Brussels, 27 November 2013
State aid: Commission approves resolution of French mortgage lender Crédit Immobilier de France
The European Commission has approved under EU state aid rules the orderly resolution of Crédit Immobilier de France (CIF) for reasons of financial stability. France will provide up to €28 billion of state guarantees to fund the orderly resolution. According to the resolution plan CIF will cease any new business and run off its assets over a period of up to 22 years. This will eliminate any distortions of competition caused by the state guarantee.
"The French authorities decided to resolve CIF because its business model is no longer viable. I am satisfied that the resolution plan of CIF will preserve financial stability while also minimising the burden for taxpayers and any distortions of competition resulting from the state aid that the bank received", said Commission Vice President in charge of competition policy Joaquín Almunia.
The Commission acknowledges that the refinancing guarantees in favour of CIF are necessary to preserve financial stability and avoid a knock-on effect on the French banking system. CIF pays an adequate remuneration for the guarantees provided by the French State and hence contributes to bearing the resolution costs. Moreover, dividend distributions to the shareholders are subject to strict limits in order to ensure a sufficient level of burden sharing.
The distortions of competition caused by the aid are minimal as CIF will exit the mortgage lending market altogether. In addition, CIF will respect a number of commitments during the run-off period, notably an acquisition and discretionary coupon ban.
The public support provided for the resolution of the bank is therefore in line with the EU's crisis rules on state aid to the financial sector.
Owned by the cooperatives "SACICAP", CIF is a mortgage lender which specialises in loans to low income households in France to promote access to home ownership. CIF has a market share of about 4% and its loan book amounts to roughly €35 billion. CIF finances itself almost exclusively on the wholesale market by means of covered bonds and unsecured issuance. Due to a drastic downgrade by Moody's in 2012 and against the background of the financial crisis, CIF faced serious refinancing problems. To avoid CIF's immediate default, France granted refinancing guarantees which were approved by the Commission on a temporary basis (see IP/13/148 and MEX/13/0814).
In agreement with CIF’s shareholders, the French government decided to resolve the bank, as the purely wholesale-financed business model is no longer viable. The French government submitted a resolution plan to the Commission, setting out the details of the run-off in accordance with EU state aid rules.
As of today, CIF will cease new lending and work out its assets over time. CIF will fund the run-off on the wholesale market with the help of the above-mentioned refinancing guarantees provided by the State.
The non-confidential version of the current decision will be made available under the case number SA.37029 in the State Aid Register on the 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