IMPLEMENTATION LEVEL

National

AFFECTED FLOW

Inflow

ANNOUNCED AS TEMPORARY

No

NON-TRADE-RELATED RATIONALE

No

ELIGIBLE FIRMS

all

JUMBO

No

TARIFF PEAK

No
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Inception date: 25 May 2011 | Removal date: 23 Jun 2012
Still in force

Capital injection and equity stakes (including bailouts)

On 25 May 2011, the state of 'Niedersachsen' approved a capital injection of EUR 600 million (later reduced to EUR 500 million) into the bank Nord/LB.
 
The beneficiary is a major commercial bank with a balance of EUR 244.3 billion (para. 3, letter from the EC to Germany, Brussels 10.9.2009). Its activities are focused on the states of 'Lower Saxony, Saxony-Anhalt and Mecklenburg-Western Pomerania'. Nevertheless, Nord LB is present in the major trading centres like London, Singapore and New York (para. 5) The key areas of the bank are: 'investment, agricultural and real estate banking, corporate finance, ship and aircraft financing and private banking' (para. 4)
 
To comply with the increased minimum tier 1 capital rate (CT1) of 9 per cent from June 2012, a second recapitalization has been undertaken: (para. 25, letter from the EC to Germany, Brussels 25.7.2012)

  • EUR 400 million capital increase by the state of 'Niedersachsen'
  • EUR 480 million conversion of silent participations into tier 1 capital by the state of Bremen
  • EUR 51 million conversion of silent participation of the Savings bankinto tier 1 capital by the state of Bremen

 
Furthermore, the states of 'Niedersachsen' and 'Sachsen-Anhalt' provide a EUR 14.4 billion contingent asset guarantee, protecting the bank from losses of the mezzanine tranche (4.93 per cent) and therefore amounts to a maximum of EUR 0.7 billion.
 
EC finds that:The capital measures allow Nord/LB to obtain capital in a financial and economic crisis situation where it would have been very difficult to find such capital on the market.' (para. 105)
 
The EC further states that: 'the capital measures would not have been provided by a market economy investor. The capital measures must therefore be regarded as providing an advantage to Nord/LB. Moreover, that advantage is selective since it only benefits one bank. (para. 105)
 
Finally, the EC concludes: 'Given that NORD/LB is and will be active in the financial sector, which is open to intense international competition, any advantage from State resources to the bank has the potential to affect intra-Union trade and to distort competition.' (para. 106).
 
A state measure in the GTA database is assessed solely in terms of the extent to which its implementation affects the extent of discrimination against foreign commercial interests. On this metric, the state aid proposed here is discriminatory.

AFFECTED COUNTRIES

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