State aid: Commission approves temporary additional aid to German Landesbank WestLB
08 October 2009
The aid measure amounts to €6.4 billion and is provided by SoFFin, a fund administrating the German support scheme for financial institutions. WestLB is currently in the process of implementing a restructuring plan.
The European Commission has approved a temporary increase of the guarantee for a portfolio of securities of German Landesbank WestLB. The aid measure amounts to €6.4 billion and is provided by SoFFin, a fund administrating the German support scheme for financial institutions. WestLB is currently in the process of implementing a restructuring plan that was approved by the Commission in May 2009. The plan foresees, among other measures, the creation of a "bad bank" which will ensure that the bank can return to viability.
Competition Commissioner Neelie Kroes said: “The temporary additional aid is necessary to allow WestLB to set up a bad bank, which was anticipated in our decision of last May."
WestLB AG, based in North Rhine-Westphalia (NRW), with total assets of €288.1 billion as of 31 December 2008, operates as a central bank and a provider of services for Germany's biggest regional saving banks' network and as a commercial bank. At the request of the Commission, WestLB has initiated a fundamental restructuring process that will result in the sale of the bank.
On 12 May 2009 the Commission approved a restructuring plan for WestLB and the prolongation of a €5 billion risk shield protecting the bank's structured investment portfolio. Under the plan, WestLB will focus on three core businesses, terminate certain risky business activities and reduce its assets by 50 per cent. Large parts of the bank will be transferred to a "bad bank" and subsequently be wound up. Moreover, Germany committed to change the bank's ownership structure through a public tender procedure before the end of 2011.
The additional aid became necessary when a delay in the implementation of the bad bank solution and increasing capital requirements for a previously hedged portfolio of structured securities led to a breach of regulatory capital requirements.
Germany has committed to submit a revised restructuring plan which will duly take into account that substantial additional aid has become necessary since the Commission's May decision.
© European Commission
