State aid recovery ends where private savings begin rules General Court in Arco judgment

December 2018

CPI EU News Column edited by Thibault Schrepel, Sam Sadden & Jan Roth (CPI) presents:

State aid recovery ends where private savings begin rules General Court in Arco judgment By Jan Blockx (University of Antwerp)¹

It has been more than 10 years since Lehman Brothers went bankrupt but the consequences of the financial crisis that ensued are still with us. In Belgium the crisis led to the collapse of two of the four main banks, Fortis and Dexia, which meant that small shareholders, who believed their investments were safe, sometimes lost their entire life savings. Dexia was a peculiar case: one of its main shareholders was Arco group, a cooperative holding with close ties to Flemish Christian-democrat organizations in Belgium.

Background

In the autumn of 2008, the European Union and Belgium introduced a number of measures to increase public confidence in the banking system. One of the promises the Belgian federal government made was to extend the deposit guarantee scheme (protecting bank account deposits up to a certain level from loss in case of a bank’s insolvency) to the shares of individuals in financial cooperatives. It took until October 10, 2011 for the Belgian government to formalize this promise in a Royal Decree which allowed financial cooperatives to opt in to such a form of financial protection. The three entities of the Arco group were the only financial cooperatives that did so: they made the necessary financial contributions until Decembe