Single Rulebook Q&A

Question ID: 2015_2339
Legal act : Directive 2014/59/EU (BRRD)
Topic : Recovery and Resolution
Subject area: Resolution tools and powers
Article: 39
Paragraph: (3)
Subparagraph:
Article/Paragraph : n.a.
COM Delegated or Implementing Acts/EBA RTS/EBA ITS/EBA GLs: Not applicable
Subject matter : Procedural requirements of the sale of business tool with regard to state aid
Question:

How can an open and competitive sale process in accordance with the state aid rules be conducted in case of applying sale of business tool and fulfilling the provisions from Article 39(3)?

Background on the question:

Article 39(3) of Directive 2014/59/EU (BRRD) states that: “The resolution authority may apply the sale of business tool without complying with the requirement to market as laid down in paragraph 1 when it determines that compliance with those requirements would be likely to undermine one or more of the resolution objectives and in particular if the following conditions are met:
(a) it considers that there is a material threat to financial stability arising from or aggravated by the failure or likely failure of the institution under resolution; and
(b) it considers that compliance with those requirements would be likely to undermine the effectiveness of the sale of business tool in addressing that threat or achieving the resolution objective referred to in point (b) of Article 31(2).

According to Recital 61 of Directive 2014/59/EU (BRRD), "the sale of business tool should enable authorities to effect a sale of the institution or parts of its business to one or more purchasers without the consent of shareholders. When applying the sale of business tool, authorities should make arrangements for the marketing of that institution or part of its business in an open, transparent and non-discriminatory process, while aiming to maximise, as far as possible, the sale price. Where, for reasons of urgency, such a process is impossible, authorities should take steps to redress detrimental effects on competition and on the internal market.

Date of submission: 30/09/2015
Published as Final Q&A: 10/03/2017
EBA answer:

Article 39(3) of Directive 2014/59/EU (BRRD) states the conditions under which the resolution authority may apply the sale of business tool without complying with the requirement to market or make arrangements for the marketing of the business the authority intends to transfer. A sale of business conducted in accordance with an open, transparent and non-discriminatory process allows in principle that the sales price resulting from such process is a market price, and therefore the sale does not involve state aid, neither to the buyer nor to the seller.

When a sale of a business is not conducted according to an open, transparent, non-discriminatory process, such a presumption does not exist. In such circumstances, the sale may involve state aid (please see below under a and b). When the use of the sale of a business tool involves the granting of state aid, intervention has to be assessed in accordance with the relevant state aid provisions and the state aid measure is subject to approval of the Commission under EU state aid rules.

In particular:

- a) the use of the sale of a business tool may involve the granting of state aid in the following cases:

• where resolution funds or deposit guarantee funds (but not in its pay-out function to guarantee individual depositors) intervene to assist in the use of the sale of a business tool;
• where public support is granted to assist in the use of the sale of a business tool on terms and in conditions which would not be acceptable to a private investor operating under the same circumstances. This includes for example the cases where the business (or part of it) on sale is acquired by a State-owned bank above its market price or where the business (or part of it) is sold by a State-owned bank below its market price.

- b) the use of the sale of a business tool will not involve the granting of state aid, even though it is not conducted according to an open, transparent, non-discriminatory process, where the sale takes place between private undertakings with the absence of public support, resolution funds or deposit guarantee funds. Indeed, State aid is any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States.

Disclaimer:

This question goes beyond matters of consistent and effective application of the regulatory framework. A Directorate General of the Commission (Directorate General Financial Stability, Financial Services and Capital Markets Union) has prepared the answer, albeit that only the Court of Justice of the European Union can provide definitive interpretations of EU legislation. This is an unofficial opinion of that Directorate General, which the European Banking Authority publishes on its behalf. The answers are not binding on the European Commission as an institution. You should be aware that the European Commission could adopt a position different from the one expressed in such Q&As, for instance in infringement proceedings or after a detailed examination of a specific case or on the basis of any new legal or factual elements that may have been brought to its attention.

Status: Final Q&A
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