In order to respond to the financial crisis, the EC adopted in 2008-2009 a number of communications allowing State support to banks while seeking to minimize resulting distortions of competition. These rules have been updated from time to time since then, to adapt to market changes. The EC recently further revised these rules and issued a new Communication on the subject on 10 July 2013.
Although the main focus of the EC’s assessment is still to guarantee financial stability, the new rules, which have applied as from 1 August 2013, require banks in most cases to present a detailed restructuring plan that ensures their long-term viability before they can receive recapitalizations or asset protection measures. In addition, the EC now requires that the burden of dealing with capital shortfalls is properly shared; shareholders and junior creditors will now have to contribute before any taxpayer’s money is spent to support the bank. The new rules also introduce a requirement that failed banks implement strict executive remuneration policies.
As with previous communications, the new rules will have to be adapted to changes in market circumstances in the future. It also remains to be seen how these new rules will interact with (and whether they will need to be amended because of) the evolving EU regulatory framework covering the banking sector. More generally, the adoption of new rules for restructuring aid specific to the banking sector is a sign that the EC expects State aid measures in favour of banks due to the crisis to continue in the near future. However, the EC wants to take into account the different financial situations in the EU Member States and to guarantee, through less flexible rules, that everyone abides by the same rules.