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State aid: Commission approves aid measure to Austrian bank Hypo Tirol for enabling lending to real economy
Commission Européenne - IP/09/928 17/06/2009
Brussels, 17 th June 2009
The European Commission has approved, under EC Treaty state aid rules, a recapitalisation measure for Hypo Tirol, an Austrian bank, for ensuring lending to the real economy. The Commission found the measure to be in line with its Guidance Communications on state aid during the current financial crisis (see IP/08/1495 and IP/08/1901 ). In particular, the measure is limited in scope, requires an adequate remuneration and provides safeguards to minimise distortions of competition. It is therefore compatible with Article 87.3.b. of the EC Treaty that allows aid to remedy a serious disturbance in the economy of a Member State.
Competition Commissioner Neelie Kroes said: "Due to the current financial crisis, even banks that meet the regulatory solvency ratios may be required to reinforce their capital ratios to satisfy market expectations. The measure will enable Hypo Tirol to continue lending to the real economy, whilst avoiding disproportionate distortions of competition."
In April 2009 the Austrian authorities formally notified to the Commission their intention to recapitalise Hypo Tirol with €100 million via a guarantee on capital subscribed by private investors. The measure aims at ensuring an adequate capital ratio in the current crisis environment, and thereby preserving the bank's rating and possibilities for refinancing.
Hypo Tirol will issue tier 1 hybrid capital ( Partizipationskapital ) for an amount of €100 million which will be subscribed by private investors. The Land Tirol will issue a state guarantee for the principal capital amount subscribed by the investors for a period of ten years, which can be recalled if the bank fails.
The financial instruments have a dividend of 5% payable annually , provided the bank shows a profit. In order to ensure that as much capital as possible stays with the bank, the bank will not release reserves for the purpose of paying dividends . In addition, the bank has committed to a dividend restriction of 22.5% for helping the bank to maintain its capital ratio and to provide an exit incentive.
Hypo Tirol would raise the capital on the private market which indicates that it is perceived as capable of paying the 5% coupon on the capital. The measure has, however, de facto the same effect as a recapitalisation and is therefore assessed as such in terms of remuneration.
For the state guarantee, Hypo Tirol will pay to Land Tirol a progressively increasing guarantee fee, starting with 3.9% in the first three years, and rising to 6.6% in the tenth year.
The non-confidential version of the decision will be made available under the case number N214/2009 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 .