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Brussels, 16 December 2010

State aid: Commission carries out in-depth review of restructuring of Hungarian FHB

The European Commission has opened, under EU state aid rules, an in-depth investigation into the proposed restructuring of FHB, a Hungarian bank which benefitted from two aid measures provided by the State. At this stage, the Commission has doubts whether the aid was properly remunerated and not used for the expansion of the bank at the expense of its competitors. The opening of an in-depth investigation gives third parties the possibility to comment and does not prejudge the final outcome.

Commission Vice-President in charge of Competition policy Joaquin Almunia said: "The Commission needs to make sure that national support to banks respects the special State aid rules put in place during the crisis In this case, the remuneration paid by the bank for the capital provided by the state does not comply with the EU rules and the necessary safeguards to avoid unnecessary distortions of competition also do not seem to have been taken care of."

FHB benefitted from two aid measures in March 2009: a loan of around HUF 120 billion (app. €400 million) and a capital injection of HUF 30 billion (app. €100 million). Hungary took the view that the measures fell under existing national Liquidity and Recapitalisation banking schemes, approved by the Commission, and did not initially notify the measures for approval.

After an exchange of correspondence with the Commission, the Hungarian government submitted a restructuring plan for the bank in June 2010.

The Commission considers that the capital injection has not been granted in line with the criteria set in the guarantee and recapitalisation scheme (IP/09/253) and thus constitutes illegal aid in the sense that it should have received clearance before being granted. It notably exceeds the limit of 2% of risk weighed assts for recapitalizations that do not require notification1.

After a preliminary assessment of the plan, the Commission also has serious doubts that the remuneration paid by the bank to the State for the capital injection is sufficient to allow an appropriate own contribution to its restructuring. Furthermore, in view of FHB's expansion strategy and its recent acquisitions, the Commission is concerned whether sufficient measures were taken in order limit the distortions of competition caused by the aid. Finally, the Commission requires more information to underpin the claim that FHB will restore its long-term viability on the basis of the current plan.

The Commission will be publishing a summary of today's decision giving interested third parties one month to comment.

The non-confidential version of the decision will be made available under the case number N212/2010 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.

1 :

This changes after Jan 1, 2011, with all recapitalisation operations, irrespective of their size, needing notification (see IP/10/1636)

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