EC Statement: State aid - Commission approves Irish resolution scheme for credit unions
( December 20, 2011, 10:45 GMT | Official Statement) -- MLex Summary: The European Commission has cleared an Irish aid scheme for distressed credit unions. The scheme will remedy serious disturbance in the economy, and is limited in time and scope.State aid: Commission approves Irish resolution scheme for credit unions
Brussels, 20 December 2011 - The European Commission found a resolution scheme for distressed credit unions in Ireland to be in line with EU rules that allow aid to remedy a serious disturbance in the economy of a Member State. In particular, the measure is limited in time and scope, ensures adequate burden-sharing and contains safeguards to avoid undue distortions of competition.
“A resolution scheme must bring swift and efficient support when a failing entity needs to be resolved in order to safeguard financial stability and minimise economic losses. At the same time, moral hazard and distortions of competition need to be limited in the interest of European consumers and taxpayers. I am satisfied that the Irish scheme fulfils these conditions." said Joaquín Almunia, Commission Vice President in charge of Competition Policy.
The Commission found the scheme to be in line with its guidance on state aid to overcome the financial crisis (see IP/08/1495). In particular, the aid is limited to the minimum necessary to ensure an orderly winding-up, as the competitive process will help to achieve maximum value for the transferred assets and liabilities. Moreover, the scheme ensures that the failing credit union adequately contributes to the wind-down costs, as all its assets and liabilities are transferred to the buyer. Finally, the competitive process will prevent that a buyer gains an undue economic advantage through the acquisition of underpriced assets. It will, therefore, minimise the distortions of competition that may arise from the state aid.
The objective of the scheme is to safeguard financial stability and minimise economic losses, when a credit union becomes unable to meet the regulatory requirements set by the Irish Central Bank. It provides for an orderly resolution of a failing credit union by transferring all assets and liabilities to an acquirer in a competitive process. If necessary, a resolution fund will provide a financial incentive directly to the acquirer. Ireland will make an initial repayable contribution to the resolution fund, which will over time be funded by levies on credit institutions.
The authorisation is granted until 30 June 2012. Beyond that date, the Commission will reassess the compatibility of the measure on the basis of the evolution of the economic and regulatory environment....
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