Impaired assets such as non-performing loans (“NPLs”) continue to pose significant problems across the EU. When possible solutions are being considered, “bad banks” or similar impaired asset relief measures are often discussed. However, if they involve support by the State such measures need to be compliant with a set of EU law provisions. This article aims to clarify which interventions are considered to be State aid, and to give an overview of the compatibility conditions that apply to State aid measures. A brief explanation is also given concerning the recent changes brought about by the EU’s new recovery and resolution framework introduced by the Banking Recovery and Resolution Directive (“BRRD”).