ANNOUNCEMENT 13 Oct 2008In October 2008, the British government announced a change in private-sector financial support.
NUMBER OF INTERVENTIONS
the letter from the EC to the UK - Brussels, 14.12.2009
C(2009)10112 final. Available from : < http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_N422_2009 >
By decision of 13 October 2008, the Commission approved a package of financial support measures to the banking industry in the UK (State aid case N 507/2008). These decisions permitted the UK to implement a recapitalisation scheme, as well as a guarantee facility, for financial institutions, subject to several conditions. The Royal Bank of Scotland (hereinafter RBS) was recapitalised, on 1 December 2008, under the terms of this scheme.
On 26 February 2009, the UK authorities and RBS announced the bank's intended participation in the Asset Protection Scheme (APS) and the associated recapitalisation of the group by the State. The UK submitted a restructuring plan of RBS on 2 June 2009, as required under the terms of the recapitalization scheme.
RBS is one of the largest financial services groups in Europe and in the world, with over 40 million private, corporate and institutional customers in 57 countries.
The aid measures are the following:
- An Implemented Recapitalisation (announced on 13 October 2008 and completed on 1 December 2008) of Ł20 billion.
- A forthcoming recapitalisation of Ł25.5 billion in B shares.
- A contingent recapitalisation of Ł8 billion.
- A participation in the UK impaired asset scheme (APS) including the possibility to pay the fee in B share.
- Liquidity Assistance extended by the Bank of England (undisclosed amount)
The commission found that the measure constitutes State aid within the meaning of Article 107 (1) TFEU and gave the following assessment:
-Regarding the Capital injections
'The Commission agrees with the position of the UK that the Ł25.5 billion recapitalisation and the contingent capital constitute aid to RBS within the meaning of Article 107 (1) TFEU. They will allow the beneficiary to get the required capital and therefore to comply with the FSA regulatory framework. This gives an economic advantage to the beneficiary and strengthens its position compared to that of its competitors in the UK (some of which are subsidiaries of foreign banks) and in other Member States and must therefore be regarded as distorting competition and affecting trade between Member States. The advantage is selective since it only benefits the beneficiary of the new aid package and is provided through State resources.' (par. 115 of the letter from the EC to the UK - Brussels, 14.12.2009 C(2009)10112 final)
-Regarding the participation in the APS
'The APS is manifestly financed by State resources. It was open to banks having a certain size and by design was interesting only for banks which were in deep difficulty and in particular in deep shortage of capital. It is therefore a selective measure. It favours RBS by indemnifying losses which would exceed the firstloss position and by improving capital ratios in the stress scenario, allowing thereby the group to pass the FSA stress test. This selective advantage to RBS distorts competition and affects trade between Member States, as discussed previously in respect of the capital injections.' (par. 118 of the letter)
-Regarding the support within the Liquidity Assistance extended by the Bank of England
'The Commission notes that the LA was granted individually to RBS and it has not been a facility provided by BoE to all eligible institutions. '...'. BoE clearly admitted that it acted at that time as 'lender of last resort' to financial institutions in difficulty. Thus, the Commission considers that the LA was clearly a selective measure providing RBS with an advantage it could have not obtained on the market. As the recapitalisation and the APS, this measure distorts competition and affects trade between Member States by preventing RBS from defaulting on its obligations and from exiting the market. The Commission recalls that, by virtue of the guarantee of 14 October 2008, the State would have to intervene in case of default of RBS, thus engaging State resources. In addition, given the announcement by the HM Treasury of 13 October 2008 to provide recapitalisation to RBS, the LA operations as from this date were clearly part of the aid package. The Commission therefore considers that in this case the part of the LA provided by the BoE to RBS as from 13 October 2008, including any rollovers of the earlier LA operations, needs to be considered as a selective support imputable to the State and thus it should be considered as State aid.' (par. 127 of the letter)
The Commission has decided to consider the aid measures to be compatible with the internal market.
The date of inception is taken from the actual date of recapitalisation (1 December 2008)
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.