ANNOUNCEMENT 11 Feb 2009In February 2009, the government of Ireland announced a change in private-sector financial support.
NUMBER OF INTERVENTIONS
The letter from the EC to Ireland - Brussels, 12.5.2009 C(2009) 3828 final. Available from < ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_N241_2009 >
the letter from the EC to Ireland - Brussels, 21.12.2010 C(2010) 9475 final. Available from : < http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_N553_2010 >
the letter from the EC to Ireland -Brussels, 15.7.2011 C(2011) 5177 final. Available from : < http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_33296 >
On 11 February 2009, the Irish Government announced its intention to inject EUR3.5 billion into Allied Irish Banks - State aid N241/2009.
Allied Irish Bank has a balance sheet size in excess of EUR182 billion (approximately 90% of the Irish GDP) and accounts for a significant share of customer deposits and lending in the Irish economy. It is one of the two largest banks in Ireland. AIB is a diversified financial services group which offers a full range of personal and corporate banking services.
The decision to inject EUR3. 5 billion into Allied Irish Bank was taken in light of the impact of the current global financial crisis on the Bank which has led to deterioration in its financial position. The measure at issue aims to ensure that the Bank is adequately capitalized to preserve financial stability, that its capital ratio levels meet the expectations of international investors and to facilitate lending to the real economy.
The Measure at issue is a EUR3.5 billion capital injection into the Bank in the form of Core Tier 1 New Preference Shares, which are non-cumulative perpetual preference shares plus detachable warrants.
The Commission came to the conclusion that the measure provides a selective advantage to AIB and that it constitutes State aid in the sense of Article 87(1) EC and gave the following assessment:
" Given that AIB is active in the financial sector, which is open to intense international competition, any advantage from State resources to the Bank would have the potential to affect intra-Community trade and to distort competition. This conclusion is reinforced by the fact that the activities of the Bank are not confined to Ireland but that the Bank is also active in the United Kingdom, the Isle of Man, Hungary, Switzerland, Luxembourg, the United States, Canada and Australia. Since the Irish Government proposes to invest EUR 3.5 billion in the Bank, it is also clear that the measure is imputable to the Irish State and that if any advantage is granted through the measure, State resources are involved." (par. 44 of the letter from the EC to Ireland - Brussels, 12.5.2009 C(2009) 3828 final ).
Article 87(3)(b) of the EC Treaty enables the Commission to declare aid compatible with the Common Market if it is "to remedy a serious disturbance in the economy of a Member State." This aid has to be applied restrictively and must tackle a disturbance in the entire economy of the Member State according to the interpretation of the Article 87(3)(b) by the Court of First Instance.
The Commission referred to its Communication on the financial crisis (Temporary Framework) and concluded that the Measure complies with the conditions laid therein. Therefore, despite the measure constituting State aid pursuant to the Article 87(1) EC, it is compatible with the Common Market according to the Article 87(3)(b) EC Treaty. The Commission raises no objections against the measure at issue and authorizes it as emergency intervention in the face of the current financial crisis. (par. 50-82of the letter).
Second emergency recapitalisation in favour of Allied Irish Banks plc - State aid N 553/2010
On 30 September 2010, the Irish Minister of Finance announced that AIB needed additional capital of EUR 7.9 billion. The Minister also confirmed that in the current stressed market conditions, the Bank was unlikely to be able to conduct a traditional privately underwritten transaction as was originally contemplated in July 2010, announcing at the same time thatthe Irish State would underwrite the capital raise, thus effectively committing to provide a further State-funded recapitalization of the Bank.
On 2 December 2010, the Irish authorities notified to the Commission a second emergency recapitalisation in favour of AIB, for an additional net recapitalisation of up to EUR 9.8 billion, to be granted in 2 phases, (i) the recapitalisation of AIB and (ii) the conversion
of preference shares into ordinary shares.
The Commission came to theconclusion that the net capital injection of EUR 9.8 billion by the State constitutes State aid pursuant to Article 107(1) TFEU and gavethe following assessment:
"The Commission finds that the measure is also able to affect trade between Member States as AIB is competing on, amongst others, the Irish retail savings markets, the Irish mortgage lending markets and the Irish and UK commercial lending markets. In the Irish market, some of AIB' competitors are subsidiaries of foreign banks, while in the UK market AIB competes with both UK-based banks and the subsidiaries of foreign banks active on the UK market." (par. 64 of the letter from the EC to Ireland - Brussels, 21.12.2010 C(2010) 9475 final)
"The Commission finds that the rescue measure in favour of Allied Irish Bank fulfils the requirements of Article 107(3)(b) TFEU and is temporarily compatible with the internal market for reasons of financial stability. The rescue measure in favour of Allied Irish Bank is accordingly approved for six months or, if the Irish authorities submit a restructuring plan within the period prescribed in the next point, until the Commission has adopted a final decision on the restructuring plan of the bank." (par. 104 of the letter)
The Commission requires the Irish authorities to submit a revised in-depth restructuring plan within six months of the present decision, which takes into account the further aid provided to Allied Irish Bank and the substantial size of the aid - in terms of % of RWA - granted to Allied Irish Bank." (par. 105 of the letter)
Emergency recapitalisation in favour of the merged entity Educational Building Society / Allied Irish Banks plc - State aid SA.33296 (2011/N)
The Irish Finance Minister announced on 31 March 2011 that the Irish banking system was to be reorganised around 2 pillar banks, Bank of Ireland and Allied Irish Bank plc. He also announced that in that context EBS would be merged into AIB to constitute this second pillar institution.
On 5 July 2011, Ireland notified to the Commission a combined rescue package for the
merged AIB/EBS ("AIB/EBS") entity of up to EUR 13.1 billion.
The Commission came to the conclusion thatrecapitalisation Measures including a (i) a placing of EUR 5 billion in ordinary shares, (ii) a Capital Contribution of up to EUR 6.5 billion and (iii) a contingent capital contribution of EUR 1.6 billion by the State constitutes State aid pursuant to Article 107(1) TFEU and gave the following assessement:
"The measure is also able to affect trade between Member States as AIB/EBS is competing on, amongst others, the Irish retail savings markets, the Irish mortgage lending markets and the Irish and UK commercial lending markets. In the Irish market, some of AIB/EBS's competitors are subsidiaries of foreign banks, while in the UK market AIB/EBS competes with both UK-based banks and the subsidiaries of foreign banks active on the UK market." (par. 59 of the letter from the EC to Ireland -Brussels, 15.7.2011 C(2011) 5177 final.)
THe EC concluded that the rescue aid in favour of the merged Allied Irish Bank/Education Building Society entity fulfils the requirements of Article 107(3)(b) TFEU and is found to be temporarily compatible with the internal market for reasons of financial stability. The rescue aid in favour of the merged Allied Irish Bank/Education Building Society is accordingly approved for six months.
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.