State aid for financial institutions—the Banking Communication
State aid for financial institutions—the Banking Communication

The following Restructuring & Insolvency guidance note provides comprehensive and up to date legal information covering:

  • State aid for financial institutions—the Banking Communication
  • Rationale
  • General prohibition against State aid
  • Temporary framework for financial institutions
  • Overarching objective—financial stability
  • Burden sharing
  • Capital raising
  • Remuneration caps
  • Preventing outflow of funds
  • Restructuring plans required before State aid granted
  • more


The European Commission (the Commission) adopted a temporary State aid framework following the collapse of Lehman Brothers in 2008/2009 to enable Member States to deal with financial problems in systemic financial institutions, as well as support access to finance for real economy firms (the 2008 Banking Communication).

Many financial institutions in Europe have required government intervention to support their restructuring and/or prevent collapse, including: Dexia and Fortis Bank (Belgium, Luxembourg), Saschen LB, IKB, Commerzbank and West LB (Germany), Bank of Ireland and Allied Irish Bank (Ireland), ING and ABN Amro (Netherlands), Bradford & Bingley, Northern Rock, Lloyds Banking Group, RBS and Dunfermline Building Society (UK). The Commission recognises the high level of inter-connectedness within the financial sector and risks of contagion that justify the maintenance of the State aid safety net.

The crisis rules for financial institutions were tightened in July and December 2010 and extended on 1 December 2011. The 2013 Banking Communication is effective from 1 August 2013 and replaces the 2008 Banking Communication. The changes introduce a stricter, less flexible regime following the subsequent economic recovery throughout Europe.

General prohibition against State aid

The EU rules generally prevent Member States from granting aid or assistance that distorts or threatens to distort competition and inter-state trade (see Articles 107-109 of the Treaty on the Functioning