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State aid: Commission opens in-depth investigation into aid package for German bank Hypo Real Estate

Commission Européenne - IP/09/712   07/05/2009

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IP/09/712

Brussels, 7th May 2009

State aid: Commission opens in-depth investigation into aid package for German bank Hypo Real Estate

The European Commission has opened under EC Treaty State aid rules an in-depth investigation into state support measures for German bank Hypo Real Estate. This is a first step towards finding a viable long-term solution, in close contact with the German authorities. Hypo Real Estate Holding AG (HRE) obtained rescue aid in the form of a state guarantee of €35 billion, endorsed by the Commission on 2 October 2008 (see IP/08/1453). Because this measure continues to be necessary for the bank to ensure its financing, Germany has notified a prolongation of the guarantee together with accompanying measures for HRE. The opening of an investigation is common for state interventions of this magnitude and will ensure legal certainty for the companies concerned. It also gives interested parties the possibility to submit their comments. It does not prejudge the outcome of the procedure.

Competition Commissioner Neelie Kroes said: “In view of the difficult situation of Hypo Real Estate and the large amount of aid involved, the Commission has decided to carry out an in-depth investigation into the aid package for Hypo Real Estate in order to ensure legal certainty and allow interested third parties to give their views."

Hypo Real Estate Group (HRE group) has its headquarters in Munich, Germany. It has a balance sheet total of around €400 billion and consists mainly of the following companies: Hypo Real Estate Holding AG, Hypo Real Estate Bank AG, DEPFA Deutsche Pfandbriefbank AG as well the Irish DEPFA Bank plc. The banks of the HRE group belong to one of the largest issuers of covered bonds (Pfandbriefe).

Currently HRE group is active in: Commercial Real Estate Finance, Public Sector & Infrastructure Finance and Capital Markets & Asset Management. It has business in Europe, Asia, North America and South America.

On 2 October 2008, the Commission approved rescue aid in form of a €35 billion state guarantee for two liquidity lines (see IP/08/1453) in line with the EU rules on rescue aid (see MEMO/04/172). In addition, HRE has received state aid in the form of guarantees amounting to €52 billion provided by the Financial Market Stabilization Fund (SoFFin) under a German banking rescue scheme, approved by the Commission on 12 December 2008 (see IP/08/1966).

In line with the Commission's decision on the rescue aid, Germany notified on 1 April 2009 a restructuring plan for HRE. This notification temporarily extends the legality of the €35 billion state guarantee until the Commission has finalised its assessment. The detailed investigation will evaluate whether the planned measures are capable of restoring the long-term viability of the bank, whether state support is limited to the minimum necessary, and whether measures should be put in place to minimise potential distortions of competition created by the aid.

The investigation will also cover the acquisition of 20 million newly-issued HRE shares by SoFFin on 30 March 2009 and the prolongation of the €52 billion guarantees granted under the German banking rescue scheme. It might possibly include an additional capital injection by SoFFin.

The opening of a formal investigation procedure does not prejudge whether the measures concerned are in line with the EU State aid rules. It is a necessary step to ensure legal certainty for the aid beneficiaries and their business partners and provides an opportunity to take account of comments from interested parties to improve the measures.


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