Wednesday

6th Jul 2022

States can force bank recapitalisation, EU court says

  • (Photo: bundesbank.de)

An EU state can take shares in a bank against shareholders' consent when the country's and the EU's financial stability is at stake, the European Court of Justice ruled on Tuesday (8 November).

The court ruled in favour of the Irish government, which in 2011 recapitalised the Irish Life and Permanent Group (ILPG) bank by pumping in €2.7 billion, thus taking a 99.2 percent share in the bank.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The government later injected another €1.3 billion in the bank.

The government acted through a direction order obtained in court to bypass the opposition of ILPG's shareholders, who later took the case to the Irish High Court and then to the ECJ.


"The direction order was the only means of ensuring the recapitalisation of ILP that was necessary to prevent the failure of that financial institution and thereby to forestall a serious threat to the financial stability of the EU," the judges argued.

At the time of the near takeover of ILPG by the Irish state, Ireland was under an €85-billion international bailout plan launched in December 2010 to prevent the collapse of the banking system.

Although there was a "clear public interest in ensuring a strong and consistent protection of shareholders and creditors," the judges said, "that interest cannot be held to prevail in all circumstances over the public interest in ensuring the stability of the financial system established by the EU treaties".

Analysis

Deutsche Bank crisis tests EU regulation

EU finance ministers insist that the bank's losses are not a systemic threat, but they revive the debate about the safeguards put in place after the financial crisis.

Green crime-fighting boss urgently required, key MEP says

The European Parliament approved last week a non-binding resolution on illegal logging, calling to extend the EU public prosecutor's mandate to also cover environmental crime. The lead MEP on the file has called for urgent implementation.

News in Brief

  1. Turkey signs Nato protocol despite Sweden extradition row
  2. European gas production hit by Norway strike
  3. EU Commission told to step up fight against CAP fraud
  4. Ukraine needs €719bn to rebuild, says PM
  5. Germany records first monthly trade deficit since 1991
  6. Pilots from Denmark, Norway, and Sweden strike
  7. Report: EU to sign hydrogen deal with Namibia
  8. Israel and Poland to mend relations

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online
  2. Nordic Council of MinistersNordic ministers write to EU about new food labelling
  3. Nordic Council of MinistersEmerging journalists from the Nordics and Canada report the facts of the climate crisis
  4. Council of the EUEU: new rules on corporate sustainability reporting
  5. Nordic Council of MinistersNordic ministers for culture: Protect Ukraine’s cultural heritage!
  6. Reuters InstituteDigital News Report 2022

Latest News

  1. 'World is watching', as MEPs vote on green finance rules
  2. Turkey sends mixed signals on Sweden's entry into Nato
  3. EU Parliament sued over secrecy on Nazi MEP expenses
  4. Italy glacier tragedy has 'everything to do' with climate change
  5. The Digital Services Act — a case-study in keeping public in dark
  6. Report slams German opposition to new child sexual abuse rules
  7. Is China a challenge to Nato? Beijing responds
  8. ECB announces major green shift in corporate bond-buying

Join EUobserver

Support quality EU news

Join us