Subject: State aid N 317/ Spain Extension of the recapitalisation measures in favour of the banking sector in Spain

Transcription

1 EUROPEAN COMMISSION Brussels, C(2010) 5127 final Subject: State aid N 317/ Spain Extension of the recapitalisation measures in favour of the banking sector in Spain Sir, 1. PROCEDURE (1) On 19 January 2010 Spain notified a recapitalisation scheme for banks (hereinafter: "the Scheme"), which was approved by Commission decision of 28 January 2010, in State aid case N 28/2010 (hereinafter "the Original Decision") 1. (2) On 14 July 2010, Spain notified a request to: i) extend the Scheme until 31 December 2010, and ii) introduce an amendment to the Scheme consisting in the recapitalisation under exceptional circumstances of specific individual credit institutions not involved in an integration project with other credit insitutions. (3) The legal basis for the Scheme is the Royal Decree-law 9/2009 of 26 June, "sobre reestructuración bancaria y reforzamiento de los recursos propios de las entidades de crédito", as amended by Royal Decree-law 11/2010 of 9 July 2010 on "de organos de gobierno y otros aspectos del regimen juridico de las Cajas de Ahorros", and a draft Agreement of the Managing Commission of the Fund for the Orderly Restructuring of Banks ("the FROB") on "los criterios y condicciones a los que se ajustara la actuacion del Fondo de Reestructuracion Ordenanda Bancaria en los procesos de integracion o recapitalizacion de entidades de credito previstos en los articulos 9 y 10 del Real Decreto-ley 9/2009, de 26 de junio, sobre reestructuracion bancaria y reforzamiento de los recursos propios de las entidades de credito." (4) Spain exceptionally accepts that for reasons of urgency the decision be adopted in the English language. 1 Commission decision C(2010) 504 final, OJ C 57, , p.2. Excmo. Sr. Don Miguel Ángel MORATINOS Ministro de Asuntos Exteriores Plaza de la Provincia 1 E MADRID Commission européenne, B-1049 Bruxelles Belgique Europese Commissie, B-1049 Brussel België Teléfono: (0)

2 2. DESCRIPTION OF THE NOTIFIED MEASURE 2.1 Objective and beneficiaires (5) In response to the ongoing exceptional turbulence in world financial markets, the Scheme was brought forward by the Spanish authorities to provide public support for the consolidation and strengthening of the Spanish banking sector by, inter alia, strengthening the capital buffers of credit institutions. The Scheme allows the FROB to acquire convertible preference shares to be issued by the benefiting credit institutions. (6) Beneficiaries of the Scheme are both fundamentally and non-fundamentally sound credit institutions established in Spain ("the Beneficiaries") 2. (7) In order to benefit from the Scheme, Beneficiaries will need to draw up a plan, setting out the specific measures and commitments to be implemented in order to achieve increased efficiency and solvability. This plan will have to be approved by the Bank of Spain. (8) Before each recapitalisation takes place the Bank of Spain will assess the risk profile of the Beneficiary. The FROB will communicate to the Commission the results of that assessment so that the Commission can also assess the situation and draw the necessary consequences, such as the needs to provide a restructuring plan, to pay an adequate remuneration on the FROB Securities or to respect a ban on coupon payments on hybrid instruments. (9) For Beneficiaries needing a second recapitalisation, the Spanish authorities have committed to notify each additional measure individually. (10) In addition, in cases where the FROB intends to subscribe for FROB Securities in excess of 2% RWA in Beneficiaries which are non-fundamentally sound, Spain commits to notify the conditions of the recapitalisation as well as a restructuring plan for the Beneficiary in line with the Restructuring Communication 3. (11) The subscription of the FROB Securities by the FROB will be capped as a maximum to the amount necessary for the Beneficiary to reach a Tier 1 ratio of 8% taking into account the potential economic losses in a two-year time horizon. (12) The original Scheme expired on 30 June The recapitalisation measures (13) Under the Scheme, the FROB may undertake the recapitalisation of the Beneficiaries with an overall budget of EUR 99 billion. To date, only saving banks have benefited from the Scheme although its scope is open to all types of credit institutions. Currently, there are 12 integration projects involving 37 4 out of the 45 existing saving banks in Spain. However, only 7 on-going integration projects, involving 25 saving banks and 2 Including subsidiaries of foreign banks but excluding banks operating by branch offices. 3 Commission Communication on the return to viability and the assessment of restructuring measures in the financial sector in the current crisis under State aid rules, OJ C 195, , p Without taking in consideration the intervention for Cajasur in May 2010 and the bailout of Caja Castilla La Mancha, which has been incorporated to the CajaStur Group. 2

3 aggregate assets of EUR 768,22 billion, have applied for the Scheme. To date the overall amount of capital injections subscribed by the FROB is EUR 10,1 billion. (14) The table below provides additional details of the integration projects under the Scheme: FROB. Approved integration operations and projected settlement Participating entities Structure Approval FROB Status Caixas d Estalvis Comarcal de Manlleu, Sabadell y Terrassa Caixas d' Estalvis de Catalunya, Tarragona y Manresa Merger 25/03/2010 Merger 25/03/2010 Cajas de Ahorros Caja España, Caja Duero Merger 25/03/2010 Caixa Galicia, CaixaNova Merger 29/06/2010 Approved by the General Assemblies. Pending final formalization of settlement. Approved by the General Assemblies. Pending final formalization of settlement. Approved by the General Assemblies. Pending final formalization of settlement. Amount of aid (millon ) Projected date of settlement /07/ /07/ August Autumn 2010 Cajas de Ahorros del Mediterraneo (CAM), CajaAstur, Caja Cantabria, Caja Extremadura SIP 29/06/ Autumn 2010 Cajas de Ahorros de Murcia, Caja Granada, Caixa Penedés y SaNostra Cajas de Ahorro de Madrid, Bancaja, Caja Avila, Caja Segovia, Caja Insular de Canarias, Caixa Laietana, Caja Rioja SIP 29/06/2010 SIP 29/06/2010 Total Insitutional Protection System. Economic effects are similar to those of a merger. 915 Autumn Autumn 2010 (15) The Scheme requires that Beneficiaries undergo some degree of restructuring during their integration so that the resulting credit institution are stronger and more efficient. To this end, the integration plans presented under the Scheme envisage a reduction in: a) branches of between 10% to 30% and b) staff of between 11% to 27%. (16) The Spanish authorities are of the view that it is necessary to extend the deadline for granting State aid under the Scheme until 31 December 2010, since the original goals of the measure are still valid and financial markets have not yet returned to normal functioning. The Bank of Spain, in a letter of 14 July 2010, confirmed the necessity of the continuation of the Scheme. (17) All conditions approved by the Commission on 28 January 2010, except for the amendment to the Scheme described below, remain unchanged and Spain confirms that all the commitments made in relation to the original decision continue to apply, including to any recapitalisation under the new Article 10 of the Royal Decree-law 9/2009 of 26 June. 2.3 The amendment to the Scheme (18) The Scheme was amended by Royal Decree-law 11/2010 of 9 July 2010 on "de organos de gobierno y otros aspectos del regimen juridico de las Cajas de Ahorros". A new Article 10 was added to Royal Decree-law 9/2009 of 26 June, "sobre reestructuración bancaria y reforzamiento de los recursos propios de las entidades de crédito", pursuant to which under exceptional circumstances individual recapitalisations are made possible. Prior to the amendment, recapitalisations under the Scheme were associated with the integration of various credit institutions by way of a 3

4 merger or otherwise 5 with a view to increase the solvency and efficiency of the resulting entity. (19) The amendment to the Scheme permits the FROB to subscribe equity-like securities in the benefiting credit institution when according to the Bank of Spain that credit institution's own resources need to be reinforced in order to cater for more difficult economic and financial scenarios. The terms and conditions for individual recapitalisations will be those that apply to recapitalisations in the context of an integration among several credit institutions under the Scheme 6. (20) Individual credit institutions applying for the Scheme will need to provide to and have approved by the Bank of Spain a recapitalisation plan pursuant to which they will be able to strengthen their solvency, increase their efficiency and buy-back the securities issued to the FROB without having to integrate with other credit institutions. 3. POSITION OF SPAIN (21) In line with the original decision, Spain accepts that the extended Scheme constitutes State aid within the meaning of Article 107(1) TFEU 7. (22) Spain seeks the authorisation of the extension of the Scheme until 31 December According to the Spanish authorities, the measure is necessary and proportionate to carry out the restructuring of the Spanish banking system by maintaining confidence in the national financial system and enhancing its strength and solvency so that the credit institutions are sound and able to provide credit to the real economy. (23) The Spanish authorities claim that the extension, like the Scheme, is compatible with the internal market, because due to the ongoing crisis it is necessary to remedy a serious disturbance in the Spanish economy pursuant to Article 107(3)(b) TFEU. (24) By letter of 14 July 2010, the Bank of Spain states that the availability of the Scheme is a necessary measure to ensure financial stability in Spain even in adverse conditions which still persist 8. (25) Spain confirms that - except for the amendment to the Scheme described above - all other conditions under the recapitalisation measure of the Scheme remain unchanged. 4. ASSESSMENT OF THE MEASURE 4.1 State aid character of the Scheme (26) As set out in Article 107(1) TFEU, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort 5 The consolidation process to date have made extensive use of the "sistemas institucionales de proteccion" or SIP. 6 As laid down in Article 9 of Royal Decree-law 9/2009 of 26 June. 7 With effect from 1 December 2009, Articles 87 and 88 of the EC Treaty have become Articles 107 and 108, respectively, of the Treaty on the Functioning of the European Union ("TFEU"). The two sets of provisions are, in substance, identical. For the purposes of this Decision, references to Articles 107 and 108 of the TFEU should be understood as references to Articles 87 and 88, respectively, of the EC Treaty where appropriate. 8 Namely, slow or negative growth in lending activities, increased provisioning linked to the growth of non-performing assets, limited growth in margins and net income, low staff productivity and growing imbalances on the funding side due to the malfunctioning of the wholesale markets. 4

5 competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market. (27) For the reasons indicated in the original decision, the Commission considers that the Scheme constitutes State aid within the meaning of Article 107(1) TFEU. Spain shares this position. 4.2 Compatibility (28) In its decision of 28 January 2010, the Commission considered the notified measures compatible with the internal market under Article 107(3)(b) TFEU. (29) The Scheme's objective is to restore market confidence in banks through improved capital buffers and ultimately to avoid negative spill-over to the Spanish real economy. (30) The Commission notes that Spain confirms that all the commitments made in relation to the Scheme will continue to apply, in particular those related to presenting every six months a report on the operation of the Scheme and submitting individual restructuring plans within six months for Beneficiaries which are considered not fundamentally sound according to the Recapitalisation 9 Communication. (31) The Commission considers that the exceptional circumstances at the origin of the notified measures persist and, therefore, recognises the need for the extension of the Scheme. The letter from the Bank of Spain confirms this necessity. In particular, the Central Bank states that in addition to completing the undergoing restructuring of the Spanish banking system, some credit institutions - forming part of or outside an integration project - may necessitate an additional capital base under a stress scenario. Furthermore, opening eligibility under the Scheme to single credit institutions, as provided for by the amendment to the Scheme, is in line with the Commission guidance and past practice. Therefore, the Commission considers that the extension of the measure is appropriate and necessary to remedy the serious disturbance of the Spanish economy. (32) The Commission notes that the extension is limited in time (not exceeding six months) which will limit the potential distortion of competition. Accordingly, recapitalisations under this Scheme may be undertaken until 31 December Any potential further extension would require the Commission s approval and would have to be based on a review of the Scheme s effectiveness in view of the monitoring report Spain has undertaken to submit to the Commission. (33) The Commission therefore does not object to extend the recapitalisation measure under the Scheme until 31 December (34) The Commission recalls that, as indicated the Annex to the Restructuring Communication, restructuring plans should contain all State aid received as individual aid or under a Scheme during the restructuring period and all such aid needs to be 9 Communication from the Commission - The recapitalisation of fiancial institution in the current financial crisis: limitation of the aid to the minimum necessary and safeguards against undue distortions of competition. OJ C 10, , p

6 justified as satisfying all criteria prescribed by the Restructuring Communication (i.e. return to viability, own contribution by the beneficiary and limitation of competition distortion). This means that, as soon as a Member State is under an obligation to submit a restructuring plan for a certain aid beneficiary, the Commission needs to take a view in its final decision as to whether any aid granted during the restructuring period satisfies the criteria required for the authorisation of restructuring aid. To this end, an individual ex ante notification is necessary. (35) Furthermore, based on paragraph 16 of the Restructuring Communication, the Commission recalls that should further aid not initially foreseen in a notified restructuring plan be necessary for the restoration of viability, this cannot be granted under an approved Scheme but needs to be subject to individual ex ante notification and any such further aid will be taken into account in the Commission s final decision on that bank. 5. DECISION The Commission concludes that the extension in question does not alter its previous assessment in the decision of 28 January 2010 in State aid case N 28/2010 that the recapitalisation measure under the Scheme is compatible with the internal market. The Commission has accordingly decided not to raise objections. The Commission notes that for reasons of urgency Spain exceptionally accepts the decision to be adopted in the English language. If this letter contains confidential information which should not be disclosed to third parties, please inform the Commission within fifteen working days of the date of receipt. If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to the disclosure to third parties and to the publication of the full text of the letter in the authentic language on the Internet site: Your request should be sent by registered letter or fax to: European Commission Directorate-General for Competition State Aid Greffe Rue Joseph II, 70 B-1049 Brussels Fax No: Yours faithfully, For the Commission Joaquín ALMUNIA Vice-President of the Commission 6