3rd Feb 2023

EU approves largest state aid plan in union's history

  • Ornate ceiling at RBS headquarters: the company was once synonymous with prudent banking (Photo: duncan)

The European Commission on Monday (14 December) sanctioned a record state aid plan for the UK's Royal Bank of Scotland (RBS).

"We're talking about a very, very large amount of public aid here, between £60-100 billion (€67-111bn)," said commission competition spokesman Jonathan Todd while announcing the decision to journalists. "This is the largest amount of state aid ever received in the EU's history."

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 scale of support measures for RBS is clear when compared to figures currently being bandied about at a UN climate conference in Copenhagen. EU leaders on Friday agreed to provide €7.2 billion in EU "fast-start" environmental aid for developing countries over the next three years.

Divestments contained in the restructuring plan for the British bank – one of the largest in Europe – will prevent the build up of market distortions as a result of the UK government aid, said the competition watchdog.

A global credit shortage last year saw European governments rush to provide bank recapitalisations and guarantee schemes in a bid to prevent bankruptcies in the systemically important financial sector.

RBS was one of the largest European firms teetering on the verge of collapse, largely the result of aggressive, debt-fueled expansionary activity in recent years, which included the takeover of certain operations within Dutch-bank ABN Amro in late 2007.

In October 2008 the bank received £20 billion (€22 billion) from the UK government in return for giving the state a 70 percent stake in RBS. But the move was dependent on commission approval of a restructuring plan, eventually submitted in June of this year.

Last month London announced details of a second recapitalisation for the bank – this time of £25.5 billion (€28.05 billion) – as well as details of the government's protection scheme for toxic assets.

Divestment details

Divestments crucial to Monday's approval include a large chunk of the bank's mid-corporate and SME lending activities – amounting to roughly five percent of the UK market – together with insurance, transaction management and commodity trading operations.

Commission agreement was also facilitated by a reduction from earlier state aid forecasts, with the bank now also taking responsibility for a larger proportion of the potential losses as a result of writedowns on toxic assets.

"This case has been one of the most complex the commission has had to deal with during the financial crisis," said competition commissioner Neelie Kroes in a statement after the decision.

The Dutch politician - set to take over in the newly created "digital agenda" portfolio after European Parliament hearings in January - said the bank's restructuring plan was an important step towards securing its long-term viability.

But she warned that the commission would be keeping a close eye on the divestment progress.

"Be aware that in case RBS does not deliver on its balance sheet reduction targets by 2013, the commission will be able to intervene again and more divestments will be required," she said.

Austrian parallel

Independently on Monday the Austrian government announced plans to nationalise Hypo Group Alpe Adria, a unit of German public-sector bank BayernLB.

The Austrian government's acquisition of a 67 percent stake in Hypo Alpe Adria for the symbolic price of €1 is designed to stop the bank falling into bankruptcy, and is a clear sign of the ongoing turmoil in the European financial sector.

Hawkish ECB rate-rise 'puts energy transition at risk'

The European Central Bank raised interest rates by another 0.5 percent to a 14-year high, and expects to hike rates by another half percent in March. But what does that mean for the green transition?

Polish backpedal on windfarms put EU funds at risk

Draft legislation in Poland aimed at relaxing some of Europe's strictest laws surrounding onshore wind-turbines has been derailed by a surprise last minute amendment, which could put Poland back on a collision course with the EU.


More money, more problems in EU answer to US green subsidies

Industrial energy-intense sectors, outside Germany and France, will not move to the US. They will go bust, as they cannot compete in a fragmented single market. So to save industry in two member states, we will kill the rest?

Latest News

  1. Greece faces possible court over 'prison-like' EU-funded migration centres
  2. How the centre-right can take on hard-right and win big in 2024
  3. Top EU officials show Ukraine solidarity on risky trip
  4. MEPs launch anonymous drop-box for shady lobbying secrets
  5. Hawkish ECB rate-rise 'puts energy transition at risk'
  6. MEPs push for greater powers for workers' councils
  7. How Pavel won big as new Czech president — and why it matters
  8. French official to take on Islamophobia in EU

Stakeholders' Highlights

  1. Party of the European LeftJOB ALERT - Seeking a Communications Manager (FT) for our Brussels office!
  2. European Parliamentary Forum for Sexual & Reproductive Rights (EPF)Launch of the EPF Contraception Policy Atlas Europe 2023. 8th February. Register now.
  3. Europan Patent OfficeHydrogen patents for a clean energy future: A global trend analysis of innovation along hydrogen value chains
  4. Forum EuropeConnecting the World from the Skies calls for global cooperation in NTN rollout
  5. EFBWWCouncil issues disappointing position ignoring the threats posed by asbestos
  6. Nordic Council of MinistersLarge Nordic youth delegation at COP15 biodiversity summit in Montreal

Stakeholders' Highlights

  1. Nordic Council of MinistersCOP27: Food systems transformation for climate action
  2. Nordic Council of MinistersThe Nordic Region and the African Union urge the COP27 to talk about gender equality
  3. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  4. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe
  5. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos
  6. European Committee of the RegionsRe-Watch EURegions Week 2022

Join EUobserver

Support quality EU news

Join us