29th Sep 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.

IEA says: Go green now, save €11 trillion later

The International Energy Agency finds that the clean energy investment needed to stay below 1.5 degrees Celsius warming saves $12 trillion [€11.3 trillion] in fuel expenditure — and creates double the amount of jobs lost in fossil fuel-related industries.


How do you make embarrassing EU documents 'disappear'?

The EU Commission's new magic formula for avoiding scrutiny is simple. You declare the documents in question to be "short-lived correspondence for a preliminary exchange of views" and thus exempt them from being logged in the official inventory.

Latest News

  1. EU women promised new dawn under anti-violence pact
  2. Three steps EU can take to halt Azerbaijan's mafia-style bullying
  3. Punish Belarus too for aiding Putin's Ukraine war
  4. Added-value for Russia diamond ban, as G7 and EU prepare sanctions
  5. EU states to agree on asylum crisis bill, say EU officials
  6. Poland's culture of fear after three years of abortion 'ban'
  7. Time for a reset: EU regional funding needs overhauling
  8. Germany tightens police checks on Czech and Polish border

Stakeholders' Highlights

  1. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  2. International Medical Devices Regulators Forum (IMDRF)Join regulators, industry & healthcare experts at the 24th IMDRF session, September 25-26, Berlin. Register by 20 Sept to join in person or online.
  3. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  4. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  5. International Medical Devices Regulators Forum (IMDRF)Join regulators & industry experts at the 24th IMDRF session- Berlin September 25-26. Register early for discounted hotel rates
  6. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch

Stakeholders' Highlights

  1. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations
  2. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  3. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  4. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  5. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  6. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics

Join EUobserver

Support quality EU news

Join us