Brussels, 23 July 2014
State aid: Commission approves restructuring aid for National Bank of Greece
The European Commission has found the restructuring plan of the National Bank of Greece (NBG) to be in line with EU state aid rules. The measures already implemented and those envisaged in the future will enable the bank to fully restore its long term viability, while limiting the distortions of competition brought about by the state aid granted.
Commission Vice President in charge of competition policy Joaquín Almunia said: "Through the restructuring plan, NBG will focus its activities on the strong Greek and Turkish banking operations and improve their efficiency. This will ensure that the bank can continue financing the Greek economy on a sustainable basis."
Since 2008, Greece and the Hellenic Financial Stability Fund (HFSF) have granted repeated capital and liquidity support to NBG. The Commission temporarily approved the public support measures in July 2012 and opened an in-depth investigation to assess the compatibility of the measures with EU state aid rules (see IP/12/860). Greece notified the restructuring plan for NBG in June 2014.
NBG has already started to implement significant rationalisation measures such as a voluntary staff retirement scheme, salary cuts, branch closures and further cost cutting initiatives in Greece and South Eastern Europe. The restructuring plan continues this effort. It provides for a further restructuring of international operations and Greek non-core activities and a reinforcement of Greek banking operations, mainly through a rationalisation of operating expenses, a reinforcement of the net interest income and prudent risk management. NBG will decrease its shareholding in its Turkish subsidiary Finansbank, which will strengthen the capital position of NBG, but it will retain a majority shareholding. Finansbank has been steadily profitable over the last years. The implementation of these commitments will be monitored by an independent trustee.
The Commission assessed the plan under its state aid rules for the restructuring of banks during the crisis (see IP/09/1180, IP/10/1636 and IP/11/1488). In its assessment, the Commission has taken into account the fact that most of NBG's difficulties do not come from excessive risk taking but primarily from the sovereign debt crisis and the related exceptionally protracted and deep recession which started in 2008. In view of those exceptional circumstances, the aid is less distortive and creates less moral hazard than large aid for financial institutions which had accumulated excessive risks. The Commission therefore concluded that a relatively limited downsizing of NBG would be sufficient to limit distortions of competition and, in particular, requested no downsizing of the Greek banking activities.
Shareholders and subordinated debt holders have contributed significantly to reducing the amount of capital aid that had to be injected by the state, respectively through their participation in the successive capital increases and in the liability management exercises. Moreover the state aid injected did not bail out historical shareholders who have been almost completely diluted.
The Commission therefore concluded that the restructuring plan was in line with its rules on banking restructuring during the crisis.
On 29 April 2014 and 9 July 2014, the Commission had already approved the restructuring plans of Eurobank and Alpha Bank, respectively (see IP/14/495 and IP/14/790). The Commission has also approved today the restructuring plan of Piraeus Bank (see IP/14/870).
NBG provides universal banking services mainly in Turkey and in Central, Eastern and South-Eastern Europe, with a focus on Greece, where it is the second largest bank in terms of deposits. In 2009 and 2011, Greece subscribed NBG preference shares for €1.35 billion, and the HFSF invested €9.8 billion in 2012. In June 2013 NBG raised €1.1 billion of private capital which was used to partially repay the HFSF. In May 2014 NBG raised a further €2.5 billion on the market.
The common EU rules on state support for the restructuring of banks during the crisis are aimed at ensuring that aided banks become viable in the long term. That is to say, state funding that merely serves to keep unsustainable banks artificially alive without restructuring them is not allowed. Moreover, the rules ensure that the aid is limited to the minimum necessary to achieve this result without a waste of taxpayers' money and that the distortions of competition brought about by the subsidies, which give aided banks an advantage over their competitors who received no such state aid, are mitigated.
The non-confidential version of this decision will be made available under the case number SA.34824 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.