State aid: Commission approves market conform asset protection scheme for banks in Greece


(Etienne Martin, Unsplash)

This article is brought to you in association with the European Commission.

The European Commission has found Greek plans aimed at supporting the reduction of non-performing loans of Greek banks to be free of any State aid.

The Commission found that, under the asset protection scheme (known by the name of “Hercules”), the Greek State will be remunerated in line with market conditions for the risk it will assume by granting a guarantee on securitised non-performing loans.

If a Member State intervenes as a private investor would do, and is remunerated for the risk assumed in a way a private investor would accept, such interventions do not constitute State aid. The Commission therefore concluded that the Greek measure does not involve State aid within the meaning of the EU rules.

Commissioner Margrethe Vestager, in charge of competition policy, said: “I welcome that with the Greek government we have a found a market conform solution to tackle the stock of non-performing loans weighing on the balance sheets of Greek banks. The scheme we approved today is another good example of how Member States can help banks clean up their balance sheets without granting aid or distorting competition.

“Hercules” is designed to assist banks in securitising and moving non-performing loans off their balance sheets. Under the scheme, an individually managed, private securitisation vehicle will buy non-performing loans from the bank and sell notes to investors. The State will provide a public guarantee for the senior, less risky notes of the securitisation vehicle. In exchange, the State will receive a remuneration at market terms. The objective is to attract a wide range of investors and to support the banks in their ongoing efforts to reduce the amount of non-performing loans on their balance sheets.

The Commission’s assessment showed that the State guarantees will be remunerated at market terms according to the risk taken, i.e. in a manner that would be acceptable for a private operator under market conditions. This is in particular ensured by the following elements:

  •  First, the risk for the State will be limited since the State guarantee only applies to the senior tranche of the notes sold by the securitisation vehicle. An independent rating agency approved by the European Central Bank will determine the rating of the senior tranche.
  •  Second, the State guarantee on the senior tranche will only become effective, if more than half of the non-guaranteed and risk-bearing riskier tranches have been successfully sold to private market participants. This will ensure that the risk distribution of the tranches is tested and confirmed by the market before the State assumes any risk.
  •  Third, the State’s remuneration for the risk taken will be market conform. The guarantee fee will be based on a market benchmark and correspond to the level and duration of the risk the State takes in granting the guarantee. This means that the guarantee fee paid will increase over time in line with the duration of the State’s exposure. This fee structure, in addition to the appointment of an external servicer, aims to increase the efficiency of the workout and likely recovery on the non-performing loans.


On this basis, the Commission was able to conclude that the measure is free of State aid within the meaning of EU State aid rules.



There are several possibilities for Member States to implement impaired asset measures to deal with non-performing loans in line with EU rules both with and without the use of State aid.

The Commission has developed a blueprint that provides practical, non-binding guidance to Member States for the design and set-up of impaired asset measures. The blueprint clarifies the permissible design of asset management companies (AMCs) receiving public support – like the special purpose vehicle in the present scheme – under the EU legal framework, in particular the Bank Recovery and Resolution Directive (BRRD), the Single Resolution Mechanism Regulation (SRMR) and EU State aid rules.

The choice of the type of intervention lies with the Member State and it is always the decision of the Member State whether to grant any State aid. The Commission, as the body responsible for EU State aid control, has to ensure that any measure implemented is in line with EU rules. If a Member State chooses to intervene as a private investor would do, then such an intervention would not constitute State aid and falls outside of EU State aid control.

In February 2016, the Commission approved, under EU State aid rules, an Italian guarantee scheme to facilitate the securitisation of non-performing loans (Fondo di Garanzia sulla Cartolarizzazione delle Sofferenze – GACS). The scheme, which is similar to the “Hercules” scheme approved today, was last prolonged on 27 May 2019. Up to mid-February 2019, the GACS scheme has removed approximately €63 billion (gross book value) of non-performing loans from the Italian banking system.

The non-confidential version of this decision will be made available under the case number SA.53519 in the State Aid Register on the competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.










the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

One for all? Are physicians prepared to deliver care to the LGBTQIA+ community?

Safer products: stepping up checks and inspections to protect consumers

3 reasons why AI won’t replace human translators… yet

Can we balance conservation and development? Science says yes

Would you let an AI vote for you?

United States: UN human rights office welcomes California moratorium on death penalty

Still recovering from devastating cyclones, Mozambique, in UN address, warns of global warming’s ‘nefarious consequences’

This is the environmental catastrophe you’ve probably never heard of

Inclusion, empowerment and equality, must be ‘at the heart of our efforts’ to ensure sustainable development, says UN chief

Giving humanitarian help to migrants should not be a crime, say MEPs

Here are three ways blockchain can change refugees’ lives

Disease slashing global meat output, cereals boom, bananas under watch: FAO

India’s agro-food sector has made strong progress, but a new policy approach is needed to meet future challenges, says new report by OECD and ICRIER

Tax crimes: special committee calls for a European financial police force

Juncker’s Investment Plan in desperate need for trust and funds from public and private investors

The refugee crisis as a young Nigerian doctor sees it

These 5 countries plan to slash their CO2 emissions. But how will they do it?

Kosovo elections: ‘Most significant change’ in 12 years, Security Council hears

Is academia losing its chance to capitalize on technology?

This Danish scheme is offering free kayak rides… for picking up trash

Why #Wherearethewomen? is an $11 trillion question

Donor countries set international standard for preventing sexual exploitation, abuse, and harassment in development sector

The current devaluation of primary health care professionals

Let us keep ‘their spirit of service alive’: Guterres leads tributes to UN workers who died in Ethiopia crash

Europe divided: 30 years on from the fall of the Berlin Wall

Newly-elected Nigerian UN General Assembly President pledges focus on ‘peace and prosperity’ for most vulnerable

European Semester 2019 Spring Package: Commission issues recommendations for Member States to advance sustainable and inclusive economic growth

Ethical education as an obligatory course in medical curriculum

‘We must fight terrorism together’ without sacrificing legal and human rights, declares UN chief

Mobile young people create the European labour market of tomorrow

Public opinion misled by the Commission on air transport safety

Lagarde’s metamorphoses, not a laughing matter

These deepwater fish farms could help natural stocks recover

Will Turkey abandon the refugee deal and risk losing a bonanza of money?

Amid ongoing fighting in northeast Syria, hundreds cross Iraqi border in search of safety

Trump enrages the Europeans and isolates the US in G7

“The markets have moved on renewables, policy makers must keep up”, A Sting Exclusive by Erik Solheim, Head of UN Environment

The EU Consumer Policy on the Digital Market: A Behavioral Economics View

Varna (Bulgaria) awarded European Youth Capital 2017

France pushes UK to stay and Germany to pay

Brexit may finally not really happen; The Brits have second thoughts

How much time has the ‘European Union of last chance’ left?

European Agenda on Migration four years on: Marked progress needs consolidating in face of volatile situation

EU unveils plan to accelerate Capital Markets Union ahead of London’s departure from the bloc

‘Growing alarm’ over Fall Armyworm advance, with cash crops ‘under attack’ across Asia

The three biggest challenges for India’s future

If we can build the International Space Station, ‘we can do anything’ – UN Champion for Space

Britain declares trade war on mainland Europe

Central Africa: Security Council concerned by ‘grave security situation’, calls for better agency cooperation

Every year, South Korea comes to a standstill for an exam marathon

The time for cities to get smart is now

Spring 2019 Standard Eurobarometer: Europeans upbeat about the state of the European Union – best results in 5 years

COP21 Breaking News_03 December: There is a new draft agreement on the negotiating table

From UN Assembly podium, Central African Republic leader appeals for lifting arms embargo

Maros Sefcovic Canete European Commission Energy

Better late than never? Commission runs now to fight energy dependency on Russia with the sustainable energy security package

Everybody against Japan over yen’s devaluation

U-turns on Global Compact ‘reflect poorly’ on countries concerned: senior UN migration official

St. Vincent and the Grenadines breaks a record, as smallest ever Security Council seat holder

Will France vote for more or less Europe in the next presidential elections?

These are the challenges facing India’s most sacred river

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s