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

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

  • State aid for financial institutions—the Recapitalisation Communication
  • The Crisis Communications
  • Recapitalisations
  • Objectives of recapitalisation schemes
  • Types of recapitalisation
  • Applicable safeguards
  • Remuneration and pricing methodologies
  • Avoiding distortion of competition
  • The Commission's approach to recapitalisations
  • Incentives to pay back State aid/redeem state capital
  • more

The Crisis Communications

The Recapitalisation Communication is one of the suite of Crisis Communications from The European Commission (the Commission) setting out the requirements for aid to be compatible with State aid principles:

  1. the 2013 Banking Communication (which replaces the 2008 Banking Communication)

  2. the Recapitalisation Communication

  3. the Impaired Assets Communication

  4. the Restructuring Communication

  5. the 2010 Prolongation Communication

  6. the 2011 Prolongation Communication

These special rules were introduced under article 107(3)(b) of the Treaty on the Functioning of the European Union (TFEU), which allows the Commission to approve state support to remedy a serious disturbance in the economy of a Member State. These rules have been updated where necessary to adapt to the evolution of the crisis.

The Restructuring Communication was introduced in 2009 and extended beyond 31 December 2011 under the 2011 Prolongation Communication on the basis that the conditions under art 107(3)(b) of the TFEU, still applied (ie a serious disturbance in the economy of the Member State). The Restructuring Communication applies to new recapitalisation schemes and allows schemes that existed before it came into effect to be adjusted.

Recapitalisations

Recapitalisations (ie the provision of capital by the state in return for taking ordinary and/or preferred shares) are usually of a permanent nature and can’t be easily undone, so there is a strict control on these measures. The