State Helps Those Who Help Themselves: State Aid and Burden-Sharing

Abstract

Since the beginning of the financial crisis, various forms of public support have been employed to provide financial assistance to troubled banks. Any such operation involving public funds must comply with EU State aid rules in order to prevent competitive distortions between banks and member states. This paper begins by examining the interaction between State aid and the Bank Recovery and Resolution Directive (BRRD) and demonstrates the continuing importance of State aid approval both in and outside resolution. The paper continues by focusing on burden-sharing as a requirement for State aid approval and examines the Commission’s approach to burden-sharing in State aid cases to date. Against this background, the paper continues by considering the CJEU’s judgment in Kotnik and Others (Case C-526/14). The paper comments on the CJEU’s findings and assesses the potential future impact of the judgment. The main conclusions are that legal certainty provided by the CJEU is to be welcomed, that the judgment is unlikely to affect the Commission’s established approach, and that the judgment could have an impact on future cases on public support to the banking sector.

Keywords: State Aid; BRRD; Kotnik; Burden Sharing; Bail-In; Commission

JEL Classification: K2; K20; G28