Commission approves State aid for Romania’s investment and development bank

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The European Commission has approved, under EU State aid rules, Romanian measures for the national investment and development bank Banca de Investiții și Dezvoltare S.A. (‘BID’).

In January 2023, the Commission approved a Romanian measure to set up BID with an initial capital of €1.6 billion. The measures approved today consist of a capital increase of €1 billion, partly funded by the Recovery and Resilience Facility (‘RRF’), as well as a three-year extension of the State guarantee backing BID’s operations. The Commission has also approved an extension of the scope of the bank’s activities beyond those authorised in 2023.

The Romanian measures

Romania notified to the Commission its plans to strengthen BID’s capacity to support investment and economic development by increasing its capital base by €1 billion and prolonging the existing State guarantee, which would have expired in 2028, until 31 December 2032.

The capital increase will include a contribution of €100 million financed through an RRF loan. The extension of the State guarantee will continue to support BID’s ability to mobilise financing for projects and beneficiaries facing difficulties in accessing sufficient funding from the market, such as innovative SMEs and start-ups with limited collateral, as well as and public infrastructure projects in areas such as health, education, public utilities and renewable energy requiring long-term financing.

Romania also notified an extension of BID’s mandate. In line with the role of National Promotional Banks, BID provides loans, guarantees and equity financing across a range of sectors, including renewable energy, broadband, local infrastructure, ports and airports, with a particular focus on small and medium-sized enterprises and innovative startups.

The broadened mandate will allow BID to expand its activities to support scale-up companies and projects in strategic sectors, including defence, high-tech manufacturing, high-tech knowledge-intensive industries and cybersecurity.

The Commission’s assessment

The Commission assessed the measures under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the EU (TFEU), which enables Member States to support the development of certain economic activities under certain conditions.

In particular, the Commission found that:

• The measures facilitate the development of economic activities across a range of sectors that continue to face financing gaps and difficulties in obtaining sufficient funding from the market. Through loans, guarantees and equity financing, BID supports investments in areas including renewable energy, broadband, local infrastructure, ports and airports, while the extension of its remit will allow it to address financing needs in additional strategic sectors, such as defence, high-tech manufacturing, high-tech knowledge-intensive industries and cybersecurity.
• The measures are necessary and appropriate to improve access to finance for companies that encounter difficulties in securing adequate financing from private investors. The additional capital resources, the extension of the State guarantee and the broader mandate will enable BID to continue addressing identified market failures and supporting economically viable projects and businesses that would otherwise face financing constraints.
• The measures are proportionate, as BID’s interventions remain limited to areas where market failures have been identified and the financing provided will not exceed what is necessary to achieve the intended policy objectives. In particular, BID’s market economy operator activities are restricted to sectors and market segments where the applicable State aid framework recognises the existence of market failures, thereby justifying the intervention of BID as national promotional bank.
• The measures contain sufficient safeguards to avoid undue negative effects on competition and trade in the EU. In particular, BID’s financing activities will be subject to mechanisms designed to prevent the crowding out of private investors where market financing is available. Furthermore, the Bank’s activities remain subject to monitoring and reporting requirements, and the safeguards governing its operations are aligned with the Commission’s recent decisional practice concerning National Promotional Banks and Institutions.

On this basis, the Commission approved the Romanian measures under EU State aid rules.

Background

According to Article 107(1) TFEU, a measure shall constitute State aid if the following four cumulative conditions are met: (i) the measure has to be granted by Member States through State resources, (ii) the measure has to confer a selective economic advantage to certain companies, (iii) the advantage has to distort or threaten to distort competition, and (iv) the measure has to affect trade between EU Member States.

EU State aid rules permit Member States to support National Promotional Banks when market failures result in an insufficient supply of financing by private operators, or private markets would not provide financing on comparable terms.

BID was set up in 2022 to complement commercial banks, promote economic development and help undertakings that struggle to obtain funding.

All investments and reforms entailing State aid included in the national recovery plans presented in the context of the RRF must be notified to the Commission for prior approval, unless covered by one of the State aid block-exemption rules.

The Commission assesses measures entailing State aid contained in the national recovery plans presented in the context of the RRF as a matter of priority and continues to provide guidance and support to Member States throughout the implementation and completion of their recovery and resilience plans. At the same time, the Commission makes sure in its decision that the applicable State aid rules are complied with, in order to preserve the level playing field in the Single Market and ensure that the RRF funds are used in a way that minimises competition distortions and do not crowd out private investment.

For more information

The non-confidential version of the decision will be made available under the case number SA.122354 in the State aid register on the Commission’s 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 Competition Weekly e-News.