Spain: Recapitalisation and Liquidity support for Banco de Valencia S.A.
On 21 November 2011, Spain notified to the Commission its intention to provide the Banco de Valencia S.A. (“The Bank”) with a capital injection and liquidity support through the Fondo de Restructuración Ordenada Bancaria (FROB).
The Bank is a Spanish commercial bank, which operates mainly in the regions of Valencia and Murcia. It is listed on the Spanish stock exchange. At the end of June 2011, the bank had 427 branches and 2 028 employees.
In November 2011, following an inspection by the Bank of Spain that revealed capital and liquidity shortfalls, the Bank failed to raise capital from its key shareholders or from other private sources and failed to meet its obligations towards depositors and creditors. Following its inspection, the Bank of Spain estimates the immediate liquidity needs to be comprised between EUR 1 000 and 2 000 million. Those needs are mainly due to the bank's weaknesses.
The recapitalisation will be achieved through issuance of a maximum of EUR 1 billion of ordinary shares by the Bank. In addition, in order to meet the expected liquidity needs of the Bank, together with the aforementioned capital injection, the FROB will grant the Bank a liquidity facility amounting at maximum to EUR 2 billion.
The commission found that the measure constitutes State aid within the meaning of Article 107 (1) TFEU and gave the following assessment:
“The Commission finds that the measures distort competition as they allow the Bank to obtain the capital and liquidity necessary to avoid technical insolvency and its exit from the market. The Commission finds that the measures are also likely to affect trade between Member States as the Bank competes on the Spanish retail savings markets, the Spanish mortgage lending markets and the Spanish commercial lending markets. In all those markets, some of the Bank's competitors are subsidiaries and branches of foreign banks.” (par. 30-31 of the letter from the EC to Spain - Brussels, 21.11.2011 C(2011) 8663 final)
The Commission finds however that the emergency measures in favor of Banco de Valencia S.A. are temporarily compatible with the internal market for reasons of financial stability on the basis of Article 107(3)(b) TFEU.
The measures are approved for six months or, if Spain submits a restructuring plan within six months from the date of this decision, until the Commission has adopted a final decision on the restructuring plan.
A state measure in the GTA database is assessed solely in terms of the extent to which its implementation affects the extent of discrimination against foreign commercial interests. On this metric, the state aid proposed here is discriminatory.
Any Evidence-Based Deliberation:
|Is there anything in the public record to suggest that evidence of the effectiveness of the proposed measure was considered during official deliberations?|
|Is there any evidence that alternatives to the proposed measure were considered?|
|Is there anything in the public record that suggests that empirical evidence informed the comparison across the alternatives available to government?|
|Was such evidence identified?|
|Is such evidence publicly available?|
|Did the official decision-maker in question provide an explanation as to why a chosen measure was favoured over alternatives?|
|Is there any evidence to suggest that potentially affected trading partners were consulted before the measures were taken?|
|Is there any evidence that safeguards have been put in place to ensure that implementation of the initiative is transparent and non-discriminatory?|
|Did the government state its intention to review the measure within one year of implementation?|
Date of inception: 21 Nov 2011
Duration: 60 months
GTA Evaluation: Red
the letter from the EC to Spain - Brussels, 21.11.2011 C(2011) 8663 final. Available from : < http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=... >