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Hand in hand or parallel paths? Reflections on the future coexistence of State aid control and bank resolution in the EU

François-Charles Laprévote and Amélie Champsaur, Research Handbook on State Aid in the Banking Sector, December 2017

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Since 2013-14 and the establishment of the “Banking Union”, the regulatory landscape of the EU banking sector has evolved radically. New regulators, including the European Central Bank (ECB), acting within the framework of the Single Supervisory Mechanism (SSM) and the Single Resolution Board (SRB) have emerged and now in charge respectively of supervising, and if necessary resolving, EU systemic banks. Rules and schemes revamping the depositor guarantee funds and their role in case of a new banking crisis have been adopted or proposed. Despite initial reluctance, a limited form of solidarity between Member States has gradually taken place with the establishment of the European Financial Stability Fund (EFSF) and the European Stability Mechanism (ESM). Crucially, common rules on the resolution of banks have been adopted both at EU and euro-area level, with the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism (SRM) Regulation.

Yet the new resolution framework and specifically, the application by the SRB of its resolution powers, remain largely untested.1 At the same time, the EU State aid control rules (and the European Commission’s DG COMP) retain a significant role in the restructuring and resolution of banks. Specifically, the State aid rules laid down in Articles 107 and 108 TFEU still confer on the Commission a fundamental role in any scheme aimed at the rescue or resolution of an EU bank that involves State-supported measures. Tellingly, the Commission’s “temporary framework” adopted since 2008, and last amended in 2013 with the Revised Banking Communication,2 has not been modified since then, despite the adoption of the BRRD and the SRM in 2014. On the contrary, the Commission seems to have considered that the Revised Banking Communication was anticipating the adoption of the new rules under the BRRD, thus implying that the purpose of the BRRD was simply to consolidate into law, and give full effect to, the Commission’s approach pursuant to the Revised Banking Communication. In the end however, notwithstanding the Commission’s powers under the State Aid framework, the EU legislators assigned the role of resolution authority for significant banks to the newly-created SRB, thereby upending the role of “de facto resolution authority” that the Commission held during the crisis.

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