ANNOUNCEMENT 21 Nov 2011

In November 2011, the government of Spain announced a change in private-sector financial support.

NUMBER OF INTERVENTIONS

1

  • 1 harmful
  • 0 neutral
  • 0 liberalising
Inception date: 21 Nov 2011 | Removal date: 19 Nov 2016
Still in force

Capital injection and equity stakes (including bailouts)

On 21 November 2011, Spain notified to the Commission its intention to provide the Banco de Valencia S.A. ('The Bank') with a capital injection and liquidity support through the Fondo de Restructuración Ordenada Bancaria (FROB).
 
The Bank is a Spanish commercial bank, which operates mainly in the regions of Valencia and Murcia. It is listed on the Spanish stock exchange. At the end of June 2011, the bank had 427 branches and 2 028 employees.
 
In November 2011, following an inspection by the Bank of Spain that revealed capital and liquidity shortfalls, the Bank failed to raise capital from its key shareholders or from other private sources and failed to meet its obligations towards depositors and creditors. Following its inspection, the Bank of Spain estimates the immediate liquidity needs to be comprised between EUR 1 000 and 2 000 million. Those needs are mainly due to the bank's weaknesses.
 
The recapitalisation will be achieved through issuance of a maximum of EUR 1 billion of ordinary shares by the Bank. In addition, in order to meet the expected liquidity needs of the Bank, together with the aforementioned capital injection, the FROB will grant the Bank a liquidity facility amounting at maximum to EUR 2 billion.
 
The commission found that the measure constitutes State aid within the meaning of Article 107 (1) TFEU and gave the following assessment:
 
'The Commission finds that the measures distort competition as they allow the Bank to obtain the capital and liquidity necessary to avoid technical insolvency and its exit from the market. The Commission finds that the measures are also likely to affect trade between Member States as the Bank competes on the Spanish retail savings markets, the Spanish mortgage lending markets and the Spanish commercial lending markets. In all those markets, some of the Bank's competitors are subsidiaries and branches of foreign banks.' (par. 30-31 of the letter from the EC to Spain - Brussels, 21.11.2011 C(2011) 8663 final)
 
The Commission finds however that the emergency measures in favor of Banco de Valencia S.A. are temporarily compatible with the internal market for reasons of financial stability on the basis of Article 107(3)(b) TFEU.
 
The measures are approved for six months or, if Spain submits a restructuring plan within six months from the date of this decision, until the Commission has adopted a final decision on the restructuring plan.
 
Update: Restructuring plan SA.34052
 
On 26 November 2012, Spain notified the restructuring plan for BVA. The stress test from 28 September 2012 revealed that BVA needs additional capital of EUR 3.46 billion. The plan presents two potential scenarios, both involving additional state aid:
-a sale of BVA to CaixaBank conditional on additional upfront capital injections of EUR 0-5 billion (exact value classified).
-Alternatively, the plan foresees a winding-down scenario.
 
The costs for the liquidiation are estimated at 5.6-7.4 billion (par. 29, letter from the EC to Spain, Brussels 28.11.2012)The potential sale to CaixaBank for EUR 1.00 is conditional on:
- FROB capital injections of EUR 4.5 million
- Asset protection scheme by FROB amounting for EUR 5-10 billion (par. 33)
 
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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