Public money and state aid for banks. Case of Carige Banca

Abstract

The main aim of this paper is to clarify circumstances where a member state could engage public money in rescue of ailing banks. It is explained that these funds cannot be directed to financial institutions that have financial problems because of their fault (ex. errors in management). They cannot neither be granted for institutions whose liquidation would not jeopardise the public interest. The main rules on rescuing banks are indicated that are embedded in the Directive on banks’ recovery and resolution. Article provides examples when the state aid could be recognised by the European Commission as compliant with EU regulations. On the basis of information (mainly from the EC) analysis has been performed of cases when such rescue packages were accepted by the EC. It has been indicated that such acceptance was granted when a state acts according to market rules, i.e. when, for example, for a guarantee a state receives remuneration that would be accepted by a private investor. A case of liquidated Carige Banca and efforts of the Italian government to rescue it have been described. Conclusions drawn on this base show that attempts of these activities are not always in line with EU regulations and that sometimes can be seen also in other member states.