Brussels, 22/08/2013 (Agence Europe) - On Thursday 22 August, the European Commission gave the go-ahead to changes to the restructuring plan in Germany for regional bank Norddeutsche Landesbank Girozentrale (NORD/LB) that is the central bank for building societies in the regions of Lower Saxony, Saxony Anhalt and Western Mecklenburg Pomerania.
The Commission says the structural commitments and additional safeguards provided by Germany mean that the state aid of €2.6 billion for the restructuring plan complies with the Single Market rules and this remains the case after the amendments to the terms of the so-called Fürstenberg hybrids, a set of four tranches of tier-1 instruments held by sundry investors (Fürstenberg hybrids) (see EUROPE 10663).
Shortly before the Commission's 2012 decision, NORD/LB had amended the terms of the Fürstenberg hybrids; an act which was not brought to the Commission's attention when the 2012 decision was taken. The change of the terms of the Fürstenberg hybrids is in contradiction with the principle of burden-sharing because the bank, at its own initiative, surrendered the possibility to retain a part of its future profits, which otherwise could have contributed to covering part of its restructuring costs. The bank thus reduced the total amount of own funds. In order to remedy the effect of the changes of the hybrid contracts and to avoid a revocation of the Commission's approval of the restructuring plan, Germany notified amended commitments. These provide, among other things, for additional divestments and a prolongation of the acquisition ban by a year and a half, until end 2016. In addition, Germany committed to reducing the balance sheet by an additional amount if the asset guarantee is activated by the bank.
The Commission says that the amended commitments are such that they will boost NORD/LB's own capital and cover the payment of coupons to owners of Fürstenberg hybrids. (MB/transl.fl)