State aid: Commission approves orderly liquidation scheme for small Italian banks

The European Commission has authorised under EU State aid rules an Italian liquidation scheme for small banks (other than cooperatives) with total assets of less than €5 billion. The authorisation is granted for 12 months from today. The scheme facilitates the work of the Italian authorities when the competent national authorities have found an eligible bank to be failing, have concluded that the resolution of the bank was not in the public interest, and consequently put the bank into compulsory administrative liquidation. When assessing the public interest the authorities must ensure that the compulsory administrative liquidation achieves the resolution objectives to the same extent as resolution. Under the scheme, the Italian State will be able support the sale of assets and liabilities of a failed bank to another bank. The buyer will be selected on the basis of a competitive bidding process and should viably integrate the acquired activities within one year. The shareholders and subordinated creditors of the failed banks will have to contribute to cover the losses, thus helping to minimise the need for aid. The Commission found that the Italian measure is in line with the conditions set out in the 2013 Banking Communication for orderly liquidation schemes for small banks, with the exception of the  €3 billion balance sheet threshold. In this respect, the Italian scheme will be available to small banks (other than cooperatives) with total assets of less than €5 billion. However, given the exceptional circumstances linked to the coronavirus outbreak and the safeguards against undue competition distortions that Italy has included in the scheme, the Commission has accepted the higher threshold of €5 billion. The Commission will also temporarily accept that higher thresholds for similar schemes are applied by other Member States in the context of the coronavirus outbreak, as long as similar safeguards to those implemented by Italy can be demonstrated. More information will be available on the Commission’s competition website, in the public case register under the case number SA.57516.