On March 19, 2019, the General Court annulled the Commission’s decision finding that the voluntary intervention by Fondo Interbancario di Tutela dei Depositi (“FITD”) in support of Banca Tercas (“Tercas”) constituted State aid, granted in violation of Article 108(3) TFEU.[1]

The FITD is the main Italian Deposit Guarantee Scheme (“DGS”). It is a consortium of banks established as a so-called mutual benefit body. FIDT guarantees its members’ deposits in the event of a compulsory liquidation. In addition, the FITD has a right to assist a member bank in distress as a preventive measure if the bank has prospects of recovery and the intervention is less expensive than the reimbursement of deposits in the event of a bank’s eventual liquidation (“voluntary intervention”).

The FIDT’s voluntary intervention in support of Tercas—approved by the Bank of Italy—was aimed at covering Tercas’ losses and facilitating its sale to Banca Popolare di Bari (“BPB”). These measures would avoid Tercas’ compulsory administrative liquidation and the subsequent reimbursement of depositors by the FITD. The support consisted of a capital injection (€265 million) and guarantees (€65 million). The Commission found this support to be State aid.

The Court disagreed with the Commission. First, the Court found that the Commission failed to prove that public authorities exercised control upon the FITD’s intervention. The FITD’s governance structure does not include public authorities. Voluntary interventions pursue member banks’ private interests and do not follow any obligations imposed by Italian law. The Bank of Italy only exercised its prudential supervisory functions and did not have any power to force the FITD to intervene.

Second, the Court found that the Commission failed to show that the funds granted to Tercas were controlled by public authorities. In adopting the voluntary measure, the FIDT did not act under a public mandate. The measure originated from BPB’s initial proposal, and was unanimously adopted by the FIDT’s member banks. The funds granted to Tercas were provided ad hoc by the FITD’s member banks and in their sole interest.

The judgment may have important implications for the management of bank bail-outs. DGS’ voluntary support measures may not fall within the scope of State aid rules if they are adopted by the DGS’ member banks without any control from public authorities.

The ruling came after six other Italian regional banks, including Banca Etruria, had been put into costly and complex resolution procedures. This resulted in losses for approximately 200,000 shareholders and bondholders. This outcome could have been avoided if the FITD funds had been used. Following the judgment, the Italian government sped up the process to finalize a reimbursement plan to compensate some savers, which it is discussing with the Commission to ensure its compliance with EU State aid rules.[2]

[1]      Italian Republic and Others v Commission (Joined Cases T-98/16, T-196/16 and T-198/16) ECLI:EU:T:2019:167; Aid to Banca Tercas (Case SA.39451), Commission decision of December 23, 2015.

[2] See https://www.politico.eu/article/eu-commission-margrethe-vestager-italian-banking-fight-plays-into-euroskeptics-hands/.