Global Trade Alert

On 16 July 2013, Spain notified a restructuring plan for Banco Gallego to the European Commission.
 
Banco Gallego is a spanish commercial bank with a market share of 0.2-0.3 per cent on the national level. The bank focusues on small and medium sized enterprises. (par. 9, letter from the EC to Spain, Brussels 25.7.2013)
 
It has been part of NovaCaixaGalicia Banco (related measure). On 28 November 2012, as part of the restructuring plan of NCG, the state decided to sell Banco Gallego. On 18 April 2013, Banco Sabadell brought banco Gallego for EUR 1.00 (par. 3)
 
On 11 May 2012, Spain adjusted the regulations for real estate assets in the financials sector, as a results of which, Banco Gallego needed additional EUR 142.7 million of capital (par. 19)
 
Banco Gallego has been subject to additional aid measures, namely:
- Recapitalisation of EUR 245 million in the form of ordinary shares by the Spanish government program FROB ('Fondo de Reestructuración Ordenada Bancaria')
- Contigent grant of defered tax assets of up to EUR 127 million
- Other contingent grants of up to EUR 163 million
- Contingent grant on badwill of up to EUR 50 million
- Loss Guarantees of up to EUR 24.3 million
- Liquidity guarantees of up to EUR 800 million
- Transfer of impaired assets of EUR 257.6 million (related measure NCG, already on 28.11.2012)
 
The EC finds that: 'After the merger, some of Banco Gallego's branches will continue to operate in Banco Sabadell's network, while Banco Gallego will cease to exist as an independent legal entity. The legacy business will therefore be allowed to continue providing the same range of banking and financial services to its customers as Banco Gallego did before the sale and will clearly continue to carry out an economic activity within the combined entity.' (par. 70)
 
The EC therefore considers all measures:' to distort competition since they enable the business to survive within another legal entity while it would have otherwise disappeared without public support.' (par. 81)
 
The EC finally concludes that: 'the measures are likely to affect trade between Member States since Banco Gallego's business activities continue - within Banco Sabadell - to compete on the Spanish retail market, the mortgage lending markets and the commercial lending markets' (par. 82)
 
The EC also names potential affected countries by stating that: 'In all those markets, some Banco Gallego's competitors are subsidiaries and branches of foreign banks. (par. 73)
 
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.