Brussels, 24 September 2010
State aid: Commission temporarily authorises additional state support for Hypo Real Estate and extends scope of ongoing investigation
The European Commission has temporarily authorised under EU State aid rules a transfer of approximately €200 billion of toxic and non-strategic assets into a winding-up institution, and additional State guarantees of up to €40 billion for the German bank Hypo Real Estate (HRE), for reasons of financial stability. The Commission will take a final view on the compatibility of these measures with EU state aid rules in the context of its ongoing investigation into the restructuring of HRE. The Commission has therefore extended the scope of the investigation to encompass the new measures.
“The huge transfer of impaired assets to a "bad bank" and the additional State guarantees should contribute once and for all to stabilising Hypo Real Estate. However, our temporary approval does not prejudge the Commission's assessment of the final terms of the transfer of the assets among other things. The new aid measures will be included in the ongoing in-depth investigation that can only be concluded when we can see the full picture of the restructuring. At this stage I still have doubts about the long-term viability of HRE. Before adopting a final decision on the restructuring plan I will closely examine the long term viability of the bank and the adequacy of the measures to limit distortions of competition and to ensure burden sharing," said Joaquín Almunia, Commission Vice President in charge of Competition Policy.
In October 2008, HRE group was severely affected by the financial crisis. In 2009, it was taken into state ownership. The bank has already benefited from State guarantees of €105 billion and State capital injections of approximately €7.9 billion.
Earlier this month, Germany notified two additional guarantees for HRE to be granted by SoFFin (Sonderfonds Finanzmarktstabilisierung), a German fund created to bailout the financial sector in the wake of the financial crisis. Both SoFFin guarantees, i.e. a guarantee of €20 billion ("liquidity guarantee") and a guarantee of up to €20 billion ("settlement guarantee") will expire at the end of December 2010 at the latest, according to the German notification. They will be used to cover liquidity needs.
Germany argues that there exists an acute risk of a liquidity shortage for HRE Group before 30 September 2010, i.e. before the transfer of assets to FMS Wertmanagement, the winding-up institution.
As regards the "settlement guarantee", the German authorities informed the Commission that this guarantee is needed in the context of the settlement procedures in connection with the transfer of assets to the winding-up institution.
The Commission temporarily authorises the two guarantees and the asset transfer as emergency aid in line with Article 107(3) (b) of the Treaty on the Functioning of the EU, which allows state aid to remedy a serious disturbance in the economy.
The Commission will take these measures into account in its assessment of Hypo Real Estate´s restructuring plan, which is ongoing (see IP/09/1708). The Commission currently still has doubts as regards the bank´s viability and doubts whether there are sufficient burden sharing measures and sufficient measures to limit distortions of competition.
Recently, Germany also notified a capital injection of SoFFin of up to approximately EUR 2.1 billion for HRE. This capital injection is not covered by today´s Commission decision. It will be included in the Commission´s overall restructuring aid investigation.
HRE is an internationally-active bank with its headquarters in Munich, Germany. It has a balance sheet total of around €385 billion. It is composed mainly of Hypo Real Estate Holding AG, pbb Deutsche Pfandbriefbank AG and the Irish DEPFA Bank plc.
On 1 April 2009, Germany submitted a restructuring plan for the bank to the Commission. On 7 May 2009, the Commission opened an in-depth investigation into state measures for the bank (see IP/09/712. On 13 November 2009, the Commission extended this investigation a first time to cover additional measures. With today's decision, the Commission has extended the scope of its investigation for the second time, to cover the two new guarantees and the asset transfer.
The non-confidential version of the decision will be made available under the case number C15/2009 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.