Non-Performing Loans and State Aid Rules

Abstract

Impaired assets such as non-performing loans (“NPLs”) continue to pose significant problems across the EU. When possible solutions are being considered, “bad banks” or similar impaired asset relief measures are oſten discussed. However, if they involve support by the State such measures need to be compliant with a set of EU law provisions. This article aims to clarify which interventions are considered to be State aid, and to give an overview of the compatibility conditions that apply to State aid measures. A brief explanation is also given concerning the recent changes brought about by the EU’s new recovery and resolution framework introduced by the Banking Recovery and Resolution Directive (“BRRD”).

The authors are respectively Head of Unit, Case Handler, and Blue-Book Trainee at the European Commission’s Directorate-General for Competition’s Task Force Financial Crisis. They have written this contribution in a personal capacity. For this reason, the views expressed in this article are solely those of the authors and do not represent a position of the Directorate-General for Competition or the European Commission.

Keywords: Non-Performing Loans; NPLs; State Aid; EU Law

JEL Classification: K21; K33; G21; G28