The European Commission has the legal powers and resources to control State Aid to financial institutions, but it has not always been able to make full use of them, according to a report by the European Court of Auditors published on Thursday 1st October.
The auditors sought to establish whether, between August 2013 - when the last Banking Communication was adopted - and the end of 2018, the Commission had adequately exercised its control to ensure that State Aid remains exceptional and limited to the minimum necessary.
The auditors recognise that the EU has appropriate means and powers to exercise effective control over State Aid to banks.
However, the procedures are sometimes considered to be very over-long and not very transparent due to the extensive use of informal ‘pre-notification’ contacts.
According to the Court, the rules on the control of State Aid to the financial sector are generally well drafted and clear.
The EU Treaties allow public support to banks on an exceptional basis, in order to remedy a serious disturbance in the economy of a Member State.
According to the Court, the EU rules are not explicit enough on this point and do not define what is meant by ‘serious disturbance’. The Commission is criticised for not systematically questioning the Member States’ statements that there is a threat to financial stability.
Furthermore, the Commission has not, according to the Court, analysed the real impact of each measure on competition. The Commission’s performance indicators were also not entirely fit for purpose.
The auditors deplore the fact that the Commission has not properly assessed its crisis rules since 2013. These rules have remained unchanged, despite the overhaul of the regulatory framework and a considerably improved economic and financial climate before the Covid-19 pandemic.
Link to the Court of Auditors’ report: https://bit.ly/3jyindb (Original version in French by Lionel Changeur)