Brussels, 11 March 2014
State aid: Commission approves restructuring aid for Danish bank FIH
The European Commission has found that state aid granted to the Danish bank FIH to deal with impaired assets is in line with EU state aid rules. In particular, the aid will be appropriately remunerated and FIH's restructuring plan will enable the bank to become viable in the long term without unduly distorting competition in the Single Market.
In July 2012, Denmark proposed an impaired assets measure in favour of FIH, in order to solve emerging liquidity problems. The measure consisted of a transfer of property finance assets from FIH to a new subsidiary of FIH Holding (Newco), subsequently purchased by the Danish Financial Stability Company. The state aid involved amounts to DKK 2.25 billion (approximately €300 million).
The Commission opened an in-depth investigation in June 2012, in order to verify in particular whether the aid was limited to the minimum necessary and whether the bank's contribution to the costs of restructuring was appropriate (see IP/12/723). At the time the Commission also approved the aid on a temporary basis, until approval of a restructuring plan in line with EU state aid rules.
In January 2013, Denmark submitted a restructuring plan, which was amended and finalised in June. The restructuring plan provides for a reorganisation of the bank which will focus on SME lending. This will enable the bank to return to long term viability without further state support.
The plan also ensures an appropriate remuneration for the impaired assets measure. In particular FIH made a one-off payment in December 2013 and committed to annual payments - all measures leading to a remuneration equivalent to 10% of the capital relief of the bank. This will ensure that the aid is limited to the minimum and mitigate the distortions of competition induced by the aid.
On this basis, the Commission has concluded that the aid measures granted are in line with the Commission's communications on state aid for banks during the crisis.
FIH is a limited liability company regulated by the Danish banking legislation. On 31 December 2012 FIH had a balance sheet of DKK 60.76 billion (€8.1 billion) and risk weighted assets of DKK 29.84 billion (€3.98 billion). At the time of the impaired assets measure FIH was the sixth largest Danish bank.
In 2011 and 2012, FIH held government-guaranteed bonds amounting to approximately DKK 41.7 billion (€5.6 billion), which constituted 50% of the bank's balance sheet. With these bonds maturing in 2012 and 2013 FIH was about to face a funding problem. The Danish regulator estimated that there was a relatively high risk that FIH would be unable to comply with liquidity requirements, as a result of its expected inability to obtain funding from the open markets, caused mainly by a decline in FIH’s credit rating and unfavourable capital market conditions. Danish authorities put in place the aid measure in order to address those emerging liquidity problems.
The non-confidential version of the current decision will be made available under the case number SA.34445 in the State Aid Register on the competition website. New publications of state aid decisions are listed in the State Aid Weekly e-News.