ANNOUNCED AS TEMPORARYNo
Capital injection and equity stakes (including bailouts)
Hypo Tirol Bank Aktiengesellschaft ("Hypo Tirol") is a credit institution in the form of a joint stock company. The Austrian federal state (Land) Tirol is, indirectly via the Landes Hypothekenbank Tirol Anteilsverwaltung, sole owner of the bank. Hypo Tirol is active in universal banking, insurance broking, in private banking and in the leasing business. Hypo Tirol is active in Tirol, in Italy (focusing on the region of Südtirol), and, as a niche bank, in Zurich, Munich and Vienna.
In 2008 Hypo Tirol employed in average 786 employees and its balance sheet amounted to approx. EUR 13 billion, with earnings before tax of approx. EUR 16.6 million. While Hypo Tirol is not amongst Austria's largest banks, it is positioned among the important Austrian banks and is, when measured by balance sheet size, the biggest bank in Western Austria. Due to the financial crisis Hypo Tirol was confronted with losses and downgrades in its credit business, forcing it to reinforce its capital position.
Hypo Tirol issues tier 1 hybrid capital (Partizipationskapital) in the amount of up to EUR 100 million, corresponding to 1.6% of the risk-weighted assets (RWA). This capital does not confer voting rights and is not cumulative in its payments to the subscribers. The capital will be issued via financial instruments and will be subscribed by private investors. The financial instruments have a dividend of 5% payable annually provided the bank shows a profit. As from 16 May 2014 the dividend amounts to EURIBOR (12 months) plus 200 basis points payable annually provided the bank shows a profit. Land Tirol issues a State guarantee for the principal capital amount subscribed by the investors for a period of ten years, which is called in the case of a bankruptcy of Hypo Tirol. For this guarantee, Hypo Tirol is paying to Land Tirol a progressively increasing guarantee fee, starting with 3.9% in the first three years, and rising to 6.6% in year number ten.
The Commission concluded that the measure is State aid pursuant to Article 87 (1) of the EC Treaty to Hypo Tirol and gave the following assessment:
" While the chosen aid instrument is a recapitalization with a guarantee for private investors, the Commission considers the measure as an aid for the bank. While the capital comes from private investors, the guarantee involves state resources. Given that Hypo Tirol is active in the financial sector, which is open to intense international competition, and as Hypo Tirol is active in neighboring countries, i.e. Italy, Switzerland and Germany, any advantage from state resources would have the potential to affect intra-Community trade and to distort competition." (par. 20-21 of the letter from the EC to Austria - Brussels, 17.6.2009 C (2009) 4691 final corr.).
Article 87(3)(b) of the EC Treaty enables the Commission to declare aid compatible with the Common Market if it is "to remedy a serious disturbance in the economy of a Member State." This aid has to be applied restrictively and must tackle a disturbance in the entire economy of the Member State according to the interpretation of the Article 87(3)(b) by the Court of First Instance.
The Commission referred to its Communication on the financial crisis (Temporary Framework) and concluded that the Measure complies with the conditions laid therein. Therefore, despite the measure constituting State aid pursuant to the Article 87(1) EC, it is compatible with the Common Market according to the Article 87(3)(b) EC Treaty. The Commission raises no objections against the measure at issue and authorizes it as emergency intervention in the face of the current financial crisis. (par. 35-49 of the letter).
Update: Further aid approved by the EC
On 4 October 2012, the European Commission approved a capital injection worth EUR 220 million for the Hypo Tyrol. Part of the aid is supposed to substitute the hybrid capital which shall expire on 30 June 2013.
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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