Survey of State Aid in the Lending Sector: A Comprehensive Review of Main State Aid Cases

Abstract: This paper reviews a considerable number of cases concerning the application of State aid rules to the EU banking sector. The relevance of the financial crisis which hit the lending industry in the 90s determined the Commission to a significant number of State aid reviews of national measures in support of the sector. Following the deep restructuring of the lending industry in the EU and the complete liberalisation of the financial services market, State aid to support the banking sector has become less frequent. However, State intervention has not disappeared but takes more complex forms. The Commission tackles now State intervention both in the form of capital injections and guarantees granted to restructure individual banks or an entire banking sector. The Commission also investigates fiscal advantages, guarantees and tax preferences conferred on a limited number of banks for distributing savings products. EU Member States appear engaged in a new regulatory race to the bottom in the form of preferential tax regimes for financial holdings compared to more 'traditional' and direct forms of State aid to national banks and financial intermediaries involving rescue and restructuring assistance to ailing national champions, or granting of State guarantees to the national banks. We expect that in the near future the Commission will increasingly monitor the existing preferential tax regimes to eliminate possible competition distortions resulting from State aid and will also ensure that capital injections and other forms of public support to public financial institutions are immune from State intervention.