EU Magistrate Finds No Fault With Italy Bank Rescue Plan

(CN) — A European Court of Justice magistrate found Thursday that Italy's rescue plan for a failing bank was legal and did not break European rules limiting government aid to private businesses.

Advocate General Evgeni Tanchev's nonbinding advisory opinion said the European General Court was correct in overturning the European Commission's finding that a rescue plan for the Banca Tercas constituted unfair government aid. He advised the

European Court of Justice, the European Union's highest court, to do the same.

The commission is appealing the General Court's 2019 ruling to the high court. The Luxembourg-based court uses advocates general to provide legal opinions to serve as guidance before making rulings. The opinions generally signal how the court will rule, but not always.

In 2014, the Tercas bank was saved through a scheme using Italy's deposit guarantee fund, the Fondo Interbancario di Tutela dei Depositi (FITD), a private consortium of banks that acts as a mutual benefit body. The rescue plan was devised after the Banca Popolare di Bari said it wanted to buy Tercas.

After examining the transaction, the commission charged that the FITD acted illegally on behalf of the Italian state and ordered Italy to recoup $340 million of funding that it said amounted to illegal state aid.

The commission is the EU's Brussels-based executive arm and it regulates the bloc's member states in many areas. Among its duties, the commission acts as an arbiter on whether member states provide unfair support to private businesses deemed to distort the EU's internal market and the goal of ensuring there's a level playing field across the union. States can challenge the commission's findings at the EU courts.

The General Court ruled last year that the FITD acted independently when it “adopted the measures for the benefit of Tercas” and that the state funds were not used to rescue the bank.

In 2012, the Banca Tercas was placed under special administration after Italy's central bank, the Banca d'Italia, found irregularities. When the Banca Popolare di Bari proposed buying Tercas, the Banca d'Italia said the FITD should cover Tercas’s deficit and that Tercas should be audited.

In 2014, the FITD decided to cover the ailing bank's deficits and grant it guarantees. The commission then examined the rescue plan and decided in December 2015 it violated state aid rules. The Italian government, the Banca d'Italia and the FITD appealed the commission's ruling to the General Court.

The commission argues the General Court's standard of proof for state aid was disproportionately higher for a private entity than for a public one. It also argues that the General Court erred by looking in a “piecemeal” fashion at the evidence in the dispute.

Courthouse News reporter Cain Burdeau is based in the European Union.

Follow @cainburdeau

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