The European Commission has approved under EU state aid rules a €650 million recapitalisation provided by Germany in the context of the restructuring of Sparkasse KölnBonn.
The Commission concluded that Sparkasse KölnBonn's restructuring plan is appropriate to restore the bank's viability, while addressing competition distortions brought about by the state support.
Commission Vice-President Joaquin Almunia, in charge of competition policy, said: "Sparkasse KölnBonn has worked out a profound restructuring plan, including changes to its corporate governance, which should ensure that the mistakes of the past are not repeated. At the same time, the plan safeguards lending to the real economy, in particular to SME's. Through a constructive dialogue with the German authorities, we have managed to strike the right balance."
Sparkasse KölnBonn is the second largest savings bank in Germany with a balance sheet of €30 billion. It provides services to retail and corporate clients. In the region of Cologne-Bohn, where it is based, it is also active in project finance and capital markets, as well as in other financial activities such as asset management.
In the wake of the financial crisis, the capital of Sparkasse KölnBonn was strengthened by a total of €650 million, through the issue of certificates of participation and a so-called "silent participation", where investors receive remuneration but do not have voting rights. The coupon for the certificates of participation is 8%. The remuneration for the silent participation is 12-month Euribor plus 7.25%.
According to the restructuring plan, Sparkasse KölnBonn will focus on its statutory business model of a regional savings bank. The bank will concentrate on providing retail banking services to its traditional customer segments, i.e. private customers and SMEs, and withdraw from activities such as proprietary trading or investments in structured products and divest non-core subsidiaries. Furthermore, the bank will significantly reduce its administrative expenses.
Overall, the restructuring measures will result in a balance sheet reduction of 17% (not including growth in the traditional local customer segments) by the end of 2014 as compared to the end of 2008.
© European Commission
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