ANNOUNCED AS TEMPORARYNo
Bailout (capital injection or equity participation)
On 20 February 2013, Lithuania informed the EC about a planned liquidation of AB Ukio Bankas. The formal notification followed on 29 May 2013. On 23 February 2013, the Lithuanian state deployed financial resources in this initiative.
Ukio bank is a commercial bank providing banking, financial, investment, life-insurance and leasing services (par. 5, letter from the EC to Lithuania, Brussels 14.8.2013) In the aftermath of the financial crisis, the quality of the bank's loan portfolio decreased over time, leading to over proportional systemic risk. (par. 8) As a result, on 18 February 2013, the Bank of Lithuania declared Ukio bank insolvent and revoked its license.
AB Siauliu Bankas finally took over assets and liabilities of Ukio bank. Approximately 80 per cent of Ukio bank's assets and liabilities were transferred to Siauliu bank. Because the liabilities exceeded the assets a state fund needed to provide liquidity to close the gap of EUR 231 million.
In this case, potential beneficiaries are Ukio bank as well as Siauliau bank. While Ukio is in the process of winding down, trade distortions are very unlikely. On the other hand Siauliu bank will remain in the market and it is therefore essential to analyse whether the takeover implied an unfair advantage that could potentially lead to trade distortions.
The EC states that: 'in order to ensure that no aid is granted to the buyer of a financial institution or parts of it, it is important that certain requirements are met, and in particular that:i) the sale process is open and non -discriminatory ii) the sale takes place on market terms iii) the State maximises the sale price for the assets and liabilities involved. (par. 46)
The EC finds that: 'The measure constitutes a clear advantage to the legacy business which will continue within Siauliu bank and would have not continued under normal market conditions.' (par. 59) The measure is therefore considered to distort competition (par. 61) and is 'likely to affect trade between Member States since the legacy business continues within Siauliau bank to compete on the Lithuanian banking market in which some competitors are subsidiaries and branches of foreign banks.'(par. 62)
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.
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