Brussels, 25 July 2013
State aid: Commission approves Banco Gallego's restructuring plan
The European Commission has concluded that the restructuring plan of the Spanish bank Banco Gallego is in line with EU state aid rules, in particular because it ensures its return to long-term viability without continued state support as a part of Banco Sabadell, while foreseeing a sufficient own contribution to the cost of restructuring.
According to its restructuring plan, Banco Gallego will be sold to Banco Sabadell, one of the top-five banking groups in Spain. Banco Sabadell will carry out an in-depth restructuring of Banco Gallego and integrate it in its own business.
The Commission concluded that the total cost of the sale, including other support measures, was lower than the cost of simply winding down the bank. The buyer was selected in a competitive tender process which resulted in the best offer in the market, thereby minimising the amount of aid needed. Banco Gallego will be fully integrated into Banco Sabadell and will cease to exist as an independent entity.
The Commission considers that the proposed restructuring measures will allow Banco Gallego to return to long term viability through integration with a sound credit institution. Also, the bank's transfer of assets to the asset management company "Sareb" further limits the impact of additional impairments on the riskier assets and helps to restore viability.
Moreover, the absorption of losses borne by Banco Gallego and its stakeholders will ensure, together with the restructuring measures, a satisfactory burden-sharing and an adequate own contribution to the financing of the restructuring costs. In addition, the disappearance of Banco Gallego as a standalone entity will further limit the distortions of competition brought by the aid.
Banco Gallego is a Spanish commercial bank operating mainly in the region of Galicia, created by the merger of Banco 21 and Banco Gallego in 1998. It is owned by NovaCaixaGalicia (NCG), whose original 50% stake rose to 100% from 29 January 2013 after an absorption of losses and a capital increase. Banco Gallego traditionally focused on SMEs and premier banking (personal and private banking) segments. However, in recent years it went through a period of geographical expansion and broadened its business areas, especially in the real-estate development sector. The total amount of state aid already received by Banco Gallego in form of impaired asset measures as well as the aid disbursed in the context of the sale to Banco Sabadell, will amount up to approximately €867 million in form of capital injections or equivalent measures and up to €806 million in guarantees.
The non-confidential version of this decision will be made available under the case number SA.36500 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.