Brussels, 24th March 2009
State aid: Commission authorises amendment to French scheme to inject capital into certain credit institutions
The European Commission has approved, under the state aid rules of the EC Treaty, an amendment to the French scheme to inject capital into credit institutions which it approved on 8 December 2008 and 28 January 2009 (see IP/08/1900 and IP/09/158). The amendment relates to the terms governing the remuneration and reimbursement of the preference shares issued by the beneficiary banks in return for their recapitalisation by the State. The amended scheme is consistent with the Commission's recommendations on support measures for banks during the crisis (see IP/08/1495 and IP/08/1901). It provides in particular for adequate remuneration for the measures in question.
Competition Commissioner Neelie Kroes stated: “The amendment to the French recapitalisation scheme provides further encouragement for banks to buy back the preference shares and to limit the State’s involvement to the length of time strictly necessary to remedy the market disturbances. It is fully in line with the decisions approved by the Commission concerning other Member States.”
On 16 March the French authorities formally notified an amendment to the capital-injection scheme for certain credit institutions. The scheme had been approved by the Commission on 8 December 2008 (see IP/08/1900) and a first recapitalisation tranche had been released under it. It then underwent a first amendment (see IP/09/158) to give the beneficiary banks the option, as part of a second tranche of operations, of either issuing subordinated debt securities on the same terms as for the first tranche or issuing preference shares.
The second amendment, which has just been approved, relates to the terms governing the remuneration and reimbursement of the preference shares – terms which act as a stronger incentive for the beneficiary banks to buy back the issued preference shares at the earliest opportunity by increasing the progressivity of the amount to be reimbursed as the years go by. All the other features of the capital-injection scheme, as approved in the decisions of 8 December 2008 and 28 January 2009, remain unchanged.
The Commission has concluded that the amendment to the capital-injection scheme is an appropriate, necessary and proportionate means of restoring confidence to financial markets and enabling French banks to increase lending to the real economy.
In particular, the Commission has concluded that the level of remuneration of the preference shares provides adequate remuneration for the State and will ensure that state involvement in the banks' capital will be as brief as possible given that the amount to be reimbursed will increase significantly over time.
The non-confidential version of the decision will be made available under case number N 164/2009 in the State aid register on the DG Competition website once any confidentiality issues have been resolved. The latest publications of state aid decisions on the Internet and in the Official Journal are listed in the State Aid Weekly e-News.