Brussels, 25 July 2012
State aid: Commission approves restructuring aid for German bank NORD/LB
The European Commission has concluded that around €3.3 billion of restructuring aid granted to the German Landesbank NORD/LB to meet its capital requirements are in line with EU state aid rules. The Commission found that the restructuring plan submitted by the German authorities ensures that the bank is viable, that the public authorities that granted the aid receive adequate remuneration for it and that the bank uses the public support to strengthen its capital in the coming years by not paying dividends to shareholders and not making acquisitions.
Commission Vice-President in charge of competition policy, Joaquín Almunia, said: "The case of NORD/LB demonstrates that the Commission is able to take a quick decision when a bank has received capital support merely to meet the new capital requirements. Of course that implies that the bank is sound and the national authorities work constructively with the Commission to achieve a tenable restructuring plan."
NORD/LB has demonstrated that it will comply with the applicable capital requirements at all times, both in a base and in a stress case scenario. Should the stress case scenario materialise, the bank has the option to activate an adequately remunerated contingent capital relief measure in the form of a guarantee put at its disposal by the German Länder of Lower Saxony and Sachsen-Anhalt, as part of the approved restructuring plan.
The Commission found that the bank will shift its business mix towards more stable business segments, will remain solvent at all times and by the end of the restructuring period will achieve an appropriate return on equity.
Moreover, NORD/LB adequately contributes to the costs of the restructuring by divesting profitable subsidiaries and through a cost-optimisation programme. The dilution suffered by the shareholders following the recapitalisation, together with a ban on dividend and hybrid coupon during the period of restructuring, also contribute to an appropriate burden sharing of the restructuring costs.
Finally, a reduction of total assets by 15% by 2016 in comparison with the end of 2011, restrictions of some business activities, divestments of non-core subsidiaries and behavioural commitments sufficiently limit the distortions of competition brought about by the aid.
German Norddeutsche Landesbank Girozentrale (NORD/LB) is a German Landesbank which serves as the central institution of the savings banks in the German Länder of Niedersachsen, Sachsen-Anhalt and Mecklenburg-Vorpommern.
In the context of a stress test and a subsequent capital exercise conducted by the European Banking Authority (EBA) in 2011 and 2012 respectively, NORD/LB received recapitalisation measures totalling to €2.6 billion in order to strengthen its core tier-1 capital (CT1) in accordance with the EBA definition (see EBA/REC/2011/1).
As the measure procured NORD/LB capital that it would not have obtained on the market the measures constitute state aid in the meaning of EU rules. In line with its Communication on restructuring in the financial sector during the crisis (see IP/09/1180), the Commission requested a restructuring plan, while acknowledging that the need for recapitalisation stemmed from the EBA requirements and not from an intrinsic problem of the bank, as NORD/LB was able to remain stable and profitable during the crisis.
The non-confidential version of the decision will be made available under the case number SA.34381 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.