The Belgian protection scheme for shareholders of financial cooperatives is being scrutinised by the European Commission. On 3 April, the executive opened an in-depth investigation to determine whether it is in line with EU state aid rules.

The guarantee scheme covers capital paid by the cooperative’s shareholders, in a maximum amount of €100,000 and provided that the shares were issued before 10 October 2011, the date on which the cooperative guarantee scheme entered into force. It is more specifically the extension of this guarantee scheme that creates concerns for the Commission because it could help them attract or maintain capital that otherwise would not have been at their disposal. The Belgian state could make advance payments should funds from participants be insufficient to finance the guarantee mechanism. This represents an economic advantage that competitors operating without such support do not enjoy, in breach of EU state aid rules.

The EU executive was apparently alerted when one of the financial cooperatives of the ARCO group, currently under liquidation procedures following the dismantling of Dexia group, in which it was a 14% shareholder, applied, in October 2011, for protection under the scheme. Belgium had to put up€1.5 billion in guarantees.

“The extension of the Belgian deposit protection scheme to shareholders in cooperatives has both direct and indirect beneficiaries. The Commission will assess, in particular, whether the indirect effects of the scheme are compatible with EU state aid rules”, said Competition Commissioner Joaquín Almunia.