March 20, 2019 / 12:35 PM / 5 months ago

EU's top regulator under fire over Italy bank rescue decision

BRUSSELS (Reuters) - The European Union’s top antitrust regulator is facing calls to resign after a “historic” court ruling involving a small Italian lender upended Brussels’ approach to bank rescues and prompted calls for compensation.

FILE PHOTO: European Competition Commissioner Margrethe Vestager talks to the media at the European Commission headquarters in Brussels, Belgium March 20, 2019. REUTERS/Yves Herman

In a blow to EU competition commissioner Margrethe Vestager, EU judges ruled on Tuesday that Italy’s plan for the rescue of Tercas bank five years ago was legal, overturning the Commission’s earlier decision that had forced the recouping of financial aid to the lender.

Vestager said she had not decided yet on whether Brussels will appeal the judgment and acknowledged the case could impact the way the EU antitrust regulator operates in future.

Italy’s Foreign Minister Enzo Moavero Milanesi said Rome will consider seeking compensation from the Commission..

EU lawmakers said the ruling shows banking rules had been interpreted incorrectly and one of them called for Vestager’s resignation.

Vestager’s current mandate ends in October and the case could affect her ambitions for the next term. The Danish liberal politician is seen as a possible president of the next EU executive.

The head of the Parliament’s economic committee, Roberto Gualtieri, said the court ruling was “historic” and upheld the assembly’s softer interpretation of EU banking rules, against the “ideological and wrong” position of the EU commission.


Tercas’s 300-million-euro ($341 million) rescue plan was orchestrated by Italy’s deposit guarantee fund, the Fondo Interbancario di Tutela dei Depositi (FITD), a private entity which is meant to protect savers in case of bank failures.

Vestager has so far prohibited the use of such funds in bank rescues along with other financial resources primarily meant to address different problems.

“The tough line the European Commission has taken by labelling any such action to be illegal state aid has effectively ruled out to make use of that possibility,” said German EU lawmaker Markus Ferber, who leads the largest conservative grouping in the economic committee of the European Parliament.

Italy’s lawmaker Mario Borghezio, a member of the far-right League which is vying for being the largest party in the EU parliament after May elections, called on the Commission to force Vestager to quit.

After the dispute with Brussels over the rescue of Tercas, Italian authorities helped four other small banks in 2015 and then salvaged larger Banca Monte dei Paschi di Siena and two smaller Veneto lenders in 2017.

Those rescues were done under less favorable terms for the banks and their creditors, because of the EU’s rejection of the Tercas plan, the Italian banking association (ABI) said, urging the Commission to reimburse lenders and savers who lost money.

Vestager said the circumstances were different in those cases and they could not be seen as consequences of the handling of the Tercas rescue.

One of the bondholders who lost money in a subsequent banking rescue in Italy committed suicide.

The case could affect the Commission’s decisions on ongoing bank rescues, including those of Italy’s Carige and Germany’s NordLB.

And it could force a rethinking of an EU plan to set up a common mechanism to protect bank savers which currently assumes that national funds cannot be used for preventive bank rescues.

“They have to revisit,” Ferber said of the European Deposit Insurance Scheme (EDIS) plan, which already faces opposition from Germany and other wealthier EU states.

Reporting by Francesco Guarascio, editing by Louise Heavens and Elaine Hardcastle

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