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Does the support of an IPS constitute state aid?

11/29/2019

The European commission's decision on the support plan for NordLB is expected in the next few days. This offers, for the first time, an opportunity to question the coherence of European state aid rules and the existence of IPS with state-owned members.

Céline CHOULET

TRANSCRIPT // Does the support of an IPS constitute state aid? : November 2019

In the days to come, the European Commission will give its opinion about the restructuring plan of Norddeutsche Landesbank. This plan has a specific interest.

It brings, for the first time, a chance to question the adequacy of European rules on state aid and banking regulation. On reading the European Treaty, it is possible that recapitalisation measures in favour of NordLB could be treated as state aid since they only mobilize state resources.

NordLB is de facto a state-owned bank, like all German Landesbanken. It belongs to two Länder and to their savings banks.

To be considered compatible with the internal market and have the approval of the European Commission, a plan interpreted as state aid must guarantee the viability of the bank over the long term, have a satisfactory burden-sharing and come with safeguards against distortions of competition.

This plan to rescue NordLB is of an unusual nature. In contrast to previous plans put in place to support the Landesbanken, the aid provided to NordLB does not come only from its public shareholders but also from the mutual cooperation and support network, the S-Group, of which it is a member.

This group is officially considered as an Institutional Protection Scheme. In banking regulation, the support packages planned by the IPS are considered as private recovery measures, even when the members of these IPS are state-owned banks.

However, the question is not addressed in the state aid principles. No particular regime has been defined for intervention by an IPS. Eventually, NordLB's restructuring plan should undoubtedly be considered only in terms of the public resources committed by the Länder.

The specific nature of the aid provided by the S-Group should be taken into account. If not, this would lead to judge all interventions of IPS with state-owned members, such as the S-Group, not compatible with the rules of the internal market.

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