The crisis approach - From guarantee schemes to asset relief measures and restructuring plans

EU state aid policy and banking institutes during the financial crisis

Diploma Thesis , 2010 , 82 Pages , Grade: Sehr Gut (1)

Business economics - Banking, Stock Exchanges, Insurance, Accounting

This diploma thesis focuses on the legal aspects and consequences of the financial meltdown that started in 2007. Although its main emphasis is on assets relief measures and bank restructuring, it also touches the issues of state guarantees and recapitalizations of banking institutes.

Inhaltsverzeichnis (Table of Contents)

• STATE AID LAW IN TIMES OF A CRISIS
• The financial crisis and the European Union
• Banks under pressure
• Common measures to support troubled banks
• EU state aid regulation
• Pre crisis standards – the R&R Guidelines
• The communications and the crisis approach
• GUARANTEE SCHEMES AND RECAPITALISATIONS
• Guarantees
• Design and effect
• Material scope of a guarantee
• Time limitations
• Private sector contribution and burden sharing
• Behavioural constraints and safeguards
• Recapitalisations
• Design and effect
• Special competition concerns
• Pricing of Capital
• Fundamentally sound banks
• Rescue aid to troubled banks
• Participation of private investors
• Incentives for State capital redemption
• Behavioural constraints
• Regular Review
• Cases and exemplary implementations
• ING a compatible recapitalisation
• Sweden - a compatible guarantee scheme
• Mid-term conclusion and prospects
• BAD BANKS AND ASSET RELIEF PROGRAMS
• The bad bank idea
• Design-decisions when creating a bad bank
• Key challenges
• Competition concerns
• THE FRAMEWORK SET IN THE IAC
• Design
• Transparency and disclosure
• Burden-sharing
• Aligning incentives for participation
• Eligible assets
• Valuation and pricing guidelines
• Management of assets
• Budgetary context
• Restructuring and follow-up measures
• APPLICATIONS AND APPROVALS UNDER THE IAC
• THE GERMAN ASSET RELIEF SCHEME
• The SPV-model
• The design
• The Com's assessment
• Analysis of the SPV-model
• The Agency Model
• A bad bank for WestLB
• The design
• The Com's assessment
• Analysis of the WestLB Case
• Individual approvals of asset relief in Germany
• LBBW
• Hypo Real Estate
• THE IRISH ASSET RELIEF SCHEME – NAMA
• The design
• The Com's assessment
• Analysis of the NAMA scheme
• RESTRUCTURING PLANS AND DECISIONS
• The Restructuring Communication
• The obligation to submit restructuring plans
• The design of a restructuring plan
• Principles of restructuring
• Degree of restructuring
• Burden sharing
• Restructuring aid
• Length of the restructuring process
• Procedure
• Proposed restructuring measures
• Divestment and restrictions on expansion
• Sale of the ailing bank
• Creation of a "good bank"
• Restructuring in practice
• Change of ownership
• Closure of branches
• Sale of subsidiaries and participations
• Structural and organisational changes
• Cutting and downsizing measures
• Other measures
• Preview

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This diploma thesis investigates the European Union's state aid policy towards banking institutions during the financial crisis. It aims to analyze the legal framework and practical implementation of state aid measures, such as guarantee schemes, recapitalizations, and asset relief programs. The thesis focuses on the transition from pre-crisis standards to the crisis approach adopted by the European Commission. Key themes explored in the thesis include:

• The impact of the financial crisis on the European banking sector
• The legal framework governing state aid in the European Union
• The transition from pre-crisis standards to the crisis approach
• The design and implementation of various state aid measures, including guarantee schemes, recapitalizations, and asset relief programs
• The interplay between competition law and state aid policy in the context of the crisis

Zusammenfassung der Kapitel (Chapter Summaries)

The first chapter provides an overview of the legal framework governing state aid in the European Union. It discusses the financial crisis, its impact on the banking sector, and the EU's response in terms of state aid measures. The chapter also examines the pre-crisis standards for state aid, as embodied in the R&R Guidelines, and how these standards evolved during the crisis. The second chapter focuses on guarantee schemes and recapitalizations. It analyzes the design, effect, and legal implications of these measures, including competition concerns, pricing of capital, and behavioral constraints. The chapter also explores the role of private investors and the incentives for state capital redemption. The third chapter examines the use of bad banks and asset relief programs as a means to address the financial crisis. It explores the rationale for creating bad banks, the design decisions involved, and the key challenges associated with their implementation. The chapter also delves into competition concerns and the framework set in the Individual Asset and Capital Instrument (IAC). The fourth chapter explores the application and approval process for asset relief programs. It analyzes the German asset relief scheme, including the SPV-model and the agency model, as well as individual approvals for asset relief in Germany. The fifth chapter focuses on the Irish Asset Relief Scheme (NAMA). It examines the design, implementation, and analysis of this scheme, which aimed to address the crisis in the Irish banking sector. The sixth chapter delves into restructuring plans and decisions. It analyzes the restructuring communication, the obligation to submit restructuring plans, and the principles and measures involved in restructuring. The chapter concludes with a preview of the conclusion.

Schlüsselwörter (Keywords)

This thesis focuses on the EU state aid policy and banking institutes during the financial crisis. It delves into the key concepts of guarantee schemes, recapitalizations, and asset relief measures. The thesis also examines the legal framework governing state aid, including the R&R Guidelines and the IAC. Key themes include competition law, restructuring plans, and the interplay between state aid and competition law during the crisis. The thesis explores specific case studies, such as the German asset relief scheme and the Irish Asset Relief Scheme (NAMA), to illustrate practical application of these concepts.

• College: Vienna University of Economics and Business (Europäisches und Öffentliches Wirtschaftsrecht)
• Grade: Sehr Gut (1)
• Author: MMMag. Thomas Obersteiner (Author)
• Publication Year: 2010
• Pages: 82
• Catalog Number: V164483
• ISBN (eBook): 9783640796175
• ISBN (Book): 9783640795895
• Language: English
• Tags: Financial Crisis, European Union, Competition Law, State Aid, Banking Crisis, Guarantee Schemes, Recapitalization, Asset Relief, NAMA