailing an advantage for the beneficiary undertakings. 
The  Treaty  is  neutral  regarding  private  versus  public  interventions  and  does  not  preclude 
Member States from undertaking economic activities in line with normal market conditions. 
Accordingly,  public  means  mobilised  on  market  terms,  and  therefore  appropriately 
remunerated,  do  not  constitute  State  aid  and  hence  do  not  affect  the  bank  resolution 
framework. To conclude on market conformity, the Commission assesses whether the public 
authorities act as a market economy operator would have acted in a similar situation (“market 
economy operator principle” (MEOP)).  

As regards recapitalisations, the Commission decided in March 2017 that the capital injection 
by  Portugal  in  the  State-owned  Caixa  Geral  de  Depósitos  (CGD)  took  place  on  market 
terms.33 In November 2019, the Commission decided34 that the planned capital injection by 
Romania in CEC, a Romanian State-owned bank, met the market economy investor principle. 
Along the same lines, Germany proposed a market conform solution to recapitalise NordLB 
based on its decision to keep the bank in public ownership. In all the cases, the Commission 
based its decision on an assessment of the bank’s business plan. 

Other  complex  no-aid  decisions  concern  impaired  asset  measures.  The  Commission’s 
Impaired Asset Communication sets out that the transfer of impaired assets to public entities 
(e.g. publicly-supported asset management companies) can be free of aid only if it takes place 
at the assets’ market value.35 This principle was applied, for instance, in the case of German 
HSH  Nordbank,  where  the  transfer  of  impaired  shipping  loans  to  a  publicly-controlled 
vehicle  was  carried  out  at  market  prices.36  Other  impaired  asset  measures  for  which  the 
Commission  adopted  no-aid  decisions  include  the  Italian  guarantee  scheme  for  NPL 
securitisations  “GACS”  (Garanzia  sulla  Cartolarizzazione  delle  Sofferenze),  the  Greek 
guarantee  scheme  for  NPL  securitisations  “Hercules”  and  the  Hungarian  AMC  “MARK” 
(Magyar Reorganizációs és Követeléskezelö). 

b.  Measures that are not imputable to the State 

Another  category  of  cases  concern  support  to  banks  by  national  deposit  guarantee  schemes 
(DGSs), which under the DGSD are allowed to carry out interventions other than reimbursing 
depositors,  such  as  interventions  to  prevent  the  collapse  of  a  bank  if  certain  criteria  are 
fulfilled (e.g. the least-cost criterion). While the pay-out of depositors by DGSs would not be 

32  

33  
34  
35  

36  

SA.35334 – Liquidation aid for the orderly market exit of Cyprus Cooperative Bank Ltd, Commission decision of 
19 June 2018 
SA.47178 – Recapitalização da Caixa Geral de Depósitos, Commission decision of 10 March 2017. 
SA.53869 – Market-conform recapitalisation of CEC Bank, Commission decision of 29 October 2019.  
The  ceding  bank  must  then  cover  with  private  means  the  losses  equal  to  the  difference  between  the  assets’  net 
book value and market value. 
SA.29338  –  Increase  of  the  ceiling  amount  of  a  second-loss  guarantee  for  HSH  Nordbank  AG,  Commision 
decision of 2 May 2016 (due to the notification and temporary approval before the 2013 Banking Communication 
came into force, the case was assessed under the 2008 Banking Communication and other crisis communications). 

142 

 
 
 
State  aid,  alternative  interventions  aimed  at  preventing  depositor  pay-outs  by  supporting  a 
bank’s economic activity may constitute State aid if they are imputable to the State and are 
not provided on market terms. In line with the jurisprudence of the Court of Justice, this is a 
subject  to  case-by-case  assessment  by  the  Commission.  For  instance,  in  2015,  the 
Commission concluded that non-notified support measures by the Italian DGS in the form of 
a capital injection and guarantees to cover Banca Tercas’ losses and to facilitate that bank’s 
sale to Banca Popolare di Bari constituted incompatible aid.37 However, following an appeal, 
the  General  Court  of  the  EU  in  March  2019  annulled  the  Commission’s  2015  decision, 
notably  finding  that  the  specific  actions  of  the  Italian  DGS  at  the  time  could  not  be 
considered imputable to the State.38 Since imputability is one of the cumulative conditions for 
a measure to constitute State aid, the General Court of the EU concluded that the Commission 
had wrongly considered that the measures by the Italian DGS amounted to State aid. In May 
2019,  the  Commission  lodged  an  appeal  against  the  General  Court’s  judgment,  which  was 
however dismissed by the Court of Justice of the European Union on 2 March 202139. In light 
of  the  judgment,  the  Commission  adopted  a  new  decision  deeming  the  intervention  free  of 
State aid40.  

37  
38  

39  
40  

SA.39451 – State aid implemented by Italy for Banca Tercas, Commission decision of 23 December 2015. 
Joined cases T98/16, T196/16 and T198/16, Italy, Banca Popolare di Bari SCpA, Fondo Interbancario di Tutela dei 
Depositi v Commission, ECLI:EU:T:2019:167.  
See CJEU press release n°30/21 
SA.39451-  State  aid  implemented  by  Italy  for  Banca  Tercas,  Commission  decision  of  21  September 
2023.  

143 

 
 
 
ANNEX X. MAIN DIFFERENCES BETWEEN THE RESCUE AND RESTRUCTURING GUIDELINES 
FOR NON-FINANCIAL FIRMS AND THE STATE AID RULES FOR BANKS IN DIFFICULTY 

The State aid rules for banks in difficulty built on the existing, well-established general rules 
concerning rescue and restructuring aid to non-financial undertakings.1 These, however, had 
to  be  adapted,  in  order  to  address  the  effects  of  the  financial  crisis  taking  into  account  the 
specificities  of  the  banking  sector,  as  allowed  under  the  ‘new’  legal  basis  for  the  State  aid 
rules  for  banks  in  difficulty,  i.e.  Article  107(3)(b)  TFEU.  The  main  changes  that  they 
introduced to this end are set out below. 

Firstly, they enlarged the scope for rescue aid by allowing aid schemes also for large firms 
and by allowing rescue aid  for more than six  months, notably in the form  of guarantees  on 
long-term  debt  or  long-term  loans,  at  a  time  when  it  was  necessary  given  the  scale  of  the 
crisis. In addition, structural aid measures, such as recapitalisation and impaired assets 
measures were accepted as rescue aid, despite their structural nature, while the Rescue 
and Restructuring guidelines limited such forms of aid to liquidity support.     

Secondly,  they  adjusted  the  requirements  for  restructuring  aid.  In  particular,  having 
regard to the objective of financial stability and the difficult economic outlook that prevailed 
at  the time throughout the EU, special attention was paid  to  ensuring a sufficiently flexible 
and  realistic  timing  of  the  necessary  restructuring  measures.  Therefore,  the  rules  extended 
the  maximum  duration  of  the  restructuring  period  up  to  five  years,  compared  to  the 
usual practice of two to three years. 

In  addition,  the  requirement  that  the  banks’  own  contribution  to  the  costs  of 
restructuring  should  meet  the  50%  threshold  fixed  in  the  Rescue  and  Restructuring 
guidelines for large firms was set aside. As a result, difficulties in accessing private capital in 
the crisis context could be taken into account. The ‘one-time-last-time’ principle was also 
lifted: the Commission did not apply that rule to restructuring aid to banks in times of crisis, 
reflecting  inter  alia  the  uncertainty  about  the  recovery  outlook  and  financial  stability 
concerns. 

Thirdly, the State aid rules for banks in difficulty introduced a number of adaptations and 
improvements  compared  to  the  Rescue  and  Restructuring  guidelines.  They  distinguished 
more  clearly  between  the  different  aid  instruments  and  prescribed  in  more  detail  the 
conditions for granting State aid, notably in terms of pricing of the different aid instruments. 
As they were sectoral, they could define more clearly required elements, such as the content 
of restructuring plans and viability plans, having regard to the evolving regulatory framework 
applicable  to  the  banking  sector.  They  clearly  outlined  the  principle  that  the  aid  should 
feature  exit  incentives.  Further,  they  allowed  for  a  more  refined  approach  as  regards 
competition remedies, based on both the size of the aid as a proxy for the distortion and an 
assessment of the competitive conditions in the market, and introduced behavioural remedies 
to compensate for the lack of sufficient structural measures. Similarly, the sectoral nature of 
the  rules  allowed  the  principle  of  burden-sharing  to  be  set  and  refined  (which  was 

1  

Information from the Commission - Community guidelines on State aid for rescuing and restructuring 
firms in difficulty (OJ C 368, 23.12.1994, p. 12); Communication from the Commission — Community 
guidelines on State aid for rescuing and restructuring firms in difficulty (OJ C 244, 1.10.2004, p. 2), 
(referred to as “Rescue and Restructuring Guidelines”). 

144 

 
 
 
 
 
 
 
subsequently reflected into the Rescue and Restructuring guidelines applying to non-financial 
firms, building on the experience gained in the banking sector).2 

Finally,  given  their  sectoral  nature,  the  State  aid  rules  for  banks  in  difficulty  were  also  a 
precursor of some of the underlying principles of the EU bank resolution framework that 
was in preparation at the time of their latest review, and were expected to pave the way to a 
smooth transition to it, while having regard to the implementation of the evolving respective 
regulatory framework. 

2  

See  paras. 11 and 65-69 of the  Communication from the Commission  — Guidelines on State aid for 
rescuing and restructuring non-financial undertakings in difficulty, OJ C 249, 31.7.2014, p. 1–28. 

145