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State aid: Commission approves restructuring aid to Austrian bank ÖVAG

Commission Européenne - IP/12/982   19/09/2012

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European Commission

Press release

Brussels, 19 September 2012

State aid: Commission approves restructuring aid to Austrian bank ÖVAG

The European Commission has concluded that restructuring aid granted by Austria to the Austrian bank Österreichische Volksbanken AG (ÖVAG) is in line with state aid rules. Public support was granted to ÖVAG in the form of capital injections totalling €1 250 million, liquidity guarantees totalling €3 000 million and an asset guarantee of €100 million. The Commission found that the restructuring plan is suitable to make the bank viable in the long term, ensures that the bank and its shareholders sufficiently contribute to the cost of restructuring and minimises distortions of competition.

Commission Vice President in charge of competition policy Joaquín Almunia said: "ÖVAG's restructuring plan addresses the problems which led to the bank's difficulties in the past. In particular, I welcome the bank's objective to focus on its core business of providing services to the local and regional Volksbanken. Making sure that banks that received state aid throughout the EU change their business model will help build a healthier financial sector, made of viable banks that do not need taxpayers' money."

ÖVAG is the central institute of the Austrian Volksbanken, which are local credit cooperatives. Under the restructuring plan, the bank will limit the scope of its activity to its core role of providing liquidity management services and intermediation in accessing capital markets to the Volksbanken. This will significantly reduce its balance sheet and the complexity of its business model. The activities which caused the bank's problems or which do not fall within this scope will be run down or divested. In particular, the bank will cease its real estate activities and parts of its corporate financing and investment portfolios. Moreover, it will divest all non-core subsidiaries. Over the last three years, the bank already divested a number of activities, including the majority of its banking operations in Central and Eastern Europe.

The Commission's investigation found that these measures are likely to restore the bank's viability in the long term without continued state support. To ensure an appropriate burden sharing, the bank, its initial shareholders and private investors holding hybrid capital will contribute to the restructuring as much as possible. To achieve this, ÖVAG committed to cost reductions and an adequate remuneration for both the capital measures and the asset guarantee. In order to reduce the distortions of competition brought about by the state aid, ÖVAG committed to an acquisition ban and a price leadership ban for its online banking activities. The divestment of non-core activities will also contribute to reducing distortions of competition.

Background

ÖVAG is the central institute of Austria's Volksbanken (local credit co-operatives), providing them with centralized back-office services, liquidity management and financial products.

In 2009 Austria granted ÖVAG a €1 000 million capital injection and a guarantee covering a €3 000 million liquidity facility on the basis of the Austrian bank rescue scheme, approved by the Commission in December 2008 (see IP/08/1933). In November 2010, Austria submitted a restructuring plan and the Commission opened an in-depth investigation in December 2011, because it had doubts whether this plan would be sufficiently far-reaching and could actually be implemented (see IP/11/1522).

The non-confidential version of the decision will be made available under the case number SA.31883 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

Contacts :

Antoine Colombani (+32 2 297 45 13)

Maria Madrid Pina (+32 2 295 45 30)


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