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IP/09/818

Brussels, 20 Th May 2009

State aid: Commission approves Portuguese bank recapitalisation scheme to boost real economy

The European Commission has approved, under EC Treaty state aid rules, a Portuguese bank recapitalisation scheme intended to bolster financing of the real economy. The scheme is in line with the Commission’s guidance on support measures for credit institutions during the financial crisis (see IP/08/1495 and IP/08/1901 ). In particular, the measure is limited in time and scope. The Commission therefore concluded that the scheme is an adequate means to remedy a serious disturbance of the Portuguese economy and as such is compatible with Article 87.3.b of the EC Treaty.

Competition Commissioner Neelie Kroes said: "The Portuguese scheme provides effective means to strengthen confidence in the markets, while it at the same time establishes safeguards to limit distortions of competition. It demonstrates again the Commission's role to maintain a level playing field throughout Europe, despite the crisis."

On 5 November 2008 the Portuguese authorities notified to the Commission a recapitalisation scheme for credit institutions registered in Portugal. The measure would make available new capital to eligible credit institutions, whether financially sound or not, in exchange for instruments eligible as tier 1 capital (ordinary or preference shares). The measure is intended to enable credit institutions to strengthen their capital base against potential losses, in line with the recommendations of the Portuguese central bank to establish a tier 1 ratio not lower than 8%.

The size of the scheme is limited both as regards the overall amount (capped at €4 billion) and in respect of individual beneficiaries (maximum 2% of the credit institution's risk-weighted assets). The latter ceiling does not apply to credit institutions that are not fundamentally sound but they must submit a restructuring plan. Furthermore, they must comply with additional safeguards regarding in particular the level of price and an obligation not to distribute dividends. In any event, the recapitalised tier 1 ratio should not exceed 8% on the day the recapitalisation is implemented.

Under the scheme, the Portuguese authorities may also take part in recapitalisations provided that at least 30% of the capital is contributed by private investors and that the state capital is on equal terms with the private capital.

The measure is limited in time and scope, with entry windows of maximum six months. It requires beneficiaries to pay a market-oriented remuneration, aligned on the recommendations of the European Central Bank.


The distortive effect of the recapitalisation is minimised by various conditions, including fixed step-up clauses over time and increases in remuneration linked to dividend payments. In order to give credit institutions an incentive to redeem the state participation once the crisis is over and to allow a return to normal market functioning, a redemption price increasing over time is foreseen as from the third year. In addition, behavioural commitments such as on dividend policy or management remuneration are part of the requirements for access to the recapitalisation scheme.

The Commission therefore concluded that the scheme was an appropriate means to restore confidence in the creditworthiness of Portuguese credit institutions and to stimulate lending to the real economy.

The non-confidential version of the decision will be made available under the case number N 556/2008 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 .


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