19 November 2009

Lloyds: Commission approves restructuring plan including a divestment package of Lloyds’ UK retail banking

The Commission found that the plan ensures a fair burden sharing of past losses and that the bank and its capital providers make a significant contribution to the financing of the restructuring costs. This is important to limit moral hazard.

On 7 March 2009, the UK authorities and Lloyds announced that the bank would take part in the UK's Asset Protection Scheme, under which the State would commit to refund losses exceeding a certain level on a pool of assets of £265 billion (€296 billion). At the same time, the State committed to underwrite and to participate in a share offer of £4 billion (€4.6 billion), which was completed in June 2009. On 3 November 2009, as an alternative to Lloyd's participation in the UK Asset Protection Scheme, a capital raising share offer of £20.5 billion capital was announced. The Commission found that the State's participation in this share offer for an amount of £5.9 billion (€6.6 billion) constitutes a state aid element, since it facilitated the placing of the shares. This was therefore also assessed in the framework of the restructuring plan.

Competition Commissioner Neelie Kroes said: "This plan effectively addresses the Commission's competition concerns and at the same time ensures the return of Lloyds Banking Group to long term viability. This decision once again demonstrates the important role that the EU's state aid rules play in facilitating sustainable bank restructuring whilst preventing undue distortions of competition. This is to the clear benefit of both customers and taxpayers".

In addition, the plan contains a divestment package of Lloyds Banking Group's core business of UK retail banking as a measure to limit the impact of the aid on competition. The divested entity will have a 4.6% market share in the personal current account market gained through a network of at least 600 branches. This proposed divestment package will facilitate the entry of a new competitor or the reinforcement of a smaller existing competitor on the UK retail banking market and will therefore remove the distortions of competition created by the aid.

 

Press release

Commission decisions on KBC, ING and Lloyds – frequently asked questions

 

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