The corona virus can infect banks too: The applicability of the EU banking and state aid regimes

Phedon Nicolaides*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

This paper examines possible options for Member States to redress the impact of the corona virus (SARS-CoV2) on financial institutions in the context of the directive on bank recov-ery and resolution, the regulation on the Single Resolution Mechanism and the State aid rules on banks. The EU banking regime requires, in principle, that the granting of State aid to a bank should lead to its resolution or liquidation. The paper considers how Member States may support banks outside the scope of Article 107(1) TFEU and how State aid may be grant-ed without triggering resolution or liquidation. The current measures which are rolled out by European governments to support the real economy will indirectly benefit banks too. The paper reviews the recently announced ‘Temporary Framework’ according to which any ‘in-direct aid’ to banks will not infringe the provisions of the directive or regulation. The paper identifies gaps in the current rules concerning solvent, but not systemic banks, ambiguities in the interpretation of the concept of ‘serious disturbance’ and unclear guidance as to how indirect aid may be minimised.
Original languageEnglish
Pages (from-to)29-38
Number of pages10
JournalEuropean State Aid Law Quarterly
Volume19
Issue number1
DOIs
Publication statusPublished - 1 Jan 2020

Keywords

  • Bank resolution
  • COVID-19
  • Liquidation
  • Temporary Framework

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