Italian Bank Rescue Plan Upheld by Top EU Court

The court rejected the European Commission’s contention that a scheme to rescue a failing Italian bank by using Italy’s deposit guarantee fund was a form of illegal state aid.

(AP Photo/Mindaugas Kulbis, File)

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

Sitting as the grand chamber, the European Union’s top court dismissed the European Commission’s contention that the rescue plan for the Banca Tercas violated EU rules over state aid.

The high court upheld a 2019 ruling by the lower European General Court that overturned the commission’s finding that the bank scheme constituted unfair government aid.

In 2014, the bank was saved by relying on 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 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. The high court agreed. Last October, an advocate general for the high court also issued a legal opinion rejecting the commission’s case.

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 argued the General Court’s standard of proof for state aid was disproportionately higher for a private entity than for a public one. It also argued 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.

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