Ten years of state aid to financial institutions: Is there still a ‘Serious Disturbance’?

State aid to financial institutions has been massive. State aid rules together with the directive on bank recover and resolution and the regulation establishing the Single Resolution Mechanism require that banks that receive State aid must be resolved or liquidated. The exception to this rule is that State aid may be granted without leading to resolution or liquidation when the beneficiary bank is solvent, the aid is necessary to preserve financial stability and the aid is intended for liquidity support or precautionary recapitalisation. This paper identifies a number of ambiguities in the application of Article 107(3)(b). First, it is unclear whether aid under Article 107(3)(b) has to counteract and/or prevent a ‘serious disturbance’ in the economy of a Member State. Second, it is unclear how Article 107(3)(b) can apply to aid that addresses regional rather than national problems. Third, it is unclear how the double requirement of remedying a serious disturbance and preserving financial stability is applied to solvent banks which are not systemically significant. Fourth, it is unclear whether the requirement that resolution aid must be in the ‘public interest’ also implies that aid must be limited to banks with systemic significance.