Brussels, 18/07/2011 (Agence Europe) - A capital injection of €10 billion, an asset relief measure with an aid element of €20 billion and liquidity guarantees amounting to €145 billion: these are the components of aid from the German government for the restructuring of the banking group Hypo Real Estate, which the European Commission approved on Monday 18 July. In exchange, the group will liquidate 85% of its commercial activities and only its core bank, Pbb, will continue to operate in two strategic fields - real estate finance and public investment finance. This drastic reduction of activities will make it possible to guarantee the bank's long-term viability and remedy the competition distortions caused by the large amounts of aid paid to this banking group, which was nationalised in 2009, by the German authorities over the course of the financial crisis.
In view of the amounts in question, this is one of the largest cases of state aid to financial institutions agreed to during the course of the financial crisis, said Vice-President of the European Commission Joaquín Almúnia. At a press conference, he also took stock of negotiations for the restructuring plans of three other German regional banks - HSH Nordbank, Westdeutsche Landesbank (WestLb) and Bayern Landesbank (BayernLb).
The Commission decided that the commitments under the HRE restructuring plan were satisfactory: - the group will progressively shed all of its commercial activities, with the exception of those of its core bank Pbb Deutsche Pfandbriefbank (Pbb). At the end of 2011, this bank's balance sheet will be less than 15% of the group's entire balance sheet at the end of 2008. With considerably reduced staff, branch network and geographic cover, Pbb will focus on two strategic activities - real estate finance and public investment finance - which will target assets eligible for mortgage or public sector bonds. Pbb's activities will be based on stable finance and improved internal audit systems. All of the bank's other activities, such as budget finance, infrastructure finance, operations on the capital markets and asset management activities, will be wound down. - The group's other main subsidiary, the Irish bank DEPFA Bank Plc., will be run down and will not develop any new commercial activities. - The group's impaired assets, which have been transferred to the winding-down institution FMS-Wertmanagement AöR (FMS-WM), will be liquidated.
As regards the three other regional banks for which negotiations are underway with the German authorities, Almunia said that an agreement had been concluded for the bank HSH Nordbank (Schleswig-Holstein and Hamburg) and that he is hoping for a formal decision of the college in September. With the exception of “a few details” still to be settled, a decision is also believed to be “imminent” (September or October) for the Westdeutsche Landesbank, for which a new restructuring plan was notified by the German authorities on 30 June. The bank will be wound down after being divided into two separate parts, which will be transferred, sold or wound down: the only entity which may continue to exist is the Verbund, the commissioner stated. On the other hand, Almunia has for the moment described as “unconvincing” the restructuring plan for the Bayern Landesbank, particularly as regards the bank's long-term viability under the model laid out and measures of the plan to compensate for competition distortions. Unless a “viable model” is presented in the next few days, it will not be possible to reach an agreement on this subject before the end of July, the deadline for the four cases to be resolved. (F.G./transl.fl)