European Commission - Press release
State aid: Commission approves amendment to Commerzbank restructuring plan
Brussels, 30 March 2012 – The European Commission has approved, under EU state aid rules, a modification to Germany's and Commerzbank's commitment to divest its largest subsidiary Eurohypo by the end of 2014. The commitment had been given in the context of Commerzbank's restructuring plan, approved by the Commission on 7 May 2009 (see IP/09/711). When it appeared that Eurohypo could not be divested because of its large funding needs and significant sovereign exposure, the German authorities proposed instead to run-off most of Eurohypo's activities on Commerzbank's own balance sheet and to prolong the acquisition ban until March 2014. The Commission found the proposed alternative in line with EU state aid rules, in particular because it will limit undue distortions of competition.
Commission Vice President in charge of competition policy Joaquín Almunia said: "Thanks to the good cooperation with the German authorities we were able to find a compromise which preserves the balance of the original Commission decision. The winding down of Eurohypo on the balance sheet of Commerzbank plus a prolongation of the acquisition ban are an adequate substitute to the divestiture of Eurohypo."
Germany and Commerzbank provided an updated catalogue of commitments. There will be a clear separation between Eurohypo's core and non-core activities. Non-core activities are public finance and parts of the commercial real estate (CRE) segment. Commerzbank will put the non-core activities in a fully separated restructuring unit which will not be allowed to write new business but will concentrate on the orderly winding down of the activities over time. At the same time Commerzbank may continue a small part of Eurohypo's CRE business along with its own activities in four selected core countries, i.e. Germany, France, Poland and the United Kingdom. These activities will be reduced to €25 billion by 31 December 2013 and will remain curtailed until 31 December 2015. The implementation of the commitments will be monitored by an independent trustee.
The new commitments ensure that Eurohypo exits the market. The fact that Commerzbank is continuing limited Eurohypo's CRE business is compensated by the prolongation of the acquisition ban for all companies, including non-financial ones, for two additional years until the end of March 2014. This substantial extension ensures that Commerzbank will not acquire attractive businesses brought to the market through the general restructuring in the sector and allows other companies that did not receive state aid to buy such businesses. This will ensure that competition distortions are kept to the minimum.
Commerzbank is a large German bank with a pro-forma balance sheet total of around €660 billion. Commerzbank is a universal bank active in both commercial and investment banking, but focuses on retail clients and corporations (with an emphasis on SMEs). Geographically, Commerzbank's main activities are in Germany and in Central and Eastern Europe.
In 2008 and 2009, Germany provided capital to Commerzbank in the form of €16.4 billion of silent participations (perpetual hybrid tier-1 capital instruments under German law) and of €1.8 billion in the form of the purchase of common shares, through which SoFFin acquired a blocking minority stake of 25% plus one share in Commerzbank.
The aid was granted under a German scheme for aid to banks during the crisis, approved by the Commission on 12th December 2008 (see IP/08/1966). This scheme allowed the recapitalisation of fundamentally sound banks if the remuneration and exit incentives met the criteria laid down in the scheme, in accordance with the Commission's Recapitalisation Communication (see IP/08/1901).
On 7 May 2009, the Commission had approved the restructuring plan of Commerzbank (see IP/09/711), including the divestment of Eurohypo, Commerzbank's largest subsidiary active in public finance and commercial real estate, by the end of 2014. However, the German authorities informed the Commission in September 2011 that Eurohypo could not be divested due to its large sovereign exposure and its funding gap.
The non-confidential version of the decision will be made available under the case number SA.34539 in the State Aid Register on the DG Competition website. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News