State aid: Commission temporarily approves rescue of BayernLB's Austrian subsidiary Hypo Group Alpe Adria and extends in-depth investigation
The European Commission has authorised under EU state aid rules the rescue of BayernLB's subsidiary Hypo Group Alpe Adria (HGAA) by Austria and the Land Carinthia for reasons of financial stability. At the same time, the Commission is extending its in-depth investigation, opened on 12 May 2009 (see IP/09/742 ) into the total aid received so far by both banks. HGAA will have to provide an in-depth restructuring plan by end-March 2010. BayernLB has to revise the restructuring plan it has already submitted to take due account of the new rescue aid to HGAA. The Commission has therefore decided to extend the scope of its in-depth investigation to cover the new aid. In the meantime, the Commission approved the measures temporarily for a maximum period of up to six months as urgent rescue aid to remedy a serious disturbance in the Austrian economy (Article 107(3)(b) of the Treaty on the Functioning of the European Union - TFEU).
Competition Commissioner Neelie Kroes said: “ I expect both BayernLB and Hypo Group Alpe Adria to submit credible and substantiated restructuring plans to address the challenges emerging from this rescue operation and to bring the aid measures fully in line with EU state aid rules."
The HGAA rescue
In the autumn of 2009 an expert assessment established that HGAA would require significant write-downs reducing its capital ratio to less than the regulatory required minimum. After intense discussions between the owners and Austria, an agreement was reached on 14 December 2009 that Austria would acquire all shares of HGAA for a symbolic price of 1 euro from each of its three owners, BayernLB, the Austrian insurance group GRAWE and the Land Carinthia. In addition, Austria and the owners decided to provide capital (Austria up to €450 million, Carinthia €200 million, GRAWE €30 million and BayernLB €825 million) and liquidity. BayernLB has to write down the full book value of HGAA and has furthermore agreed to provide additional capital and funding.
The banking group
HGAA is an international finance group with a balance sheet total of €43 billion and risk weighted assets of €32.8 billion as of 31 December 2008. Currently, HGAA has 8100 employees.
HGAA is presently 67.08% owned by BayernLB. The other shareholders are: GRAWE-Gruppe (Grazer Wechselseitige Versicherung AG) with 20.48%, and the Kärntner Landesholding controlled by the Land Carinthia, with 12.42%. A further 0.02% of the group is owned by employees (Hypo Alpe Adria Mitarbeiter Privatstiftung).
Previous state aid
Already in December 2008, BayernLB obtained rescue aid in the form of a capital injection of €10 billion and a risk shield of €4.8 billion, endorsed by the Commission on 18 December 2008 (see IP/08/2034
). Also in December 2008 HGAA received a €0.7 billion capital injection from BayernLB. In addition, HGAA received a €0.9 billion capital injection from Austria on the basis of the Austrian banking emergency rescue scheme. The scheme had been approved by the Commission in December 2008 (see IP/08/1933
On 29 April 2009 Austria submitted a viability plan for HGAA and Germany notified a restructuring plan for BayernLB.
As HGAA is a systemic bank in Austria and a number of countries in South-Eastern Europe, the Commission has approved the new aid measures for a maximum period of up to six months. During this period, the Commission will evaluate in detail whether the new state support is fully in line with EU state aid rules and in particular whether the restructuring plan will be apt to restore the viability of HGAA. The Commission will also investigate whether the bank's owners sufficiently participate in the cost of restructuring. Moreover, regarding BayernLB, the Commission needs to investigate on the basis of a revised restructuring plan whether BayernLB will be able to restore its viability and whether adequate measures for limiting market distortions are in place.
The non-confidential version of the decision will be made available under the case number C 16/2009 in the State Aid Register
on the DG 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
EUROPA - Press Releases - State aid: Commission temporarily approves rescue of BayernLB's Austrian subsidiary Hypo Group Alpe Adria and extends in-depth investigation