This decision is based on new commitments by Germany to split HSH Nordbank (HSH) into two parts and to sell the operational business without additional state aid. It enables the bank's core activities to remain in the market if the sale process is completed successfully and the resulting entity is viable. This follows the agreement in principle reached between Commissioner Vestager and German authorities in October 2015.
Commissioner Margrethe Vestager, in charge of competition, said: "Today's decision puts an end to the investigation into HSH Nordbank's state guarantee without granting more aid to the bank. The split and sale solution, as I already outlined in agreement with the German authorities in October, creates an opportunity to sell an important part of the bank. It paves the way for a privatised, viable business to emerge from the sale process."
The procedure was opened in June 2013 after HSH's risk shield, i.e. its asset guarantee, had to be re-increased from €7 billion to €10 billion. At that time, the Commission temporarily approved the aid but opened an in-depth investigation to assess whether the bank could restore its viability on the basis of additional and deeper restructuring measures.
Today's decision gives final approval to the €3 billion re-increase in the guarantee ceiling without approving any new State aid. Therefore, the Commission has assessed the measure under the State aid rules applicable at the time of notification of the aid measure in May 2013, i.e. before the 2013 Banking Communication entered into force in August 2013.
The decision enables the German authorities and the bank to launch a sale procedure from which a viable business could emerge. Should this not be possible, the bank will go into orderly wind-down and exit from the market.
In particular, under the decision the German authorities committed to:
1) Corporate split: HSH will be split into a holding company, taking over most of the guarantee fee payment obligations, and an operating subsidiary, which will continue the bank's current operations. This operation will have no impact on the level of the guarantee fee.
2) State aid free asset relief on market terms: HSH still suffers from depressed shipping markets and the consequently high levels of bad assets. Under the decision, the bank can sell at market value up to €6.2 billion in bad assets to its owners, the German Länder of Schleswig Holstein and Hamburg, and another €2 billion to the market. The sale of bad assets will allow the bank to improve the overall quality of its portfolio and, therefore, its risk profile. This asset relief involves no new aid since it will take place at market prices, as established through an independent value assessment.
3) State aid free sale of operating subsidiary: The German authorities committed to sell the operating subsidiary within an agreed deadline in an open, transparent and non-discriminatory tender process. To facilitate a sale, the subsidiary will undergo further restructuring. If the sale process results in a positive price offer or offers without the involvement of State aid, the Commission will assess the viability of the future entity resulting from the sale process. If the sale process triggers no such bids at a positive price and without State aid, or if the Commission concludes that the entity which would result from the sale is not viable, the sale cannot take place. In this case, the bank will cease new business activities and manage its assets with a view of winding them down.
The in-depth investigation was opened in June 2013 when HSH Nordbank's risk shield (asset guarantee) – originally approved by the Commission in September 2011 together with a capital increase – was re-increased from €7 billion to €10 billion.
- In September 2011, HSH Nordbank's guarantee had originally been reduced from €10 billion to €7 billion to lower the bank's high fee payments on the guarantee. This reduction was already taken into account in the original restructuring decision of 2011.
- However, because of the still depressed shipping markets, in May 2013 Germany notified the re-increase of the guarantee ceiling back to the original level of €10 billion. The Commission temporarily approved the aid in June 2013 but expressed doubts as to the restoration of the bank's long-term viability on the basis of the then submitted restructuring plan.
Today's final approval of the re-increase of the guarantee by €3 billion is taken on the basis of the rules applicable at the time of the notification in May 2013, i.e. the 2009 Restructuring Communication. This pre-dates the 2013 Banking Communication and the entry into force of the Bank Recovery and Resolution Directive (BRRD). This is because there is no new aid being granted to HSH. Any new state aid would have to be assessed under the BRRD and the Commission's 2013 Banking Communication.