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Brussels, 09 February 2001

Commission and Germany start focused discussions on guarantees to public banks

A delegation led by Mr Caio Koch-Weser, State Secretary at the German Federal Ministry of Finance, and Mr Peer Steinbrück, Minister of Finance of the Land Nordrhein-Westfalen, met today with EU Competition Commissioner Mario Monti to discuss the issue of State aid in the form of guarantees to public banks in Germany. The meeting took place in the context of the process started by the letter of 26 January 2001 (see IP/01/119) by which the Commission informed the German authorities that it considers these guarantees in as far as they affect the competitive position of the banks and trade between Member States to be State aid which is incompatible with Community law. « I welcome the fact that the discussion with Germany on the guarantees has started again after quite some precious time has been lost since we entered into talks last February, » Mr Monti said. « This is a constructive development and I hope that it will provide an impetus for making rapid progress in the context of the procedure launched to bring the guarantee schemes concerned into line with EU rules. »

The Competition Commissioner made it clear that there are three different - and quite separate - issues:

  • The question of 'Anstaltslast' and 'Gewährträgerhaftung', the two guarantee instruments in favour of Germany's public law credit institutions. « In this respect the letter of the Commission's sent on 26 January 2001 should be seen as an incitement which became necessary in the light of the complaint directed against these two guarantee instruments and the fact that the Commission has not yet received from Germany any proposal on how to solve the guarantee problem as such », Mr Monti declared.

  • The cases of equity transfers to a number of Landesbanken, including the transfer of the « Wohnungsbauförderungsanstalt » (WfA) a public entity for the promotion of social housing of the Land Nordrhein-Westfalen to Westdeutsche Landesbank Girozentrale (WestLB) in 1991. « The Commission's decision ordering the recovery of the state aid element contained in this transaction must be executed independently of the matter of 'Anstaltslast' and 'Gewährträgerhaftung' », the Commissioner stressed.

  • The application of the Transparency Directive to the banking sector. Where certain banks are entrusted with the provision of public services and receive compensation in whatever form - by the State for the costs of such services, and where such banks also have activities outside their public service obligation, then they fall under the scope of the Transparency Directive as revised in July 2000 (see IP/00/763) and have to operate separate accounts.

The German delegation today presented a proposal for splitting WestLB, Germany's biggest public bank, into two entities: one which would carry out public service activities and one that would take over the commercial activities. By doing so, the German authorities hope to settle the issue of the guarantees as far as WestLB is concerned.

Mr Monti, in a first brief reaction, called this proposal « a step in the right direction, as regards the guarantees for WestLB and the application of the Transparency Directive to that bank. I hope that it can lead to a solution as far as WestLB is concerned. » However, he also pointed out that it does, at first sight, raise two questions in particular:

  • The question where to make the split, that means, which activities can be regarded as belonging to the "public" part and which as belonging to the "private" one. The split proposed seems to pose problems, because it would maintain preferential financing of all savings banks in Nordrhein-Westfalen.

  • The proposal mentions a guarantee ("Patronatserklärung") of the « public » part in favour of the « private » one. At first sight such a guarantee seems to extend « Anstaltslast » and « Gewährträgerhaftung » to that entity and this could not be accepted.

The Commissioner also stressed that the proposal does not provide possible solutions for a number of other issues:

  • It does not address the question of the guarantees for the savings banks as well as for the other Landesbanken.

  • It asks for exempting the savings banks from the application of the Transparency Directive without stating any reason for this.

  • Finally, it does not represent any step forward in the question of the equity transfers in favour of WestLB and other Landesbanken.

« We will now enter into a process of clarification of this particular proposal between my services and the German authorities», Mr Monti said. « But however important the WestLB case is, we have to move forward with the whole issue of 'Anstaltslast' and 'Gewährträgerhaftung'. We must find a simultaneous, overall solution for all cases where there is a distortion of competition as a result of these guarantees. Such a solution could comprise a variety of options to suit the different financial institutions. As long as the minimum requirements necessary to remedy the distortion are met, the Commission is neutral as to any particular model. »

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