State Aid and Deposit Guarantee Schemes. The CJEU Decision on Tercas and the Role of DGSs in Banking Crises

Abstract

In Tercas, the General Court of the European Union decided on the actions for annulment brought against the Commission’s Decision that deemed the measures taken in 2014 by the Italian Fondo Interbancario di Tutela dei Depositi (FITD) in favor of Banca Popolare di Bari to support its acquisition of Cassa di Risparmio di Teramo, a small regional bank operating in the south of Italy, to be State aid. In this respect, the EU competition authority’s opposition to the use of the deposit guarantee scheme (DGS) was critical for the Italian Republic because, at the time of the decision, four regional banks were in the process of being bailed out by the FITD, but where ultimately instead put under resolution, with a dramatic impact on savers’ confidence.

The judgment is certainly relevant for many reasons. First, the ruling represents a benchmark in the use of a DGS after the introduction of Directives 2014/59/EU and 2014/49/EU as it implicitly defines the principles according to which a national DGS can intervene in a banking crisis without breaking EU laws on State aid. Secondly, the decision overrules the interpretation presented by the European Commission regarding the role played by the Bank of Italy in the operation carried out by the FITD for the benefit of Tercas.