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Brussels, 21 September 2010
Statement on WestLB and BayernLB possible merger announcement and its repercussion on State aid investigations
The Commission services were informed yesterday by the German authorities about the intention of BayernLB and WestLB to examine the possibility of a merger.
Vice President responsible for Competition Policy, Joaquín Almunia, notes that for both banks a formal investigation procedure is ongoing to examine large amounts of state aid received by them since the start of the financial crisis. For both banks the Commission has approved various state interventions on a temporary basis. In both cases, the Commission has opened an investigation into the measures and into the respective restructuring plans.
Until now, WestLB has received a risk shield of € 5 bn, a capital injection of € 3 bn, and an asset relief measure including further aid which is currently under assessment. BayernLB has received a capital injection of € 10 bn and a risk shield of € 4.8 bn. While for WestLB the Commission had already once taken a final decision, in May 2009, the case has been opened again because WestLB required an additional impaired asset measure.
Also BayernLB investigation needed to be extended because of the bail out by Austria of BayernLB's subsidiary Hypo Group Alpe Adria.
Currently the Commission is assessing whether the restructuring plans are apt to address the structural problems that led to the banks' demise. The Commission must ensure that the restructuring plans restore the long-term viability of the banks, provide for an adequate burden sharing as well as for sufficient measures to limit the distortions of competition caused by the aid. If the discussions between the banks will lead to a decision to merge, the Commission will need to assess, in the context of the ongoing state aid investigations, whether these conditions are met.
"Given that both banks are under restructuring process, a merger itself may not automatically result in restoration of their long-term viability," Vice President Almunia said, adding: "The Commission would need to assess whether the merged entity would be viable in the long-term and whether the measures to ensure burden sharing and to limit competition distortions are adequate". These State aid investigations would continue whether the merger was notifiable at the national or EU level.