Brussels, 12 May 2009
Competition Commissioner Neelie Kroes said: “The opening of the in-depth investigation will ensure legal certainty and provide third parties with an opportunity to comment on the measures. I am looking forward to continuing our constructive dialogue with the national authorities in order to find a viable and acceptable solution for the two banks."
BayernLB is Germany's second largest Landesbank and one of the biggest German banks with a balance sheet total of €422 billion in 2008. It is owned by the Free State of Bavaria and the Association of the Bavarian Savings Banks.
BayernLB is a commercial bank with regional focus on Germany and selected European countries. It provides banking services in the field of retail banking, corporate clients, money markets and securities as well as other financial services such as leasing.
Following the deterioration in the financial and economic environment in the aftermath of the insolvency of Lehman Brothers in September 2008, BayernLB's asset portfolio was downgraded significantly, which, combined with large write-downs on its asset-backed securities (ABS) portfolio, resulted in the need for additional regulatory capital in December 2008.
In this context the Free State of Bavaria agreed to strengthen the core capital of BayernLB by an amount of€10 billion and to provide a risk shied of €4.8 on the ABS portfolio of BayernLB, to prevent further write-downs.
The Commission approved these measures on 18 December 2008 (see IP/08/2034). In line with this decision, Germany notified on 29 April 2009 a viability strategy for BayernLB. This notification temporarily extends the approval of the €10 billion recapitalisation and the €4.8 billion risk shield until the Commission has finalised its assessment.
In addition to the measures by the Free State of Bavaria, in December 2008 the German Financial Markets Stabilisation Fund (SoFFin) granted a guarantee of €15 billion for liquidity loans to BayernLB on the basis of the German banking emergency rescue scheme, approved by the Commission in December 2008 (see IP/08/1966).
The Austrian financial group HGAA is a subsidiary of BayernLB. It is active in banking and leasing with a balance sheet of €43 billion. In banking, HGAA serves both corporate and retail customers and offers services ranging from traditional lending through savings and deposits to complex investment products and asset management services.
After large write-downs and losses, the bank received a capital injection of €0.7 billion from Bayern LB in 2008 in December 2008 which, in the view of the Commission, would not have been granted without the aid measure from the Free State of Bavaria to BayernLB. In addition, also in December 2008, HGAA received State aid in form of a recapitalisation of €0.9 billion from Austria on the basis the Austrian banking rescue scheme (see IP/08/1933).On 29 April 2009 Austria submitted informally a viability plan for HGAA.
The Commission will evaluate in detail whether the planned measures are capable of restoring the long-term viability of BayernLB and HGAA, whether the 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 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.
The text of today's decision, with any confidential information removed, will be published in due course in the Official Journal of the European Communities, together with a meaningful summary in all Community languages.
The non-confidential version of the decision will be made available under the case number 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.