Some cases in Europe, starting with Mps, are bringing the issue of state aid to banks back into the limelight. It is possible that after the substantial stability which, after the great wave of the first phase of the crisis, has characterized public disbursements in favor of this sector since 2009, we will enter a new phase, probably of lesser quantitative importance but certainly of greater complexity also following the regulatory interventions of the European Commission.
In particular, in the event that a government decides to intervene in support of a financial institution, the operation must be structured in such a way that it satisfies both the Bank Recovery and Resolution Directive and the rules on state aid. An article recently published in the Oxera online magazine focuses on these aspects of dual compliance in its economic-financial profiles.
In summary, it underlines how the 2013 Banking Communication marks a shift towards greater relevance of the ex-ante analysis, effectively raising the standard of evidence necessary to demonstrate the compatibility of the aid and enhancing the economic and finance for the evaluation of the bank's assets, its long-term sustainability (covering all costs and guaranteeing an adequate return on equity, even in the presence of "stress scenarios") and the compensatory measures, sometimes adopted when authorizing state aid.
In particular, the judgment of the adequacy of the yield depends on a careful definition of the assets that remain on the bank's balance sheet, on an appropriate measurement of its leverage, its mix of services as well as on country risk, with robust and credible forward-looking analyses.
The new emphasis on burden sharing, introduced by the Commission's measures, on the basis of which not only shareholder capital and subordinated debt but also senior debt is wiped out before State aid is granted, can lead to on the other hand lead to a relaxation of the compensatory measures required to authorize state aid.
The valuation of impaired assets also requires in-depth economic assessments, since it is necessary to resort to an estimate of prospective cash flows and bearing in mind that this assessment can be challenged by the Commission.
In conclusion, the greater complexity of the rules on the regulation of banking crises and their "intersection" with the rules on State aid reinforces the need to have solid and well-founded economic and financial analyses: at least in Brussels it is not a regulatory environment for lawyers only.
