Brussels, 18th December 2008
The European Commission has approved, under EC Treaty state aid rules, a capital injection and a risk shield that the Freistaat Bayern, a German region, intends to grant to BayernLB. The support aims at reinforcing the core capital basis of BayernLB and to ensure the refinancing capability of BayernLB. The Commission found the measures appropriate to stabilise the bank, in line with its Guidance Communications on state aid in the financial crisis (see IP/08/1495 and IP/08/1901). The aid is necessary to avoid a serious disturbance in the German economy. The measures are limited in time and scope to the minimum necessary to restore the financing, require an adequate fee level and provide safeguards to minimise distortions of competition. They are therefore compatible with Article 87.3.b. of the EC Treaty. Germany has committed itself to submitting a preliminary comprehensive restructuring plan for BayernLB within four months and the final plan within six months.
Competition Commissioner Neelie Kroes said: "The Commission's very rapid decision supports the German authorities efforts to stabilise financial markets. In return, I expect the bank to now concentrate on restructuring and come up with a sound and comprehensive plan very soon."
On 4 December 2008, Germany notified two measures to be granted by the Freistaat Bayern, a German Land, to BayernLB. BayernLB is a German Landesbank and an international wholesale bank. It is owned by the Freistaat Bayern and the Association of the Bavarian savings banks (Sparkassenverband Bayern)
The measures are necessary as BayernLB needs to enhance its core capital and thereby to ensure BayernLB's capability to obtain refinancing on the market. To this end, BayernLB obtains a core capital increase of €10 billion through one of its owners, the Freistaat Bayern. This will reduce the shareholding of the savings banks significantly. The capital increase will be implemented in several instalments. As a second measure the Freistaat Bayern provides a risk shield for part of the ABS portfolio of BayernLB for an amount of €4.8 biilion. The objective of this risk shield is to avoid further write downs on the ABS portfolio which would weaken the capital position of BayernLB.
The measures comprise elements of state aid but contain several provisions aimed at ensuring its adequacy and proportionality under the EU state aid rules, in accordance with the Commission's guidance documents (see IP/08/1495 and IP/08/1901). In particular, the capital measure will be linked to a series of behavioural commitments such as passing credit to the real economy.
In addition, Germany committed itself to submitting a preliminary restructuring plan for BayernLB within four months. Key elements of the restructuring plan have already been presented and include a concentration on core competences and regions as well as downsizing. Notwithstanding this, the Commission decision covers a period of six months until submission of the final restructuring plan. This period would be automatically prolonged should Germany submit a restructuring plan for BayernLB until the Commission takes a decision on this plan.
The non-confidential version of the decision will be made available under the case number N 615/2008 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.