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30.10.2012 Official
Journal
of
the
European
Union
L
301/1
II
(Non-legislative acts)
DECISIONS
COMMISSION DECISION
of 27 March 2012
on the measures SA. 26909 (2011/C) implemented by Portugal for the restructuring of Banco
Português de Negócios (BPN)
(notified under document C(2012) 2043)
(Only the Portuguese version is authentic)
(Text with EEA relevance)
(2012/660/EU)
THE EUROPEAN COMMISSION,
(4)
Portugal did not submit any prior notification of any of
the measures granted to BPN by the State. It informed
the Commission of those measures only with
Having regard to the Treaty on the Functioning of the European
considerable delay and after having been repeatedly
Union, and in particular the first subparagraph of Article 108(2)
requested to do so.
thereof,
Having called on interested parties to submit their comments ( 1 )
(5) In
this
context,
on
14
November
2008
the
Commission
pursuant to Article 108(2) of the Treaty and having regard to
made requests for information regarding the specific state
their comments,
aid measures provided to BPN as well as requesting a
restructuring plan. The Commission then sent
reminders on 5 January and 23 and 29 April 2009.
Whereas:
1. Procedure
(6) The
Portuguese
authorities
replied
to
the
information
requests on 8 January, 28 April and 23 June 2009,
(1) On
2
November
2008,
the
Portuguese
Government
without providing information on specific state aid
approved a draft law to nationalise the shares repre
measures in favour of BPN or furnishing a restructuring
senting the share capital of Banco Português de
plan. In their letter of 23 June 2009 the Portuguese
Negócios, S.A. (‘BPN’ or ‘the bank’). That law was
authorities indicated that they were considering the
published on 11 November 2008 as Law No 62-
option of segregating the assets of BPN and selling the
A/2008 (‘Nationalisation Law’). The nationalisation of
bank.
BPN took effect on 12 November at zero price.
(2) On
5
November
2008
the
Portuguese
authorities
informed the Commission about the approval of the
(7) The
Commission
reiterated
its
requests
for
information
draft law by the Portuguese Government. On 11 and
on 17 July, 4 and 14 September, and 30 November
13 November 2008 they informed the Commission of
2009, and 5 February and 16 March 2010.
the publication of the Nationalisation Law.
(3) The Commission immediately requested further (8) The
Portuguese
authorities
replied
on
14
August
2009,
information concerning any state aid measures to be
indicating that commercial papers totalling up to EUR 2
granted to BPN under the nationalisation procedure as
billion were to be issued by BPN and subscribed by Caixa
well as the submission of a restructuring plan for BPN.
Geral de Depósitos (‘CGD’) with a state guarantee. In
their view the guarantee resulted directly from the
( 1 ) OJ C 371, 20.12.2011, p. 14.
Nationalisation Law and therefore could not constitute

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L 301/2
EN
Official Journal of the European Union
30.10.2012
state aid. On 12 October 2009 the Portuguese authorities
process. Since no response was provided by the
sent further information on intervention by CGD and the
Portuguese authorities, a reminder was sent on 8 July
State. They submitted additional information on
2011, together with an additional request for
21 November 2009, and 17 and 18 February and
information following press reports on further state
31 March 2010.
resources having been provided to BPN by means of a
state guarantee. An overview of the privatisation process
was provided by the Portuguese authorities on 5 August
2011.
(9) Following
a
meeting
held
with
the
Portuguese
authorities
on 16 June 2010, on 12 August 2010 the Commission
again asked the Portuguese authorities, inter alia,
immediately to submit the restructuring plan for BPN.
No plan was submitted and the Commission accordingly
(14) The
Commission
met
with
the
Portuguese
authorities
on
sent an official reminder on 31 August 2010 pursuant to
10 August 2011. The Portuguese authorities provided
Article 5(2) of Council Regulation (EC) No 659/1999 of
additional information to the Commission during the
22 March 1999 laying down detailed rules for the appli
meeting and subsequently on 28 August 2011. The
cation of Article 93 of the EC Treaty (now Article 108 of
Commission received further information on
the Treaty on the Functioning of the European Union) (
14 September and 14 October 2011.

1 ).
(10) On
14
September
2010,
the
Portuguese
authorities
sent
(15) By Decision of 24 October 2011 (‘the Decision of
a document entitled ‘Memorando: a nacionalizao, a
24 October 2011’), the Commission initiated the
reestruturao e a reprivatizao projectada do Banco
procedure laid down in Article 108(2) of the Treaty
Português de Negócios, SA’ (hereinafter ‘the
under case number SA.26909 with respect to alleged
Memorandum of 14 September 2010’) which outlined
aid granted to BPN and Banco BIC Português S.A.
the restructuring plan of BPN and the main elements
(‘BIC’) ( 3 ).
of the privatisation process.
(11) Having
found
that
some
information
was
still
missing
(16) The
Decision
of
24
October
2011
was
published
on
from the Memorandum of 14 September 2010, the
20 December 2011. No third-party comments were
Commission sent a letter on 29 September 2010
received within the one-month deadline.
requesting additional information from the Portuguese
authorities. By electronic mail of 15 November 2010
the Portuguese authorities sought an extension of the
deadline for reply, which was granted by the Commission
(17) On 9 December 2011, Portugal submitted to the
by letter of 18 November 2010. The Portuguese auth
Commission the Framework Agreement signed between
orities provided additional clarifications by letter of
BIC and the Portuguese authorities on that same day (the
26 November 2010 and by electronic mail of 25 January
‘Framework Agreement’).
2011.
(12) On
16
February
2011
the
Commission
sought
clarifi
(18) On
20
January
2012,
Portugal
submitted
its
reply
to
the
cation on a number of points and requested further
observations raised in the Decision of 24 October 2011.
data. The Portuguese authorities replied on 16 March
On the same date, the Portuguese authorities also
2011.
provided additional information, including a new restruc
turing plan for BPN (hereinafter the ‘January 2012
Restructuring Plan’) and a reply to additional questions
which had been posed by the Commission on
(13) In the context of meetings preceding the signature on
21 December 2011 regarding the Framework Agreement.
17 May 2011 of the Memorandum of Understanding
That information was supplemented on 3 February 2012
(the ‘MoU’) (
with a business and viability plan which had been

2 ) between Portugal on the one hand and
the International Monetary Fund, the European Central
prepared by BIC and which hereinafter for the
Bank and the European Commission on the other hand,
purposes of this Decision is considered an integral part
the Commission had a meeting with the management of
of the January 2012 Restructuring Plan. Further
BPN on 27 April 2011. The MoU envisaged the sale of
information was provided on 10, 17 and 23 February
BPN by the end of July 2011. The Commission therefore
2012, in reply to additional questions that the
sent on 20 May 2011 requests for information on the
Commission had addressed to the Portuguese authorities
restructuring of the bank and on the planned sale
on 8, 14 and 17 February 2012. On 16 March 2012,
Portugal provided a series of commitments to the
Commission.
( 1 ) OJ L 83, 27.3.1999, p. 1.
( 2 ) Portugal, ‘Memorandum Of Understanding On Specific Economic
Policy Conditionality’, 17 May 2011, http://ec.europa.eu/economy_
( 3 ) As described in more detail in paragraph (53) BIC is a small bank
finance/eu_borrower/mou/2011-05-18-mou-portugal_en.pdf.
which has been active in Portugal since 2008.

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EN
30.10.2012 Official
Journal
of
the
European
Union
L
301/3
(19) During
the
procedure,
numerous
information
exchanges,
(23) According to the Portuguese authorities, the impairments
teleconferences and meetings took place between the
resulted from irregularities and illegal practices detected
Portuguese State, BPN and the Commission.
by the BdP and external audits conducted during June
2008, which were later described in a 2009 BdP report
as constituting ‘fraudulent behaviour, persistent and
deliberate, undertaken at the highest level of the
management of the Group’ ( 7 ). These practices led to
2. Description of the beneficiaries and the measures
investigations and to the launch of several administrative
infringement proceedings (‘processos de contra-orden
2.1 The beneficiary and its difficulties
ao’) and to the filing of a complaint with the Office
(20) BPN
is
a
financial
institution
based
in
Portugal
providing
of the Public Prosecutor of the Republic.
a wide range of banking services. It was nationalised on
11 November 2008 at which time it had a network of
213 branches (4 of which were in France), approximately
(24) Under
the
Nationalisation
Law,
CGD
was
assigned
the
2 200 employees and total assets of EUR 6,6 billion,
task of managing BPN, appointing the members of
accounting for around 2 % of the total assets of the
BPN’s management bodies, and establishing the
Portuguese retail banking sector.
management objectives of BPN within 60 days of the
nationalisation. Furthermore, the Nationalisation Law
also set out the provision that any credit or liquidity
assistance measures undertaken by CGD ‘in favour of
(21) According
to
the
Portuguese
authorities
(
BPN within the context of the nationalisation or in

1 ), BPN had
been facing liquidity issues since the summer of 2008,
substitution of the State … shall benefit from a state
with the rating agency Moody’s having downgraded BPN
guarantee’ ( 8 ).
from Baa1 to Baa3 on 18 July 2008 ( 2 ). Whilst at the
end of August BPN had a positive liquidity of EUR 316
million, by 22 October 2008 it had severe negative
2.2 The financial support measures prior to nationalisation
liquidity of EUR 831 million, with its deposit account
with the Bank of Portugal (‘BdP’) far from the average
(25) Prior
to
its
nationalisation
in
November
2008,
BPN
had
amounts it would have had to maintain in order to
already benefited from a number of financial support
comply with the legal limits. At that stage, during the
measures described by the Portuguese authorities as
month of October 2008, several initiatives were
‘special liquidity support measures’ ( 9 ). On 17 February
undertaken in order to allow the bank to overcome the
2010, the Portuguese authorities informed the
liquidity difficulties it was facing and to prevent default
Commission that in the period up to 30 October
in payments, in particular through the provision of
2008, BPN had obtained special liquidity assistance
special liquidity aid in the form of loans, and through
measures from both CGD and the BdP for a total
other operations by the BdP and by the state-owned
amount of EUR 501,6 million, consisting of four loans
CGD ( 3 ).
granted to BPN by CGD for a total amount of EUR 315
million ( 10 ) and emergency liquidity assistance (ELA)
provided in October 2008 by the BdP for an amount
of EUR 186,6 million ( 11 ).
(22) Given the volume of the losses being accumulated by
BPN, further liquidity support was not considered
feasible by the Portuguese authorities, in light of the
(26) Whilst the BdP was reimbursed after the nationalisation,
‘high risk to which [BdP and CGD] would be exposed’ ( 4 ).
the four loans granted by CGD were reimbursed only on
A plan had been put forward by the shareholders of BPN,
9 March 2009, with the issuance of the first commercial
but the Government, based on an opinion of the BdP
paper by BPN.
issued on 30 October 2008, did not consider the plan to
be feasible. Given that BPN no longer complied with the
(
solvency requirements because of the high level of

7 ) Report on Financial Stability of the Bank of Portugal for the year
2008, cited at p. 16 of Memorandum of 14 September 2010.
impairments ( 5 ), the Government then proposed to
( 8 ) Article 2(9) of the Nationalisation Law.
Parliament the nationalisation of BPN at zero price ( 6 ).
( 9 ) See p. 3 of the document sent by the Portuguese authorities entitled
That proposal was approved on 11 November 2008 by
‘Nota: Banco Português de Negócios, S.A.’ dated 17 February 2010.
Law 62-A/2008 (the ‘Nationalisation Law’).
( 10 ) In October 2008, CGD signed three short-term loan agreements
with BPN: (i) on 9 October 2008 for an amount of EUR 200
million with a pledge over certain assets as well as the promise
( 1 ) ‘Note on Banco Português de Negócios’ dated 17 February 2010.
of mortgage rights over buildings under the control of BPN (ii) on
( 2 ) See for example p. 96 of the Report on Financial Stability of the
28 October 2008, for an additional amount of EUR 15 million, and
Bank of Portugal for the year 2008.
(iii) on 29 October 2008, in the form of a new loan for EUR 20
( 3 ) CGD is a bank wholly owned by the Portuguese State.
million. A fourth short-term loan was granted by CGD for the
( 4 ) ‘Note on Banco Português de Negócios’ dated 17 February 2010,
purposes of liquidity provision to BPN for an additional EUR 80
page 4.
million and was signed on 3 November 2008. All four loans were
( 5 ) Those impairments were estimated, after the nationalisation, ‘at more
undertaken on Euribor 1 month plus spread of 1 % and the second,
than 20 % of the total of the assets of BPN at that time’; see
third and fourth loans benefited from the same collateral rights as
Memorandum of 14 September 2010, p. 17.
the first EUR 200 million loan.
( 6 ) According to the evaluations of both Deutsche Bank and Deloitte,
( 11 ) According to the ‘Nota on BPN’ dated 17 February 2010, the ELA
BPN had a negative asset and financial value at the date of national
facility was contracted on 17 October 2008, and was increased on
isation.
27 October 2008.

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L 301/4
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Official Journal of the European Union
30.10.2012
2.3 The financial support measures after the nationalisation
given to it by CGD. The amounts owed by BPN to
CGD under these short-term instruments reached
(27) In
March
2009,
BPN
issued
commercial
paper
with
guar
approximately EUR 2,2 billion on 28 February 2009.
anteed subscription by CGD and a state guarantee for a
According to the data provided by the Portuguese auth
global amount of EUR 2 billion. The Commission was
orities, those amounts were reduced with the issue of the
informed only on 14 August 2009 of these state guar
commercial paper referred to in paragraphs (27), and
antees.
(28) ( 1 ).
(28) By
letter
of
17
February
2010,
the
Portuguese
authorities
also mentioned that CGD had been authorised on
(30) By
June
2011,
the
exposure
of
BPN
to
CGD
in
money
27 October 2009 to subscribe a further EUR 1 billion
market instruments was approximately EUR 1 billion.
of commercial papers with a state guarantee.
Although the financing was being carried out on a
Subsequently, by electronic mail of 14 June 2010, the
daily basis, it was, according to the Portuguese auth
Commission was further informed that the total of the
orities, of a structural nature with longer dates ( 2 ), and
state guarantees on commercial papers issued by BPN
was also substituted by the fourth, and last, commercial
and subscribed by CGD had risen to EUR 4 billion, as
paper issue of June 2011, with the launch of two issues
in April 2010 a third issue of BPN commercial paper had
of EUR 500 million each.
been organised and was subscribed by CGD for an
amount of EUR 1 billion.
(31) According
to
the
figures
supplied
by
the
Portuguese
auth
orities on 3 February 2012, the outstanding amount
(29) In
this
context,
it
should
be
noted
that
since
its
national
owed by BPN to CGD (apart from the commercial
isation in November 2008 and until June 2011, BPN had
paper issues) was EUR 433,7 million on 31 December
constantly made use of money market credit facilities
2011 and EUR 232 million on 31 January 2012.
Table 1
Overview of liquidity obtained by BPN from CGD, as at 31 December 2011
CGD Loans
With explicit state guarantee
(without explicit state
Total
guarantee)
BPN 1
400
000
000,00
433 732 654,56
1 833 732 654,56
Special Purpose Vehicles ( 1 ) 3
100
000
000,00
795 111 660,00
3 895 111 660,00
Total 4
500
000
000,00
1 228 844 314,56
5 728 844 314,56
Source: Portuguese authorities
( 1 ) The Special Purpose Vehicles were segregated from an accounting point of view from BPN on 31 December 2010, and formally taken
over directly by the State on 15 February 2012.
(32) It should be noted that under Article 2(9) of the
(35) In
that
plan,
the
Portuguese
authorities
explained
their
Nationalisation Law all credit or liquidity lines offered
intention to split BPN into a good bank and a bad bank
by CGD to BPN in the context of the nationalisation
and to then try to sell the good bank.
are to be guaranteed by the Portuguese State.
(33) It is therefore clear that all of the amounts described in
The extent of the bank to be reprivatised: creation of the SPVs
Table 1 above benefited from a state guarantee pursuant
to Article 2(9) of the Nationalisation Law and the various
(36) The
State
wanted
to
proceed
through
an
open
tender
orders issued by the Secretary of State for the Treasury
process with the sale of the ‘good bank’, BPN S.A.,
and Finance. The remuneration for the state guarantees
which was to be exclusively a retail bank. That process
was set at 0,2 % per year.
was to be conducted on the basis of a call for
expressions of interest, for which the specification
2.4 The Restructuring of BPN
(‘Caderno de Encargos’) was approved on 16 August
2010 by the Portuguese authorities ( 3 ).
The 2010 restructuring plan
(34) An
initial
restructuring
plan
of
13 September
2010
( 1 ) See p. 32 of January 2012 Restructuring Plan.
(hereinafter ‘the 2010 Restructuring Plan’) was sent to
( 2 ) See p. 28 of January 2012 Restructuring Plan.
( 3 ) Resoluo do Conselho de Ministros n. o 57-B/2010) for the repri
the Commission by the Portuguese authorities on
vatisation of BPN. The decree-law setting out the legal framework for
16 September 2010.
the privatisation of BPN was approved in November 2009.

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30.10.2012 Official
Journal
of
the
European
Union
L
301/5
(37) Under
the
2010
Restructuring
Plan,
a
number
of
BPN’s
(42) According
to
information
received
from
the
Portuguese
assets and liabilities were to remain outside the scope of
authorities, in order to allow BPN to comply with legal
the reprivatisation and transferred to three new Special
and regulatory requirements (namely in order to reach
Purpose Vehicles (‘SPVs’), Parvalorem, Parups and Parpar
the 9 % core tier 1 capital required for 2011 ( 2 )), and
ticipadas. These SPVs would initially remain within BPN
given that the own capital of BPN would still be
and after the sale would be transferred to the State. Loans
negative after the transfer of assets to the SPVs, the
and credits would be transferred to Parvalorem, real
State would have had to recapitalise BPN by about
estate and investment funds to Parups, and subsidiaries
EUR 417 million ( 3 ).
to Parparticipadas. The Portuguese authorities valued the
total amount of assets to be transferred to the SPVs at
EUR 3 885 million, with EUR 2 507 million transferred
to Parvalorem, EUR
1
228 million to Parups and
The first two calls for reprivatisation
EUR 150 million to Parparticipadas.
(43) The
base
price
set
for
BPN
(which
excluded
the
assets
to
be transferred to the SPVs) in the tender published by
Portugal was fixed at EUR 171,1 million based on the
(38) Loans
were
transferred
at
nominal
value;
fund
units,
valuations of third party consultants Deloitte (EUR
securities and real estate were to be transferred at
[…] (*) million) and Deutsche Bank (EUR […] million).
purchase price, and companies owned by BPN at their
BPN’s new CGD management had in the meantime
book value. The Portuguese authorities estimated that the
started a restructuring process for the bank. Operational
overall impairments as of December 2010 totalled
costs were reduced by [1-10] % from December 2008 to
EUR 1 798 million broken down as follows: i) loans:
December 2010; BPN’s activity was reduced in order to
EUR 1 474 million; ii) real estate: EUR 16 million; iii)
achieve a bank exclusively focused on retail commercial
fund units: EUR 247 million; and iv) securities: EUR 61
banking. That reduction in activity resulted partly from
million. According to the information provided by the
the drop in deposits following the nationalisation, but
Portuguese authorities on 20 January 2012, these assets
also from the transfer of assets to the three SPVs.
were transferred to the SPVs on 23 and 30 December
These measures reduced losses in 2010 to EUR
2010 ( 1 ). However, the SPVs remained within BPN until
[50-150] million, compared with EUR [150-250]
15 February 2012, when they were removed from BPN
million in 2009. Since the beginning of 2009, in an
and transferred to another state-controlled company.
attempt to improve the bank’s image and range of
products, the new management undertook the launch
of […] new products and campaigns. Measures to
improve the risk management and internal control
systems of the bank were also implemented by the
(39) According to the Portuguese authorities, the transfer of
assets to the SPVs was done on the basis of objective
new management.
criteria, taking into account the volume of impairments
as well as the fact that certain activities were not core for
BPN after the nationalisation (consumer credit,
investment bank, asset management, investment fund
(44) No
interested
parties
came
forward
in
response
to
the
management, insurance and international business). BPN
first two calls for privatisation by 30 September and
was to reposition itself as a pure retail bank with reduced
30 November 2010.
exposure to the uncertainty of wholesale funding.
(45) Following the failure of the tender process, in January
(40) The SPVs financed the acquisition of the assets through
2011 Portugal indicated its intention to restructure
two financing lines for EUR 3 895 million, consisting of
BPN, making it more independent of CGD by appointing
bonds with a state guarantee for EUR 3 100 million
a new board, independent of the latter. It also sought to
acquired by CGD and loans from CGD with pledged
accelerate the operational recovery of BPN, by redefining
assets for an aggregated value of EUR 795 million. The
the bank’s brand and corporate identity and by
revenues from the sale of the assets to the SPVs allowed
reinforcing the recovery plan through cost cuts and
BPN to pay back EUR 3 900 million of financing which
enhancing commercial dynamics. However, despite
it had obtained from CGD - EUR 3 600 billion of the
several requests, no updated restructuring plan was
initial EUR 4 billion of commercial paper (meaning that
provided to the Commission.
an amount of EUR 400 million of commercial paper
guaranteed by the State would remain unpaid by BPN),
as well as EUR 300 million of short-term money market
loans.
(46) In
the
MoU
of
17
May
2011,
the
Government
gave
an
undertaking to launch a new privatisation process.
( 2 ) See the ‘Aviso de Banco de Portugal n o 3/2011’ that requires credit
(41) Following
the
transfer
of
assets,
BPN’s
balance
sheet
was
institutions to reach a consolidated basis core tier 1 ratio of 9 % by
reduced by around 30 %.
31 December 2011.
( 3 ) See response of the Portuguese authorities of 17 February 2012,
Q. 7.
( 1 ) See p. 35 of January 2012 Restructuring Plan.
(*) Confidential data.

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Official Journal of the European Union
30.10.2012
(47) In the MoU, the Portuguese authorities committed to
(52) Based on the only valid offer submitted under the tender
‘launching a process to sell Banco Português de
procedure, which was made by BIC on 20 July 2011 (the
Negócios (BPN) on an accelerated schedule and without
‘BIC offer of 20 July 2011’), the Government decided on
a minimum price. To this end, a new plan is submitted
31 July 2011 to continue exclusive negotiations with
to the EC for approval under competition rules. The
BIC.
target is to find a buyer by end-July 2011 at the latest.
To facilitate the sale, the three existing special purpose
vehicles holding its non-performing and non-core assets
have been separated from BPN, and more assets could be
(53) BIC
was
authorised
by
the
BdP
to
exercise
commercial
transferred into these vehicles as part of the negotiations
banking activities on 9 October 2007 and actually
with prospective buyers. BPN is also launching another
started its activity in Portugal in May 2008, being
program of more ambitious cost cutting measures with a
active mainly in corporate banking and in private
view to increase its attractiveness to investors. Once a
banking. BIC’s main shareholders are a group of
solution has been found, CGD’s state guaranteed claims
investors from Angola, and include Portuguese share
on BPN and all related special purpose vehicles will be
holders such as Amorim Projectos SGPS, SA (which
taken over by the state according to a timetable to be
has a 25 % shareholding). As at December 2010, it had
defined at that time’ ( 1 ).
a turnover of EUR 389 million, with total assets of
EUR 1 billion, and at 31 March 2011 it had capital of
EUR 32 million and 7 branches. According to the
Sale to BIC
information provided by Portugal the market share of
BIC in the market segments where it is active is less
(48) A third privatisation attempt was launched at the
than 1 % ( 4 ).
beginning of May 2011 without a minimum price in
order to find a buyer for BPN by 31 July 2011, as
agreed in the MoU.
The sale conditions
(54) According to the information provided by the Portuguese
(49) A
tender
procedure
was
held
during
which
contacts
with
authorities, following the BIC offer of 20 July 2011 ( 5 ),
potential interested buyers took place. An Investment
the negotiations with BIC culminated with the signing on
Opportunity Overview (‘IOO’) was also produced.
9 December 2011 of a Framework Agreement for the
According to the IOO, interested parties had to bid for
sale of BPN to BIC ( 6 ).
up to 100 % of the shares of BPN, but could ask for
additional assets and liabilities to be removed from BPN’s
balance sheet. They could also ask for higher recapitali
sation scenarios. A memorandum governing the rules of
the process was signed between BPN and the potential
(55) The
BIC
offer
of
20
July
2011
set
out
only
general
terms,
bidders allowing them to enter a data room, set up on
and provided for:
15 June 2011 for five weeks.
i. a recapitalisation by the State in order for BPN to
(50) Four
binding
offers
were
submitted
by
20
July
2011.
reach a core tier 1 ratio of [between 9 and 18] %
These offers were analysed by the boards of CGD and
plus EUR [100-300] million;
BPN who submitted their opinion to the shareholder –
the State – by 25 July 2011.
ii. the removal of part of the credit loans to be selected
(51) Three
of
the
four
bidders
submitting
binding
offers
were
by BIC in order to achieve a loan-to-deposit ratio of
eliminated. According to the Portuguese authorities, two
[110-150] %;
bidders (Montepio and Aníbal Ribeiro) did not fulfil the
requirements of the memorandum signed with BPN ( 2 ).
Montepio did not bid for the acquisition of the shares of
BPN, but only for selected assets and liabilities, while
iii. the transfer out of BPN of all non-performing loans
Aníbal Ribeiro had not provided sufficient proof of
above the threshold of approximately EUR […]
managerial and financial capacities to run a bank. The
million (estimated level of provisioning of loans at
third bid, from NEI ( 3 ), complied with the memorandum’s
BPN);
requirements, but there was insufficient proof of its capa
bilities to run the bank and of its financial capacity to
assume future capital needs of BPN.
( 4 ) See document sent by the Portuguese authorities entitled ‘Plano
Revisto’, dated 20 January 2012, p. 125.
( 5 ) Minuta de contrato de compra e venda das aces no mbito da
( 1 ) Point 2.10 and 2.11 of the MoU.
reprivatizao do Banco Português de Negócios, S.A.
( 2 ) A Memorandum governing the rules of the process was signed
( 6 ) According to Article 2.5 (c) of the Framework Agreement the
between BPN and the parties who declared an interest to enter the
agreement would be terminated should the sale not be concluded
data room.
by 31 March 2012 (subject to the possibility for BIC to extend that
( 3 ) Núcleo Estratégico de Investidores (NEI), a group of investors.
deadline).

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EN
30.10.2012 Official
Journal
of
the
European
Union
L
301/7
iv. the right of BIC to remove from the balance sheet of
iii. the right of BIC to remove from the balance sheet
BPN additional assets and liabilities (e.g. loans to
additional assets and liabilities (e.g. loans to credit
credit institutions, financial assets, real estate assets,
institutions, financial assets, real estate assets, some
some provisions, other assets and other liabilities)
provisions, other assets and other liabilities);
that have been provided outside the scope of its
normal activity;
iv. the right of BIC to sell back within […] months
v. the transfer out of BPN of deposits selected by BIC
loans that are non-performing for at least […]
that are not offering market conditions;
days (up to a maximum of […] of the nominal
value of the total loan portfolio selected by BIC
after compensation with existing deposits) and for
the amount exceeding the level of provisioning (EUR
vi. the granting of a money line to BIC from CGD for
[…] million ( 3 )) ( 4 );
up to [150-650] million for a period of […] years,
with a lending rate at […] months Euribor. That
amount would be increased if deposits were to fall
below EUR […] billion;
v. the right of BIC to transfer deposits with pricing at
least […] basis points (‘bps’) above the relevant
reference rate ( 5 ) or to receive from the State the
difference in remuneration ( 6 );
vii. the maintenance of 500 to 600 employees of BPN
(out of approximately 1 600 employees) and of
160-170 branches which are in facilities belonging
to the bank or with leasing contracts with a
maturity up to 12 months.
vi. the right of BIC to request the transfer, before
closing, of other assets and liabilities of BPN, such
as loans to credit institutions, physical and financial
assets, etc;
viii. the transfer to the State of the costs linked to liti
gation; and
vii. the granting of a money line to BIC from CGD until
[> 2013] for up to EUR [150-350] million, with a
ix. an acquisition price of EUR 30 million to be paid by
lending rate at […] months Euribor (
BIC.

7 ) plus a spread

of […] bps. That money line would be made
available if the level of deposits of BPN were to
fall below EUR […] billion;
(56) Following
the
negotiations,
that
lasted
approximately
five
months, the Framework Agreement provides for:
viii. the maintenance of a credit line of EUR [150-500]
million with CGD until [> 2013] for the ongoing
i. a recapitalisation by the State to reach the minimum
commercial paper programme bearing a state
capital level and the additional level required by BIC
guarantee for three years but with a commitment
— BIC required a final capital level of EUR [200-
from CGD that it would not call the loan before
400] million after the balance sheet adjustments it
[…];
had proposed ( 1 );
( 3 ) The Portuguese authorities note that the current non-performing
loans amount to EUR […] million as at September 2011, see
document sent by the Portuguese authorities entitled ‘Plano
ii. the removal of part of the loans in BPN, over and
Revisto’, dated 20 January 2012, p. 126.
above those loans which had already been trans
( 4 ) According to the Portuguese authorities, the existing provisions
should ensure that BIC will in practice not use that possibility, as
ferred to the SPVs as of 30 December 2010 ( 2 ).
non-performing loans would need to increase in the first year
The removal of the additional loans would allow a
following the sale by around […] % for BIC to be able to use that
loan-to-deposit (‘LTD’) ratio of [110-150] % to be
option
achieved. That ratio had been set at [110-150] %
( 5 ) That reference rate may vary depending on duration and currency of
in the BIC offer of 20 July 2011;
the deposits (EURIBOR/LIBOR).
( 6 ) That possibility was included in the Framework Agreement in order
not to impose on BIC any less prudent decisions taken by the
( 1 ) The amount of the capital injection needed to reach the level sought
previous management of BPN.
by BIC was estimated by the Portuguese authorities as follows:
( 7 ) According to the answer of the Portuguese authorities of
approximately EUR […] million in September 2011, EUR […]
2 September 2011 and the document sent by the Portuguese auth
million in November 2011, and EUR 600 million in January 2012.
orities entitled ‘Plano Revisto’, dated 20 January 2012, p. 126, BIC
( 2 ) The SPVs passed from the control of BPN on 15 February 2012 and
can use that money line for up to three years during a drawing
were transferred to the State.
period of four years.

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L 301/8
EN
Official Journal of the European Union
30.10.2012
ix. the maintenance of approximately half of the
3. Grounds for initiating the formal investigation
employees of BPN (at least 750 out of approxi
procedure
mately 1 600 employees). The State would cover
the total cost of closing the branches not taken
(60) In the Decision of 24 October 2011, the Commission
over by BIC and of paying compensation to
expressed doubts on whether:
dismissed employees or to employees whose place
of employment would be changed;
— BPN, as a combined entity with the purchaser, was
x. the transfer to the State of the costs linked to liti
viable;
gation risks;
xi. an acquisition price of EUR 40 million paid by BIC;
— the aid granted to BPN was limited to the minimum
and the sale to BIC was the least expensive option
compared with a liquidation scenario;
xii. a price clause for the sharing with the State of 20 %
of net profits (after tax) for the earnings to be
generated by BPN during the next five years, for
— the measures limiting distortions of competition were
earnings cumulatively exceeding EUR 60 million;
sufficient; and
xiii. the commitment by BIC not to pay out dividends or
any other equivalent benefits to shareholders in
— the sale process entailed aid to the buyer.
relation to BPN for a period of five years.
(57) According
to
the
January
2012
Restructuring
Plan,
the
4. Comments from interested parties
combined entity resulting from the sale of BNP to BIC
(the ‘combined entity’) will be profitable after […] years
(61) The Commission received
no comments from third
in a base line scenario, as well as in a less favourable one.
parties.
It is thus estimated that the core tier 1 capital ratio of the
combined entity will drop from [10-15] % of the
combined entity’s risk-weighted assets (RWA) after the
first year to […] % after the fifth year. The projected
5. Position of the Portuguese State
fall would be due to the negative results of the first
years linked to the restructuring to be undertaken by
5.1 Position of the Portuguese State on the Decision of
BIC and the increase of the activity of the bank in
24 October 2011 (Opening Decision)
terms of resizing it to return to viability by granting
more credit to the economy. The restructuring will
(62) The
Portuguese
authorities
claim
that
the
January
2012
include investments in the bank’s agencies and image,
Restructuring Plan complies with the Restructuring
as well as in the integration of processes, procedures
Communication. In addition to that plan, the Portuguese
and organisation, and in IT. The return on equity
authorities submitted by letter of 20 January 2012 a
(ROE) is expected to grow from – [1-5] % in year 1 to
number of observations on the Decision of 24 October
+ [1-5] % in year 5, whereas the return on assets (ROA)
2011.
is expected to grow from – [0-2] % in year 1 to +
[0-2] % in year 5.
(63) The Portuguese authorities consider that three types of
(58) In a less favourable scenario, characterised by a higher
measure in favour of BPN do not constitute state aid.
level of non-performing loans and by higher financing
costs, the core tier 1 capital ratio is expected to drop to
[8-12] % in year 5, from [10-15] % at the end of year 1.
(64) First,
Portugal
claims
that
there
is
no
aid
in
the
support
measures granted to BPN before the nationalisation,
(59) Finally,
the
Portuguese
State
injected
capital
into
BPN
on
namely the ELA and the four loans granted by CGD in
15 February 2012 for an amount of EUR 600 million (
October 2008. Portugal argues that the ELA was granted

1 ).
by the BdP in an independent manner, at a penal interest
rate and with collateral from BPN. The loans by CGD in
( 1 ) Electronic mail from the Portuguese authorities received on
October 2008 were granted at market terms with a
17 February 2012 in response to Commission’s request for
competitive interest rate and appropriate guarantees,
information of 8 February 2012, question17. According to that
response, the capital injection led to the reimbursement of
and accordingly did not confer any economic
EUR 210 million of CGD money market loans.
advantage on BPN.

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30.10.2012 Official
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the
European
Union
L
301/9
(65) Second,
Portugal
denies
that
state
aid
was
involved
in
the
one. Third, the negative sale price is acceptable because
financing granted to BPN by CGD after the former’s
liquidation is more expensive for the State and would
nationalisation (interbank money market operations and
pose a threat to financial stability.
underwriting of commercial paper by CGD). Portugal
argues they were commercial transactions whose terms
and conditions were equivalent to comparable trans
actions carried out by prudent investors in a market
economy. They therefore conferred no economic
(70) Portugal
considers
that
the
measures
are
restricted
to
the
advantage on BPN.
minimum necessary in order to guarantee the stability of
the Portuguese financial sector and to re-establish the
viability of BPN.
(66) Finally,
the
Portuguese
authorities
also
consider
that
no
state aid was granted to BIC as a buyer of BPN. The
(71) Additionally,
Portugal
argues
that
the
sale
scenario
was
Portuguese authorities argue that the sale process was
the only alternative to the more costly liquidation
transparent, objective and non-discriminatory. BIC’s
scenario. Other options (integration into CGD and
proposal was globally the best in economic terms and
stand-alone restructuring) would not allow sufficient
should therefore be regarded as reflecting the market
resources in net present value terms to be generated to
price. The Framework Agreement signed on
compensate for the initial investment that would have to
9 December 2011 largely reflected the terms of the
be made. Portugal estimates the cost of the sale to BIC at
BIC offer of 20 July 2011. The Portuguese authorities
around EUR […] million to […] million (excluding the
also consider that despite the sale price being negative,
potential impact of some future contingencies which
the only alternative to the sale (a liquidation of BPN)
Portugal considers will not materialise), which is lower
would have obliged the State to support a higher
than the cost of liquidation under a number of different
financial burden and would have posed a threat to the
scenarios.
stability of the national financial system.
(72) Furthermore,
according
to
Portugal,
the
liquidity
granted
to BPN through the guarantee on issuance of commercial
(67) At
the
same
time,
Portugal
acknowledges
that
some
paper by BPN following the nationalisation was necessary
measures in favour of BPN constitute state aid. They
to ensure the continued activity of the bank during the
are the state guarantee on commercial paper issued by
restructuring.
BPN, the transfer of selected assets to the SPVs in 2010,
the recapitalisation of BPN undertaken on 15 February
2012 in view of the sale, and some of the measures
granted in the context of the projected sale to BIC
(such as the state guarantee on the commercial paper
(73) Regarding
the
selection
of
assets
transferred
to
the
SPVs,
programme which will be maintained after the sale).
Portugal considers that it was done based on objective
criteria with the aim of promoting the long-term viability
of BPN and of making potential buyers interested in the
reprivatisation process. Portugal also claims that further
transfers of assets within the framework of the sale to
(68) Furthermore,
Portugal
argues
that
all
the
measures
consti
BIC are adequate to guarantee the future viability of BPN
tuting state aid are compatible with EU law, as they
and are limited to the minimum necessary to allow the
address a serious disturbance in the Portuguese
sale.
economy pursuant to Article 107(3)(b) of the Treaty.
(74) Portugal claims that the increase in the capital of BPN
undertaken on 15 February 2012 is designed to ensure
(69) According
to
Portugal,
the
January
2012
Restructuring
that BPN will not face a capital short-fall during the
Plan allows BPN to re-establish its long-term viability
period covered by the January 2012 Restructuring Plan.
without the need of further aid. First, the State has
According to the plan’s projections for core tier 1 capital,
restructured BPN through the separation of assets and
that ratio is expected to decrease to [10-15] % in 2016
the transfer of some assets to the SPVs, and through
under the base case scenario and to [8-12] % in a less
the reduction of its presence on the market by more
favourable scenario, compared to the minimum
than 50 % and the halting of activities that did not
mandatory level of 10 % which will be effective as of
constitute the core of the retail bank, as well as
the end of 2012. Portugal also states that the sale
through different risk control measures and a prudent
conditions offered by BIC within an open and trans
commercial policy. Second, according to the BIC projec
parent sale process without minimum price are the
tions, when BPN is integrated into BIC the combined
minimum necessary to ensure the future viability of
entity should reach positive results […] the restructuring
BPN, as liquidation would be more expensive for the
plan, both in a base line scenario and in a less favourable
State and might threaten financial stability.

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L 301/10
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Official Journal of the European Union
30.10.2012
(75) Portugal
also
claims
that
both
the
former
shareholders
of
Portugal points out that the combined entity will have a
BPN and BPN itself have shared or will share sufficiently
market share lower than 1 % ([0-1] % of market share in
the costs of the restructuring process, ensuring adequate
the banking sector, 14th in terms of credit to clients and
burden-sharing. BPN’s previous shareholders had received
15th in terms of deposits). Moreover, the measures are
no compensation as a result of the nationalisation and
not likely to have a negative impact on the entry of
had lost the entirety of the capital they had invested in
foreign banks on the domestic market, as is evident
the bank.
from the fact that BIC itself is held by an Angolan
financial group. Portugal also considers that there is no
moral hazard as the bank has been nationalised, its
management has been removed, its shareholders
(76) However,
Portugal
considers
that
it
is
not
appropriate
to
obtained no compensation and the bank has undergone
seek burden-sharing from clients who contributed
a profound restructuring.
subordinated debt to BPN, given the specific circum
stances of the sale of those instruments […]. In some
cases, the technical specifications of the products prevent
BPN from refusing to pay clients interest to reimburse
capital.
(81) Further,
Portugal
considers
that
a
number
of
measures
taken within the process would be adequate and
sufficient to limit any distortion of competition. BPN
had a reduced presence on the market before the
(77) According to Portugal, BPN’s contribution to the restruc
nationalisation (9th largest bank in Portugal with
turing process is also significant as its management was
market shares between [1-5] % and [1-5] % depending
replaced following the nationalisation, its commercial
on the markets), it was restructured and its presence
and risk management policies have been substantially
on the market was reduced by more than 50 % and
altered and it will see its activity reduced by more than
was re-centred on retail banking. The nationalisation
50 %.
happened without compensation of previous share
holders, while the commercial strategy and the risk
control policy of BPN were changed in its wake.
(78) Portugal concedes that the transfer of assets to the SPVs
at book value took place above the assets’ real economic
value and without remuneration for the State. However,
Portugal considers that an own contribution by BPN is
(82) The Portuguese authorities also claim that the sale
ensured through its nationalisation at zero price, which
process for BPN was open and transparent. Finally, BIC
was followed by a deep restructuring. Portugal claims
is prohibited from distributing dividends until 2016 in
that any advantage that could result for BPN from the
order to ensure that the financial support granted to BPN
separation of assets into the SPVs would be partially
is used for ensuring the long-term viability of the bank.
recovered through the reprivatisation price for the
The profit-sharing agreement between the State and BIC
bank, which was the highest possible. Portugal also
for results above EUR […] million allows the State to
considers that the state guarantee is properly remun
recover part of the restructuring costs of the bank. BIC’s
erated. Despite the remuneration being lower (at 0,2 %
commitment not to refer to state aid it has received in its
per year) than is required for government guarantees ( 1 ),
commercial communication ensures, according to the
any potential additional income received by BPN (or any
Portuguese authorities, that the aid is not used to the
expense that does not materialise) during the restruc
detriment of competitors. Other possible commitments
turing process would benefit the State, which currently
foreseen in the Commission guidance for bank restruc
owns the entirety of BPN’s shares.
turing (such as measures to foster market opening,
market share limits or the divestment of additional
assets and activities) are not appropriate in the context
of BPN’s restructuring.
(79) Concerning
the
capital
increase
in
BPN
undertaken
on
15 February 2012, Portugal comments that it will not
alter the shareholder structure of BPN and that the capital
will be at least partially recovered through the sale of
BPN, as it contributes to avoiding the even higher cost
5.2 Commitments given by the Portuguese State
of liquidation.
(83) As regards the implementation of the restructuring plan,
the Portuguese authorities commit to the following:
(80) Portugal
also
considers
that
the
measures
adopted
or
to
be adopted by the State do not distort competition.
Capital level
( 1 ) See in particular the Communication on the application of State aid
rules to measures taken in relation to financial institutions in the
context of the current global financial crisis, OJ C 270, 25.10.2008,
(84) The core tier 1 capital ratio of BPN at the date of the sale
p. 8.
to Banco BIC will not be higher than [10-18] %.

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30.10.2012 Official
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European
Union L
301/11
(85) If Banco BIC or the combined entity chooses to return
Marketing
loans to the State or any entity controlled by the State
after the sale, it will pay back to the State the capital
(93) Banco
BIC
or
the
combined
entity
will
not
refer
to
the
associated with those loans to the tune of [10-18] % of
use of state aid in its marketing campaigns and
the loans’ risk weighted assets.
communications to investors.
6. Assessment
Non-performing loans
6.1 Existence of aid
(86) Banco
BIC
and
the
combined
entity
will
not
be
entitled
to transfer non-performing loans to the State or any
(94) Article 107(1) of the Treaty on the Functioning of the
entity controlled by the State after [> 2013].
European Union provides that any aid granted by a
Member State or through State resources in any form
whatsoever which distorts or threatens to distort
competition by favouring certain undertakings or the
(87) Banco BIC or the combined entity will transfer non-
production of certain goods shall, insofar as it affects
performing loans to the State or any entity controlled
trade between Member States, be incompatible with the
by the State under the conditions set out in paragraph
internal market. It follows that a state measure qualifies
(85) above only after having completely exhausted the
as state aid if it meets the following four (cumulative)
provisions available at the date of the sale in the accounts
criteria:
of BPN.
— state resources;
Liquidity lines
(88) The
existing
credit
line
for
EUR
[150-500]
million
set
out in the Framework Agreement in relation to BPN’s
— selective advantage;
commercial paper programme and guaranteed by the
State, will not be extended beyond […] years from the
date of sale.
— distortive impact on competition; and
— impact on trade between Member States.
(89) The
remuneration
of
the
EUR
[200-400]
million
liquidity
line to be granted by CGD to Banco BIC or the
combined entity will be set as a minimum at Euribor
+[…] bps.
6.1.1. M e a s u r e s i n f a v o u r o f B P N a n d o f
t h e e c o n o m i c a c t i v i t y a f t e r t h e s a l e
6.1.1.1 Measures granted before the nationalisation
(90) Until
31
December
2016
Portugal
will
request
the
prior
approval of the Commission in advance of any granting
(95) Portugal
argues
that
the
measures
granted
to
BPN
before
of credit lines or guarantees by CGD or the State to
the nationalisation do not constitute state aid. The
Banco BIC or the combined entity after the sale.
measures consist of the ELA and the four loans granted
by CGD before the nationalisation of BPN in October
and November 2008.
Ban on acquisitions
ELA
(91) Banco BIC and the combined entity will not make any
acquisition in undertakings until 31 December 2016
(96) Regarding the ELA, as pointed out by the Portuguese
unless the total gross cumulative purchase price paid
authorities in their observations on the Decision of
by Banco BIC and the combined entity for all
24 October 2011, the emergency liquidity support
acquisitions during a fiscal year is less than EUR […]
granted to BPN before the nationalisation was decided
million. The total gross cumulative purchase price of
upon independently by the BdP at a penalising interest
any such acquisitions will be calculated without
rate and supported by guarantees provided by BPN,
including the assumption or transfer of debt in relation
without a state guarantee.
to such acquisitions.
(97) At the time of the attribution of the ELA facility (17 and
Subordinated debt
27 October 2008) no decision had been taken regarding
the solvency and nationalisation of BPN (since those
(92) Banco BIC, the combined entity and Portugal will not
decisions were taken only in early November 2008).
exercise until 31 December 2016 any call option rights
The ELA was not part of a larger aid package, but
in relation to subordinated debt issued by BPN prior to
rather the offering of liquidity as part of the normal
the date of the sale.
activities of the BdP.

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L 301/12
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Official Journal of the European Union
30.10.2012
(98) The
Commission
therefore
concludes
that
there
was
no
(104) Fourth, concerning the fourth loan, the Commission
state aid in the provision of ELA by the BdP to BPN, in
notes that CGD was not only managing BPN in the
line with the Banking Communication ( 1 ).
interests of the State pursuant to Article 2(7) of the
Nationalisation Law but also obtained a state guarantee
pursuant to Article 2(9) of the Nationalisation Law in
respect of all credit and liquidity it might grant to BPN
Loans granted by CGD
in the context of the nationalisation and ‘in substitution
of the State’.
State resources
(99) Concerning the loans granted by CGD, the Commission
notes that prior to the nationalisation of BPN, the bank
received from CGD loans for a total of EUR 315 million
(105) Given the financial and economic situation in general,
and not EUR 235 million ( 2 ).
and the widely-known difficulties of BPN in particular,
it would be highly unlikely that another institution would
have provided the liquidity in question to BPN, which
explains why the Portuguese authorities considered the
(100) The Commission notes that CGD is wholly owned by the
CGD liquidity measures as being of a ‘special’ nature (see
State, which appoints the members of its Board. In order
paragraph (25)).
to establish whether the loans are imputable to the State,
the specific circumstances under which they were granted
need to be assessed in order to determine whether CGD
acted for reasons differing from normal commercial
practice. To that end, the following considerations are
(106) Based on each of these considerations, the Commission
relevant.
concludes that the CGD’s decision to grant the relevant
loans to BPN before its nationalisation was not a normal
commercial decision. The decision to do so must be
considered as directly imputable to the State. The loans
therefore constitute state resources.
(101) First, at the time when the first three loans were granted
in October 2008, BPN’s difficulties were already widely
known. According to the Portuguese authorities, BPN
had been facing liquidity problems since the summer
of 2008, as evidenced by significant changes in the top
Advantage
management of BPN (changed twice since the beginning
of 2008), audits of BPN undertaken by the BdP in June
(107) As the loans allowed BPN to obtain liquidity that it
and the downgrading of BPN by Moody’s to Baa3 on
would otherwise not have been able to obtain on the
18 July 2008. Further, the second, third and fourth
market, they provided BPN with the liquidity it needed in
loans were granted after 22 October 2008, the date by
order to continue to operate and to compete, inter alia,
which, according to Portugal, BPN was in a position of
for loans and deposits on the banking markets in which
severe negative liquidity. Any lender acting under normal
it was active.
commercial practice would have requested from BPN the
information necessary to understand its liquidity position
and repayment capacity before extending an additional
loan to it, and would therefore have become acquainted
with BPN’s precarious financial position.
(108) The Commission therefore considers that BPN obtained
an economic advantage.
(102) Second, the amounts of the loans were very significant
compared with the size of BPN’s balance sheet and
Selectivity
liabilities at the time, constituting a significant individual
exposure to a bank in difficulty for CGD.
(109) The measures concerned are selective as they solely
benefit BPN.
(103) Third, the loans were granted in October and November
2008, soon after the failure of Lehman Brothers, at a
time when interbank markets were largely inaccessible
Distortion of competition and impact on trade
even for the strongest international financial institutions,
let alone banks facing significant liquidity challenges.
(110) Despite Portugal’s comment to the effect that BPN ranked
only ninth in the Portuguese banking sector before its
nationalisation, the loans by CGD distorted or threatened
( 1 ) Communication on the application of State aid rules to measures
to distort competition by placing BPN in a beneficial
taken in relation to financial institutions in the context of the
position vis-à-vis other competing banks, allowing it to
current global financial crisis, OJ C 270, 25.10.2008, p. 8, point 51.
( 2 ) Considering the submission of 20 January 2012 that sets out the
obtain liquidity that it would not otherwise have
loan of EUR 80 million granted on 3 November 2008.
obtained on the market.

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30.10.2012 Official
Journal
of
the
European
Union L
301/13
(111) Given that BPN was active at national, European and
Advantage
international level at the time the loans were made,
including for instance through its French subsidiary, the
(117) The state guarantees allowed BPN to obtain financial
measures also threatened to affect trade between Member
support in a situation where there were no alternatives
States.
for it on the market.
Conclusion
(118) They allowed BPN to continue activity on the market,
competing for business (not only for the maintenance of
(112) The Commission therefore considers that the four loans
totalling EUR 315 million made by CGD to BPN in
business but also possibly for new business) as well as to
October and November 2008 constitute state aid.
meet its obligations towards clients and other market
players.
6.1.1.2. Measures granted after the nationalisation, not
specifically linked to the sale to BIC
(119) On the basis of the foregoing, the Commission concludes
that the state guarantees confer an economic advantage
(113) The Commission has already established in the Decision
on BPN.
of 24 October 2011 that the nationalisation does not
constitute state aid in favour of BPN’s shareholders.
Selectivity
(114) The following measures, which were not specifically
linked to the sale to BIC, were granted after the national
(120) The measures concerned are selective as they benefit a
isation of BPN:
specific entity, BPN. Moreover, for the part of the
liquidity line continuing after the sale, they also benefit
the combined entity.
(a) the state guarantee on liabilities issued by BPN and
funded by CGD, including both issuance of
commercial paper subscribed by CGD and use of
Distortion of competition and impact on trade
money market credit facilities provided by CGD;
(121) Given the position of BPN in the Portuguese financial
sector, and the fact that the financial sector is open to
intense competition at Union level, as well as the fact
(b) the transfer of assets and liabilities to three SPVs
that BPN is competing with a significant number of
owned by the State.
subsidiaries of foreign banks in Portugal, the Commission
considers that any advantage from state resources would
have the potential to affect intra-Union trade and to
The State guarantee on liabilities issued by BPN
distort competition within the meaning of Article 107(1)
of the Treaty.
State resources
(115) The state guarantee on commercial paper issued by BPN
(and the SPVs) and subscribed by CGD, which was
Conclusion
granted to BPN after the nationalisation, was directly
financed by the Member State. Additionally, under
(122) The state guarantees in favour of BPN allowed BPN to
Article 2(9) of the Nationalisation Law all credit or
receive a large amount of funding which was not
liquidity lines offered by CGD in favour of BPN (and
available on the market and provided BPN with a
of the SPVs) in the context of the nationalisation were
selective advantage. They allowed BPN to remain on
to be guaranteed by the Portuguese State. It is therefore
the market and pursue its activities without further
indisputable that all funding provided by CGD to BPN
contamination from its previous situation. They
(or the SPVs) after nationalisation involves state
constitute state aid.
resources.
The transfer of assets to the SPVs
(116) Additionally, it should be underlined that after the
nationalisation CGD was the only entity providing
State resources
funding to BPN or to the SPVs, and that its exposure
increased over time as other liabilities matured and were
(123) The removal of certain assets from BPN to the SPVs,
not rolled over by the original lenders or substituted by
which are wholly owned by the Member State, means
lending from other institutions. The lack of alternative
that the Member State bears the entire financial respon
funding sources for BPN is not surprising, given that its
sibility for them and incurs all the risks for assets in the
financial difficulties and its precarious future were public
SPVs, at least some of which may be irrecoverable. The
knowledge.
measure therefore involves state resources.

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L 301/14
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Official Journal of the European Union
30.10.2012
Advantage
The recapitalisation of BPN in view of the sale
(124) The Commission considers that the transfer of assets to
State resources
the SPVs before the sale, at book value for EUR 3,9
billion (with impairments estimated at EUR 1,8 billion)
(129) A EUR 600 million recapitalisation of BPN took place on
involves an advantage to BPN because there was no ex
15 February 2012. That measure was carried out directly
ante transparency, assets were not valued at market price
by the State and through state resources in view of the
and the State was not remunerated in the framework of
sale to BIC.
the transfer.
Advantage
(125) The Commission considers that the transfer of assets at
book value and not at market value confers an economic
(130) The EUR 600 million recapitalisation of BPN on
advantage on BPN compared with its competitors.
15 February 2012 was calibrated to provide BPN with
EUR [200-400] million of equity capital at the moment
of the sale. The latter amount corresponded at the time
Selectivity
of BIC’s offer of 20 July 2011 to an estimated [10-18] %
of core tier 1 capital. It is significantly in excess of the
(126) The measures concerned are selective as they benefit a
regulatory minimum (9 % of core tier 1 as of end 2011
specific entity, BPN.
and 10 % core tier 1 as of end of 2012) ( 1 ).
Distortion of competition and impact on trade
(131) The Commission considers that the capital injection
(127) Given the position of BPN in the Portuguese financial
confers an economic advantage on BPN and on the
sector, and the fact that the financial sector is open to
economic activity after the sale. The advantage stems
intense competition at Union level, as well as the fact
from ensuring that the capital necessary to meet and
that BPN is competing with a significant number of
exceed regulatory requirements is available to BPN
subsidiaries of foreign banks in Portugal, the Commission
following the recapitalisation and will also be available
considers that any advantage from state resources would
to the combined entity. That capital allows BPN, and will
have the potential to affect intra-Union trade and to
also allow the combined entity, to be active on the
distort competition within the meaning of Article 107(1)
markets and to provide new credit, in an economic
of the Treaty.
context in which other competitors must deleverage.
6.1.1.3. Measures granted after the nationalisation,
linked to the sale to BIC
Selectivity


(128) In addition to the measures granted to BPN after the
(132) The measures concerned are selective as they solely
nationalisation that were unconnected to the sale to
benefit a specific entity - BPN and the combined entity
BIC, additional measures were granted in connection
that will continue the economic activity after the sale.
with the sale to BIC. They comprise:
Distortion of competition and impact on trade
a) the recapitalisation of BPN with a view to the sale;
(133) Portugal claims that BPN continued reducing its market
share following the nationalisation and that the
b) the transfer of additional assets and liabilities to BPN
combined entity will have a market share of less than
linked to the sale;
1 % in terms of credit to clients, client recourses or
banking products and of less than 2 % on any of the
relevant markets. Nevertheless, the measures distort or
threaten to distort competition as they place BPN and
c) the right of BIC to transfer non-performing loans to
the combined entity after the sale to BIC in a beneficial
the State, after the sale;
position vis-à-vis other competing banks. The capital in
excess in the combined entity shields the economic
activity from investment risks that other competitors
d) the transfer to the State, in view of the sale, of costs
face. It also increases the likelihood that additional
linked to litigation risks; and
liquidity will be available to both beneficiaries and
could facilitate future expansion by BPN and the
combined entity in an economic context where other
competitors active in Portugal must deleverage.
e) the granting by CGD of a liquidity line to the
combined entity after the sale and the maintenance
( 1 ) See the ‘Aviso de Banco de Portugal n o 3/2011’ that requires credit
of a credit line of commercial paper, after the sale,
institutions to reach a consolidated basis core tier 1 ratio of 9 % by
secured by the State, of EUR [150-500] million.
31 December 2011.

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(134) Given the position of BPN in the Portuguese financial
Agreement and those assets would be neither valued at
sector, and the fact that the financial sector is open to
market value, nor the State reimbursed for them. On the
intense competition at Union level, as well as the fact
contrary, to the extent that this option reduces the RWA
that BPN is competing with a significant number of
of BPN, it would result in an increase of the bank's
subsidiaries of foreign banks in Portugal, the Commission
capital ratio, and consequently of its capacity to extend
considers that any advantage from state resources would
new loans and to be active in the market. After the sale,
have the potential to affect intra-Union trade and to
that advantage would be carried over to the combined
distort competition within the meaning of Article 107(1)
entity.
of the Treaty.
(140) The remuneration by the State of the difference between
Conclusion
the applicable interest on deposits and the pricing
threshold of […] bps above the reference rate removes
(135) The EUR 600 million recapitalisation of BPN which took
a cost that BPN would have to bear in normal circum
place on 15 February 2012 constitutes state aid.
stances, and therefore confers an advantage on it.
Selectivity
The transfer of additional assets and liabilities from
BPN linked to the sale
(141) The measures concerned are selective as they solely
benefit a specific entity - BPN – and the economic
(136) The measures granted in connection with the sale to BIC
activity that will be continued after the sale.
include the right of BIC to request the transfer, before
closing, of other assets and liabilities of BPN, such as
loans to credit institutions, or physical and financial
assets. They also include the right of BIC to transfer
Distortion of competition and impact on trade
deposits with pricing […] bps above the relevant
reference rate or to receive from the State the difference
(142) The measures distort or threaten to distort competition
in remuneration for such deposits.
as they place BPN and the combined entity after the sale
to BIC in a beneficial position vis-à-vis other competing
banks by not requiring it to deleverage unlike other
competitors and by allowing BPN and the combined
State resources
entity to grant more credit to the economy.
(137) The removal from BPN of certain loans and liabilities
(including deposits) selected by BIC is directly financed
by the Member State. Any items removed from BPN will
(143) Given the position of BPN in the Portuguese financial
either be transferred at book value to the SPVs, which are
sector, and the fact that the financial sector is open to
wholly owned by the Member State, or will in any case
intense competition at Union level, as well as the fact
be under its financial responsibility. The Member State
that BPN is competing with a significant number of
would thereby bear the financial burden of managing and
subsidiaries of foreign banks in Portugal, the Commission
disposing of those assets and liabilities. The Member
considers that any advantage from state resources would
State would also have to finance the difference between
have the potential to affect intra-Union trade and to
the applicable interest on deposits and the pricing
distort competition within the meaning of Article 107(1)
threshold of […] bps above the reference rate.
of the Treaty.
Advantage
Conclusion
(138) The Commission considers that the transfer of additional
(144) The transfer of additional assets and liabilities (including
assets and liabilities to the SPVs before the sale involves
deposits) from the balance sheet of BPN to the SPVs
an advantage to BPN and the combined entity, because
before the sale constitutes state aid.
there was no ex ante transparency, assets were not valued
at market price and the State was not remunerated in the
framework of the transfer.
The right of BIC to transfer non-performing loans to
the State after the sale
(145) BIC has the right to sell back within […] months loans
(139) The Commission considers that the transfer of assets at
that are non-performing for at least […] days (up to a
book value and not at market value confers an economic
maximum of […] % of the nominal value of the total
advantage on BPN and the combined entity compared
loan portfolio selected by BIC after compensation with
with its competitors. BIC could freely choose the assets
existing deposits) and for the amount exceeding the level
to be removed under that condition of the Framework
of provisioning (EUR […] million).

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L 301/16
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Official Journal of the European Union
30.10.2012
State resources
Distortion of competition and impact on trade
(146) The right of BIC to remove additional assets and
(151) The measure distorts or threatens to distort competition
liabilities from the balance sheet after the sale is
as it places BPN and the combined entity after the sale to
directly financed by the Member State. Any items
BIC in a beneficial position vis-à-vis other competing
removed from BPN will either be transferred at book
banks by not requiring it to deleverage unlike other
value to the SPVs, which are wholly owned by the
competitors and thus allowing BPN and the combined
Member State, or will in any case be under its financial
entity to grant more credit to the economy.
responsibility. The Member State would thereby bear the
financial burden of managing and disposing of those
assets.
(152) Given the position of BPN in the Portuguese financial
sector, and the fact that the financial sector is open to
intense competition at Union level, as well as the fact
that BPN is competing with a significant number of
Advantage
subsidiaries of foreign banks in Portugal, the Commission
considers that any advantage from state resources would
(147) The Commission considers that the possibility of
have the potential to affect intra-Union trade and to
removing non-performing loans after the sale enables
distort competition within the meaning of Article 107(1)
BPN and the combined entity to expand their activity
of the Treaty.
and grant more credit in an economic context where
other competitors active in Portugal must deleverage.
Indeed, if the same level of equity were retained, the
bank's capital ratio would increase through the removal
Conclusion
of non-performing loans and the reduction of RWA.
Consequently its capacity to extend new loans and to
(153) The measure could allow BPN and the combined entity,
be active in the market would increase.
in the absence of a commitment to give back the capital
linked to the loans, to retroactively modify the RWA of
the bank after the sale. This would result in a higher
proportional capitalisation of the bank. It thereby
confers an advantage on the bank and distorts
(148) The combined entity will also have an advantage over its
competition with other competitors. The measure
competitors that are faced with impairments on lower
constitutes state aid.
quality assets, which they have to absorb, limiting the
capital available to them for new lending. The
combined entity, in contrast, will not have its capital
base reduced by such impairments and the decreasing
The transfer of litigation risks to the State
value of its loan portfolio.
State resources
(154) The transfer of BPN’s litigation risks to the State
constitutes a liability which is taken over by the State.
(149) In addition, the option of BIC to give back non-
performing loans to the State until no later than […]
after the date of the sale could alter the RWA of the
Advantage
bank and result in a higher core tier 1 capital than the

level of [10-18] % implied in the offer of BIC of 20 July
(155) By taking over a liability from BPN, the State is granting
2011. The Commission notes Portugal's commitment in
an advantage to BPN and to the combined entity in
this respect that if Banco BIC or the combined entity
comparison with their competitors who must incur
chooses to return loans to the State or any entity
equivalent liabilities on their own balance sheet.
controlled by the State after the sale, it will pay back
to the State the capital associated with those loans to
the tune of [10-18] % of the loans’ risk weighted assets
and will, in addition, transfer non-performing loans and
Selectivity
pay back the capital associated with those loans to the
State only after having completely exhausted the
(156) The measure concerned is selective as it solely benefits a
provisions available at the date of the sale in the
specific entity (BPN and the combined entity resulting
accounts of BPN.
entity after the sale to BIC).
Distortion of competition and impact on trade
Selectivity
(157) The measure provides capital relief to BPN and the
(150) The measure concerned is selective as it solely benefits a
combined entity where no alternatives existed on the
specific entity - BPN – and the economic activity that will
market and where other competitors must incur such
be continued after the sale.
liabilities on their balance sheet.

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(158) Given the position of BPN in the Portuguese financial
(165) Concerning the EUR [200-400] million credit line
sector, and the fact that the financial sector is open to
granted by CGD to BIC, the Commission notes that it
intense competition at Union level, as well as the fact
will provide a cushion for the combined entity’s funding
that BPN is competing with a significant number of
position, should there be deposit outflows after the sale.
subsidiaries of foreign banks in Portugal, the Commission
No such credit line is granted by CGD to any entity other
considers that any advantage from state resources would
than the combined entity. The credit line therefore
have the potential to affect intra-Union trade and to
constitutes an economic advantage for the combined
distort competition within the meaning of Article 107(1)
entity.
of the Treaty.
(166) The maintenance of a credit line, with state guarantee, of
Conclusion
EUR [150-500] million until […] for the ongoing
commercial paper programme also gives BPN and the
(159) The measure provides a capital relief measure and
combined entity an advantage over its competitors in
constitutes state aid.
terms of access to liquidity.
The granting by CGD of a EUR 300 million liquidity
Selectivity
line to the combined entity after the sale and the
maintenance of a credit line of commercial paper
(167) The measures concerned are selective as they solely
of EUR [150-350] million in favour of BPN
benefit a specific entity (BPN and the combined entity
resulting from the sale to BIC).
State resources
(160) The granting of a EUR [150-350] million liquidity line to
the combined entity after the sale and the maintenance
Distortion of competition and impact on trade
of a credit line of commercial paper of EUR [150-500]
million by CGD in favour of BPN after the sale must be
(168) The advantage granted to BPN and the combined entity
considered as imputable to the State taking into account
after the sale distorts competition, all the more so
the specific circumstances under which they occurred.
considering the current high cost of borrowing on the
financial markets.
(161) First, CGD is wholly owned by the State, which appoints
the members of its Board. As noted in paragraph (100),
(169) Given the position of BPN in the Portuguese financial
CGD was appointed by law to manage BPN and also
sector, and given that the financial sector is open to
obtained a state guarantee pursuant to Article 2(9) of
intense competition at Union level, and that BPN is
the Nationalisation Law in respect of all credit and
competing with a significant number of subsidiaries of
liquidity it might grant to BPN in the context of the
foreign banks in Portugal, the Commission considers that
nationalisation and ‘in substitution of the State’. That
any advantage from state resources would have the
guarantee continues to apply to the EUR [150-500]
potential to affect intra-Union trade and to distort
million credit line.
competition within the meaning of Article 107(1) of
the Treaty.
(162) Second, the decisions to grant the liquidity and credit
lines were not taken independently by CGD, but were
Conclusion
part of the conditions of the sale negotiated between BIC
(170) The grant by CGD of a EUR [200-400] million liquidity
and the Portuguese authorities.
line to the combined entity after the sale and the main
tenance of a credit line of commercial paper of EUR
[150-500] million in favour of BPN constitute state aid.
(163) The granting by CGD of a EUR [200-400] million
liquidity line to the combined entity after the sale and
the maintenance by CGD of a credit line of commercial
6.1.1.4. Possible aid to the buyer
paper of EUR [150-500] million after the sale are
therefore both directly imputable to the Member State.
(171) According to point 49 of the Banking Communication,
in order to ensure that no aid is granted to the buyer of a
financial institution sold by the State, it is important that
certain requirements are respected and in particular that:
Advantage
the sale process is open, transparent, non-discriminatory
and unconditional, the sale takes place on market terms,
(164) The measures allow BPN and the combined entity to
and the State maximises the sale price for the assets and
have easy and cheap access to liquidity.
liabilities involved.

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L 301/18
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Official Journal of the European Union
30.10.2012
(172) Concerning the first requirement, while the sale process
liabilities to be transferred to the SPVs prior to the
started as an open and unconditional tender procedure,
sale), the Commission notes that it is possible that BPN
the binding offer submitted by BIC was not final as
may end up with a core tier 1 ratio in excess of what
regards several material aspects of the proposed trans
was implied in the offer. According to information
action, including the ultimate extent of BPN’s assets
submitted by the Portuguese authorities, [10-18] % of
and liabilities that BIC intended to acquire, and the
core tier 1 is the level of capital implied in BIC’s offer
exact number of branches and the number of staff to
of 20 July 2011.
be taken over. All those aspects were discussed in
subsequent bilateral negotiations between the Portuguese
authorities and BIC, and culminated in the Framework
Agreement of 9 December 2011. Even the Framework
(177) The Commission notes however that Portugal has
Agreement is not final as regards the exact extent of the
undertaken to limit the level of capitalisation of BPN
bank being acquired. In particular, it does not determine
on the date of the sale to [10-18] % of core tier 1
the assets and liabilities that BIC will take over, despite
capital, as implied by BIC’s offer. This will allow the
clearly specifying that BPN will have equity of EUR [200-
State to maximise the sale price for the assets and
400] million at the moment of sale. In other words,
liabilities involved. This commitment is necessary to
neither the BIC offer of 20 July 2011 nor the
ensure that no advantage is granted to BIC.
Framework Agreement clearly specify what BIC is
buying, but both fix a precise price for it.
(178) Moreover, by exercising the right to transfer to the State
further non-performing loans after the sale, BIC could
(173) In this connection, it is important to note that the
reduce further the extent of the bank, thus increasing
Framework Agreement should not deviate from the
the core tier 1 ratio for the combined entity to a
terms of BIC’s binding offer of 20 July 2011 by
higher level than the one implied in BIC’s offer of
providing additional advantages to BIC and/or the
20 July 2011. This could confer an additional
combined entity. Indeed, given the very loose terms of
advantage on BIC. The additional commitment of
the 20 July 2011 binding offer, BIC could very well
Portugal for BIC to give back the capital linked to any
extract additional concessions from the State, e.g. by
non-performing loans that it would return to the State or
reducing the extent of the assets and liabilities it effec
to a state-owned vehicle after the sale ensure that the
tively acquires. Such additional concessions would result
level of core tier 1 capital will not be increased further
in a higher core tier 1 ratio than the BIC offer of 20 July
after the sale. This additional commitment is necessary to
2011 implied, without contradicting the terms of the sale
avoid conferring an advantage on BIC.
process.
Selectivity
(174) The Commission therefore welcomes Portugal’s
(179) The measures concerned are selective as they benefit a
commitment to limit the level of capitalisation of BPN
specific entity, namely BIC, and implicitly also the
on the date of the sale to [10-18] % of core tier 1 capital,
combined entity.
as implied in BIC’s offer. The additional commitment of
Portugal for BIC to give back the capital linked to any
non-performing loans that it would return to the State or
to a state -owned vehicle after the sale ensures that the
Distortion of competition and impact on trade
level of core tier 1 capital will not be unduly increased
after the sale.
(180) Given the position of BPN in the Portuguese financial
sector, and the fact that the financial sector is open to
intense competition at Union level, as well as the fact
that BPN is competing with a significant number of
subsidiaries of foreign banks in Portugal, the Commission
State resources
considers that any advantage from state resources would
have the potential to affect intra-Union trade and to
(175) As demonstrated in section 6.1.1.3 all the measures
linked to the sale to BIC involve state resources.
distort competition within the meaning of Article 107(1)
of the Treaty.
Advantage
Conclusion
(176) In the absence of a determination of the core tier 1
(181) In view of the commitments granted by Portugal, the
capital of BPN in the BIC offer of 20 July 2011 or the
Commission can conclude that the final results of the
Framework Agreement (both of which only indicate the
process, including the elements agreed upon with BIC
absolute amount of capital to exist in BPN at the
in the Framework Agreement, would not have altered
moment of the sale without taking into account the
the outcome of the tendering procedure and no
bank’s RWA or the right to BIC to select assets and
advantage is granted to BIC by the sale process.

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6.1.2 Q u a n t i f i c a t i o n o f t h e a i d
transfer in the context of the sale of additional assets and
liabilities, including non-performing loans, from the
(182) BPN and the combined entity that will continue BPN’s
balance sheet of BPN to the SPVs, involve additional
economic activities benefited from several state aid
aid, which was considered non quantifiable by Portugal.
measures as summarised below:
Table 1
6.2 Compatibility of the various aid measures: application of
Article 107(3)(b) TFEU
Aid measures granted to BPN and the combined entity
(186) Article 107(3)(b) of the Treaty on the Functioning of the
European Union empowers the Commission to declare
Description
Amount EUR
million
aid compatible with the internal market if it is intended
‘to remedy a serious disturbance in the economy of a
a. Loans granted by CGD before national
315
Member State’.
isation
b. Transfer of EUR 3,9 billion of assets to the
Between
SPVs before the tender process
1 800 and
4 000
(187) The Commission has acknowledged that the global
financial crisis can create a serious disturbance in the
economy of a Member State and that measures
c. Capital injection by the State of 15 February
600
supporting banks may be apt to remedy that disturbance.
2012
That analysis has been confirmed in the Banking
Communication, Recapitalisation Communication ( 1 ), the
d. Liquidity lines granted by CGD to BPN (as of
[150-500]
Impaired Assets Communication
( 2 ) (IAC) and the
31 December 2011)
Restructuring Communication
( 3 ). The Commission
continues to take the view that state aid may be
of which covered by an explicit state guar
[200-400]
approved pursuant to Article 107(3)(b) of the Treaty in
antee
view of the reappearance of stress in financial markets.
The Commission confirmed that view by adopting the
e. Liquidity lines requested by BIC for the
2011 Prolongation Communication that prolongs
combined entity
beyond 31 December 2011 the application of state aid
rules to support measures in favour of banks in the
of which maintenance of the existing
400
context of the financial crisis ( 4 ).
commercial paper programme
of which new liquidity line 300
(188) Portugal in particular has been severely hit by the
financial and economic crisis. Its effects have been
confirmed in the Commission’s various decisions ( 5 )
approving the measures taken by the Portuguese auth
(183) First, it must be noted that these aid measures are not all
orities to combat the financial crisis. In addition, account
to be considered as cumulative, as according to the
should be taken of the challenging economic and
Portuguese authorities, some measures replaced others
financial situation which led to an official request for
(for example, the initial loans granted by CGD before
international assistance from Portugal on 7 April 2011,
nationalisation were replaced by the commercial paper
leading to the signing of the MoU on 17 May 2011.
issued by BPN after nationalisation).
( 1 ) OJ C 10, 15.1.2009, p. 2.
( 2 ) Communication from the Commission on the treatment of impaired
assets in the Community banking sector, OJ C 72, 26.3.2009, p. 1.
(184) Measures b and c either involve capital injections or are
( 3 ) Commission Communication on the return to viability and the
equivalent to capital injections. They amount to at least
assessment of restructuring measures in the financial sector in the
EUR 3 billion, or around 50 % of BPN’s balance sheet
current crisis under the State aid rules, OJ C 195, 19.8.2009, p. 9.
before nationalisation. In addition, the total amount of
( 4 ) Communication from the Commission on the application, from
state guarantees on the commercial paper issuance
1 January 2012, of State aid rules to support measures in favour
programme granted by Portugal in favour of BPN since
of banks in the context of the financial crisis, OJ C 356, 6.12.2011,
p. 7.
nationalisation amounts to EUR 5 billion, EUR 4,5 billion
( 5 ) Commission Decision of 29 October 2008 in State aid case
of which had been used as at 31 December 2011.
NN60/2008 – Portuguese guarantee scheme, OJ C 9, 14.1.2009
and Corrigendum, OJ C 25, 31.1.2009, prolonged by the
Commission Decision of 22 February 2010 in State aid case
N51/2010, OJ C 96, 16.4.2010, further prolonged by the
(185) In addition, there is the right for BIC to transfer deposits
Commission Decision of 23 July 2010 in State aid case N315/2010,
with a pricing above […] bps or to have the State
OJ C 283, 20.10.2010, further prolonged by the Commission
remunerate the difference, with a cost estimated by
Decision of 21 January 2011 in State aid case SA.32158,
OJ C 111, 9 April 2011 and further prolonged by the Commission
Portugal as amounting to around EUR […]. Finally, the
Decision of 21 December 2011 in State aid case SA.34034, not yet
transfer to the State of costs linked to litigation, and the
published.

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L 301/20
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30.10.2012
(189) The Commission considers that the disorderly failure of
entity with BIC and thus it could not reach a conclusion
BPN would entail serious consequences for the
in that respect. Portugal submitted a detailed business
Portuguese economy. The measures can therefore be
plan for BPN integrated with BIC in the form of the
assessed under Article 107(3)(b) of the Treaty.
January 2012 Restructuring Plan (including the additional
information on the business and viability provided on
3 February 2012).
6.3 Compatibility under the Restructuring Communication
(190) The Restructuring Communication sets out the state aid
(195) According to the January 2012 Restructuring Plan, the
rules applicable to the restructuring of financial insti
part of BPN which is sold to BIC has a considerably
tutions in the current crisis. According to the Restruc
smaller balance sheet, of around EUR […] billion, in
turing Communication, in order to be compatible with
comparison with that of BPN at the moment of national
Article 107(3)(b) of the Treaty, the restructuring of a
isation.
financial institution in the context of the current
financial crisis has to:
(196) Together with BIC’s assets, the combined entity will have
(i) lead to a restoration of the viability of the bank;
total assets of around EUR […] billion.
(ii) include sufficient own contribution by the bene
(197) The balance sheet of BPN at the moment of the sale to
ficiary (burden-sharing);
BIC contains only the more viable activities and the best
assets of the bank. In particular, the loan portfolio trans
ferred to BIC has been cleaned and most of the illiquid
assets have been transferred to the SPVs.
(iii) contain sufficient measures limiting the distortion of
competition.
(198) BPN’s liabilities consist mainly of retail deposits totalling
EUR 1 669 million and subordinated debts totalling
6.3.1 V i a b i l i t y
EUR 246 million.
(191) Points 9 and 10 of the Restructuring Communication
state that the Member State should provide a compre
hensive and detailed restructuring plan which should
Table 2
provide complete information on the business model.
The plan should also identify the causes of the difficulties
BPN after the sale and after capital injection (Pro forma) ( 1 )
faced by a financial institution and alternatives to the
restructuring plan proposed.
EUR Million
Cash, central banks and credit institutions […]
(192) The restructuring plan should demonstrate that the
bank’s strategy is based on a coherent concept and
Net credits to customers […]
show that the bank has restored long-term viability
without reliance on state support.
Other assets […]
TOTAL ASSETS […]
(193) The Restructuring Communication in point 17 confirms
that a sale of (part of) the financial institution to a third
Deposits […]
party can help to restore its long-term viability. In the
present case the Commission observes that the
Other liabilities […]
Portuguese authorities have chosen to sell BPN through
a tender process. As a result, the banking business will be
Subordinated debt […]
sold to BIC after certain adjustments, and selected assets
will be transferred to the SPVs with the goal of being
liquidated over time. The Commission therefore has to
TOTAL LIABILITIES […]
assess whether the banking business of BPN which will
be part of the business of the buyer (the combined
Own Capital […]
entity), will be viable.
TOTAL LIABILITIES AND CAPITAL […]
(194) In the Decision of 24 October 2011 the Commission
indicated that it had not received a business plan effec
tively demonstrating the viability of BPN as an integrated
( 1 ) Submission by Portugal dated 17 February 2012, Annex II.

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EN
30.10.2012 Official
Journal
of
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European
Union L
301/21
(199) The restructuring measures already initiated by the
above the minimum requirements and thus to safeguard
interim administrators will be continued by BIC,
the solvency of the bank. According to the business plan
remedying the specific causes of BPN’s problems.
provided by Portugal and reflected in the January 2012
Restructuring Plan, under a base case scenario the core
tier 1 capital at the end of the restructuring period
(31 December 2016) will be [8-12] %, slightly above
the minimum regulatory requirements of 10 % estab
(200) As indicated in paragraph (24) above, the management
has been fully replaced. Taking into account the specific
lished by the BdP as of December 2012 ( 2 ), and under
circumstances that led to the nationalization of BPN, and
a stressed scenario just below it ([7-11] %) as indicated in
in particular numerous alleged cases of fraud committed
Graph 1 attached to paragraph (207).
by the former management of the bank, several legal
proceedings ( 1 ) have been initiated by the new
management to defend the interests of the bank. The
(207) That evolution is expected to be mainly due to the need
bank’s risk assessment procedures have been completely
to implement the business plan set out in the January
redesigned to implement best practices.
2012 Restructuring Plan by granting a larger volume of
credit to the economy, and to the impact of negative
results in the first years of the restructuring plan. The
negative results will mainly be due to the still high cost
(201) The new administrators of BPN also concentrated on the
structure of the bank, when compared with its business
optimisation of the cost structure and adopted a number
volume, combined with the cost of the restructuring BIC
of initiatives to reduce operational costs. Between
will undertake.
December 2008 and December 2010 operational costs
were reduced by around EUR […] million and personnel
costs were reduced by around EUR […] million.
Graph 1
Projections for the combined entity BPN/BIC under the
base case scenario, 2012-2016
(202) According to the January 2012 Restructuring Plan, BIC’s
strategy is to concentrate on the core retail business and
[…]
to exploit BPN’s network to become the reference bank
to support trade and financial transactions between
Portugal and Angola.
(208) As to liquidity, the business plan relies mainly on
deposits, with a projected deposit growth of around
[1-10] % per year. The Commission considers that a
stable financing of the combined entity via deposits is
(203) That plan is based on reasonable underlying macro
an important feature of the restructuring plan.
economic assumptions, when account is taken of the
Considering the small size of the combined entity and
current situation of the markets in Portugal, with the
its growth potential, the projections for deposit evolution
economy forecast to remain in recession until 2014.
are credible.
(209) At the same time, the Commission considers that in
(204) The financial projections show that at the end of the
order to ensure the viability of the combined entity,
restructuring period (31 December 2016) the combined
there should be no incentive to replace deposits with
entity is expected, even in a stress scenario, to be able to
wholesale funding. In that vein, it is important that the
cover its costs and realise an ROE of approximately [1-
remuneration of the liquidity line requested by BIC to
10] %.
compensate for a possible deposit outflow is increased
to at least Euribor +[…] bps. Portugal’s commitment in
this respect is necessary to ensure the compatibility of
the restructuring aid with the internal market, taking into
account the fact that […] has a significant amount of
(205) The expected initial capital base is going to be well above
the minimum capital requirements with a core tier 1
deposits which are currently remunerated in excess of
ratio of around [10-18]
%, thanks to the capital
Euribor +[…] bps, a level at which BIC can choose not
injection by the State.
to retain those deposits. If the remuneration on the new

credit line were not set at a level which gives BIC an
incentive to maintain the level of deposits in line with
what is foreseen in the January 2012 Restructuring Plan,
BIC could be induced to substitute deposits with cheaper
(206) As a result of the significant capital injection by the State,
funding from CGD. Such a substitution might improve
the projected capital ratios of the bank during and at the
the combined entity’s short-term profitability, but at the
end of the restructuring period are expected to stay
same time it would damage its prospects of viability.
( 1 ) Including 45 actions against BPN ex management, 25 civil
( 2 ) See Notice of Banco de Portugal of 10 May No 3/2011, Official
proceedings and 20 criminal proceedings.
Gazette No 95, Series II.

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L 301/22
EN
Official Journal of the European Union
30.10.2012
(210) In that respect, it is also important to note that at
Limitation of the aid to the minimum
Euribor +[…] bps, the credit line is still granted at
more favourable terms than BIC is likely to obtain in
(215) As regards the limitation of the aid to the minimum, the
the market. While no comparable benchmark has been
Restructuring Communication indicates in point 23 that
provided to the Commission for similar transactions
the restructuring aid should be limited to covering the
occurring in the market, the Commission notes that it
costs which are necessary for the restoration of viability.
would be unlikely that a credit line of that duration and
size would be available on the market, even at higher
interest levels. Additionally, the Commission considers it
instructive that the remuneration on loans granted by
CGD […] is fixed at Euribor […] months +[…] bps.
(216) To that end, the Commission needs to assess: first, the
claim of the Portuguese authorities that the costs
associated with the sale of BPN to BIC are lower than
the costs that would be incurred by Portugal if BPN were
(211) On the basis of the foregoing the Commission’s doubts
liquidated; and second, whether the aid granted for the
on the viability of BPN have been allayed.
restructuring of BPN has been kept to the minimum
necessary.
6.3.2 A i d l i m i t e d t o t h e m i n i m u m a n d
b u r d e n - s h a r i n g
Sale/orderly liquidation comparison
(212) The Restructuring Communication indicates that an
appropriate contribution by the beneficiary is necessary
(217) In the Decision of 24 October 2011 the Commission
in order to limit the aid to a minimum and to address
questioned several aspects of the quantitative comparison
distortions of competition and moral hazard. To that
between the two scenarios as provided by Portugal at the
end: a) both the restructuring costs and the amount of
time.
aid should be limited and b) a significant own
contribution is necessary.
(218) In the January 2012 Restructuring Plan Portugal provided
(213) The principles on the own contribution of the beneficiary
an updated comparison of the two scenarios and
bank in the restructuring phase are laid down in section
modified its initial assumptions to address the main
3 of the Restructuring Communication. It requires (i) that
concerns expressed by the Commission in the Decision
the restructuring aid is limited to the minimum to cover
of 24 October 2011, which related to the costs in the
costs necessary for restoring viability; (ii) that the bene
event of orderly liquidation. Specifically, Portugal
ficiary bank should use to the extent possible its own
addressed the haircut on loans and the treatment of
resources to finance restructuring, for example, through
subordinated bond holders.
the sale of assets and (iii) that the costs associated with
the restructuring are also adequately borne by those who
invested in the bank by absorbing losses with available
capital and by paying an adequate remuneration for state
interventions. The objective of burden-sharing is twofold:
(219) In particular, Portugal provided additional information
to limit distortions of competition and to address moral
and an alternative benchmark regarding its assumption
hazard ( 1 ).
in relation to the haircut to book value of 30-50 % on
the sale of loans. Portugal also provided the final figures
on the loans eventually taken over by BIC, whose
amount was not known at the moment of the initial
(214) A restructuring plan should clearly show that the aid has
comparison, on 17 February 2012. It also removed
been kept to the minimum necessary. Costs associated
from the orderly liquidation scenario costs associated
with the restructuring should be borne not only by the
with the reimbursement of certain subordinated bond
State but to a maximum extent also by those who
holders, as specified in paragraph (221).
invested in the bank. In other words, the bank and its
capital holders should contribute to the restructuring as
much as possible with their own resources. Restructuring
aid should be limited to covering costs which are
necessary for the restoration of viability. Accordingly,
(220) The Commission considers that, when account is taken
an undertaking should not be endowed with public
of the current economic situation and the substantial
resources which could be used to finance market-
deleveraging of the banking sector, the application of a
distorting activities not linked to the restructuring
haircut on the sale of a loan portfolio is justifiable. Also,
process, such as acquisitions ( 2 ).
if the loans had to be held until maturity, the State would
need to incur financing costs and bear the credit risk
until maturity. The Commission therefore can accept
( 1 ) See point 22 of the Restructuring Communication.
( 2 ) See Case T-17/03 Schmitz-Gotha Fahrzeugwerke GmbH v Commission
the lower range estimate of a haircut provided by
[2006] ECR II-1139.
Portugal, i.e. a haircut of [20-50] %.

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EN
30.10.2012 Official
Journal
of
the
European
Union L
301/23
(221) In relation to subordinated bond holders, the
(223) Overall the options of orderly liquidation whereby the
Commission understands that the total amount of
State would pay all deposits (other than those of
EUR 245 million is composed of various issuances. It
subordinated creditors holding perpetual bonds) and
may be possible […]. Portugal submitted that, after a
whereby the State would pay the whole exposure to
legal assessment of the conditions of each issuance, […].
credit institutions would be more costly than the sale
to BIC.
(222) Table 3 provides an overview of the estimation of
inflows/outflows, taking account of the revised
(224) The Commission recognises the uncertainty linked to a
assumptions mentioned in paragraphs (219)-(221)
number of assumptions, namely the possibility to recover
above. That estimation takes into account only the
the credits transferred to BIC. Account should also be
marginal costs linked to the two scenarios (and not the
taken of the fact that orderly liquidation could have
costs already incurred) and is based on the balance sheet
negative spillovers on confidence in the whole banking
data of BPN at the time of the sale to BIC ( 1 ).
sector and the sovereign rating of the Member State.
Table 3
(225) On the basis of the available information, the
Comparison of the sale to BIC and orderly liquidation
Commission concludes that the option of restructuring
scenarios (Data in EUR million)
of the bank, i.e. the sale to BIC, contributes to limiting
the aid amount to the minimum.
Sale to BIC Liquidation
OUTFLOWS
Aid limited to minimum in the restructuring of BPN
1 Payment
of
the
funding
to
[…] ( 1 )
credit institutions
(226) BPN received a significant amount of aid before and after
the nationalisation as indicated in paragraphs (182) to
2 Payment
of
deposits
from
[…]
(185). The aid was necessary to keep the bank afloat
clients
for the period necessary to implement the chosen
restructuring, which is the sale of its viable parts to
3 Capital
increase […]
BIC and the liquidation over time of the bad assets. As
a result of the restructuring process, BPN will disappear
4 Subordinated
bond
holders
[…]
as an independent bank. The retail banking business that
excluding perpetual issuance
will be taken over by BIC has a balance sheet of less than
TBC
35 % of the balance sheet of BPN before its national
isation. In the prevailing market conditions, these
Total Outflows […] […]
measures (and in particular the separation of the non-
retail banking assets in the SPVs) are intimately linked to
Sale to BIC Liquidation
the viability of the bank that remains on the market. The
business and activities other than retail banking have
INFLOWS
been transferred to the SPVs to be liquidated over time.
The Commission recognises that the significant delays in
5 Sale of client loans
[…]
the implementation of the restructuring of BPN are
(EUR 2 114 million net of
connected to the exceptional circumstances that
haircut 30 %)
affected the Portuguese economy and led to the signing
of the MoU of 17 May 2011.
6 Reimbursement cash and
[…] ( 2 )
loans to credit institutions
7 Price
BPN
sale […]
(227) As indicated by the Commission in its Decision of
8 Deposits
sale
premium
-
2
%
[…]
24 October 2011, in addition to the measures granted
of the deposit balance
to BPN before its sale, BIC is requiring additional
measures, which are indicated in paragraph (56).
Total Inflows […]
ESTIMATED DIFFERENCE […] […]
(228) In its Decision of 24 October 2011 the Commission
( 1 ) Value of debts to credit institutions taken over by BIC before the
raised the question of whether the capital injection
capital injection by the State.
requested by BIC was the minimum amount necessary
( 2 ) Value of cash and loans to credit institution taken over by BIC before
to ensure viability. Taking into account the balance sheet
the capital injection by the State.
adjustments requested by BIC in its offer of 20 July 2011
and the June 2011 BPN financial statements, Portugal
estimated that a level of capital of EUR [200-400]
( 1 ) Submission by Portugal dated 17 February 2012, Annex II.
million represents a core tier 1 capital ratio of [10-18] %.

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L 301/24
EN
Official Journal of the European Union
30.10.2012
(229) Portugal claims that level of capital is the result of the
immediately decrease (as reflected in the January 2012
tender process, when account is also taken of the price
Restructuring Plan). Accordingly, if the combined entity
BIC will pay to the State (EUR 40 million). It is justified
were to maintain a core tier 1 ratio of [10-18] % after
by the costs of refocusing the bank on its core business
the merger, it would have a capitalisation above what BIC
and the need to maintain a sufficient buffer of additional
itself has forecast. Second, the January 2012 Restruc
capital. Portugal considers that the buffer is adequate to
turing Plan already factors in new lending to the
maintain a sufficient level of own capital, in particular in
economy, and for that purpose the (very high) [10-
the initial years of the integration, when account is also
18] % core tier 1 level in BPN at the moment of the
taken of the negative reputation of BPN and the difficult
sale is considered sufficient. There is therefore no need
economic situation of Portugal.
to dedicate even more capital than is foreseen in the
January 2012 Restructuring Plan to the production of
new loans. In this respect, the Commission takes a
positive view of the commitment given by Portugal
(230) It should be noted that according to the January 2012
that the core tier 1 capital ratio of BPN at the date of
Restructuring Plan the capital ratio is estimated to reach
the sale to Banco BIC will not be higher than [10-18] %
[8-12] % at the end of the fourth year after the sale and,
and that if non-performing loans are transferred to the
under a stressed scenario, to reach [7-11] % (slightly
State or any entity controlled by the State after the sale,
lower than the minimum required by law in Portugal
Banco BIC or the combined entity will transfer to the
of 10 %).
State or any entity controlled by the State any capital
associated with those loans to the tune of [10-18] % of
the loans’ risk weighted assets.
(231) The Commission can therefore conclude that the capital
level equivalent to a core tier 1 ratio of [10-18] % is the
result of the tender process and is necessary to ensure the
viability of the bank, based on the January 2012 Restruc
(235) In addition, the Restructuring Communication states that
turing Plan.
an acquisition ban is necessary to keep the aid limited to
the minimum necessary. Point (23) of the Restructuring
Communication mentions explicitly that ‘an undertaking
should not be endowed with public resources which
could be used to finance market-distorting activities not
(232) The Commission also regards as positive the fact that the
linked to the restructuring process. For example,
Framework Agreement with BIC includes a commitment
acquisitions of shares in other undertakings or new
by BIC not to distribute dividends or other equivalent
investments cannot be financed through State aid
benefits to shareholders in relation to BPN for a period
unless this is essential for restoring an undertaking’s
of five years. The purpose of that commitment is to
viability’.
ensure that the capital injected in BPN will not
immediately leave the bank, in the form of resources
distributed to shareholders.
(236) The Commission observes that already in the January
2012 Restructuring Plan it was indicated that the
(233) However the final assets eventually taken over by BIC
combined entity will become a viable entity that should
differ from the BIC offer of 20 July 2011 and BIC also
realise an acceptable ROE and is even expected to realise
reserves the right to give back loans that are non-
profits. That return to viability does not hinge on acquisi
performing. The Commission therefore considers that
tions. On the contrary, the Commission considers that an
in order to maintain the aid to the minimum, any
acquisition ban will ensure that the capital considered
reduction in RWA resulting from the restitution of
necessary for the restructuring remains in the bank,
loans to the State should be accompanied by a
therefore aiding the return to viability. In this respect,
corresponding reduction in capital, to the tune of [10-
the Commission considers that the commitment by
18] % of the reduction in the RWA. The reduction in
Portugal to enforce an acquisition ban is necessary to
capital could take the form of a haircut to the book value
ensure the compatibility of the restructuring aid with
of the loans given back to the State.
the internal market.
(234) The Commission notes that BIC has suggested that the
combined entity could maintain a core tier 1 ratio of
Own contribution
[10-18] % in the event it were to give back non-
performing loans, by extending new credit to the
(237) As regards own contribution, the Restructuring
economy. The Commission considers that such a
Communication requires restructuring costs to be borne
measure would not limit the aid to the minimum for
not only by the State but also by a bank’s past investors
the following reasons. First, BIC’s own capital ratio
and former shareholders. That requirement ensures that
before the sale will be inferior to [10-18] % at the date
rescued banks bear adequate responsibility for the
of the sale. Therefore as soon as BPN is merged with BIC,
consequences of their past behaviour and creates appro
the level of core tier 1 in the combined entity will
priate incentives for their future behaviour.

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EN
30.10.2012 Official
Journal
of
the
European
Union L
301/25
(238) In the present case the Commission takes a positive view
Remuneration of the aid measures
of the fact that the shareholders have lost their stake in
the bank without any compensation. They are thus
(245) The Commission notes that the remuneration for each of
adequately participating in the burden-sharing for a
the aid measures listed in paragraphs (182) to (185)
bank whose value was negative according to the esti
above, and in particular the guarantees, the capital
mation of two independent entities appointed by
injection and the transfer of assets to the SPVs, is not
Portugal. It also regards as positive the fact that the
in line with the relevant Communications of the
board of BPN has been changed and replaced in the
Commission.
context of the nationalisation process.
(239) However, the Commission notes that subordinated bond
holders, holding an amount of EUR 245 million, will be
(246) The state guarantees were priced at 20 bps, well below
maintained in the bank that is being privatised and may
the level resulting from the application of the Commis
continue to receive coupons.
sion’s rules on the remuneration of state guarantees on
liabilities issued by financial institutions.
(240) As stated in point 26 of the Restructuring Communi
cation, ‘banks should not use State aid to remunerate
own funds (equity and subordinated debt) when its
activities do not generate sufficient profits’.
(247) The EUR 600 million capital injection into BPN of
February 2012 clearly does not bear a remuneration
that is in line with the Recapitalisation Communication.
Indeed, the Portuguese authorities expect no remun
(241) As to the period under which BPN was in restructuring,
eration on the capital injected. As a matter of fact, the
BPN has not complied with the Commission’s policy on
capital was injected with the purpose of allowing the sale
hybrid instruments as set out in point 26 of the Restruc
of the bank at a negative price.
turing Communication. The Commission clarified there
that in a restructuring context the discretionary offset of
losses (for example by releasing reserves or reducing
equity) by beneficiary banks in order to guarantee the
payment of dividends and coupons on outstanding
subordinated debt, is in principle not compatible with
(248) As to the transfer of assets to the SPVs at book value,
the objective of burden-sharing. The Commission notes
whilst the Commission acknowledges from a theoretical
that the payment of coupons did not respect that
point of view that the transfer of assets to the three SPVs
principle and should be compensated for by a more in-
is intended to protect BPN’s viability and to allow for its
depth restructuring ( 1 ).
sale, the transfer at book value entails aid that is not in
line with the main requirements of the IAC. In particular,
the transfer is at book value, well above the real
economic value and no remuneration for the State is
(242) The Commission considers that the far-reaching restruc
contemplated. The IAC recognises that in-depth restruc
turing of the bank can be sufficient to compensate for
turing can compensate for potential misalignments with
the lack of burden-sharing.
the main criteria of that Communication, including those
on pricing. The existence of in-depth restructuring of
BPN is an element that could allow the Commission to
find that measure compatible with the Impaired Assets
(243) However, since the bank is now being sold, a ban on
Communication. Thus, the transfer of assets to the SPVs
calls until 31 December 2016 is necessary to provide a
could be assessed together with the rest of the measures
minimum level of burden-sharing from the bank’s capital
in favour of BPN and as a part of the far-reaching
holders.
restructuring.
(244) In this respect, the Commission takes stock of the
commitment by Portugal that, in order to contribute to
the restructuring process of BPN, Banco BIC, the
(249) Point 25 of the Restructuring Communication sets out
combined entity and Portugal will not exercise until
that any derogation from an adequate burden-sharing ex
31 December 2016 any call option rights in relation
ante which may have been exceptionally granted in the
to subordinated debt issued by BPN prior to the date
rescue phase for reasons of financial stability should be
of the sale.
compensated for by a further contribution at a later stage
of the restructuring, for example in the form of claw-
back clauses and/or by farther-reaching restructuring
( 1 ) See, amongst others, Commission Decisions in Case N 61/2009,
Rescue and Restructuring of Caja Castilla la Mancha, OJ C 289,
including additional measures to limit distortions of
26.10.2010, p. 1.
competition.

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L 301/26
EN
Official Journal of the European Union
30.10.2012
(250) The Commission considers that the restructuring of BPN
Third, even after the integration with BIC, the new inte
is sufficiently far-reaching. It notes first that the bank is
grated entity will have less than [< 1] % of market share
small in size. As a result of the restructuring process,
in Portugal, as the market share of BPN is currently
BPN will disappear as an independent bank. The retail
around [< 1] % for both credit to customers and
banking business that will be taken over by BIC has a
deposits and the market shares of BIC is in the order
balance sheet of less than 35 % of the balance sheet of
of [< 1] % for loans and [< 1] % for deposits.
BPN before its nationalisation. Businesses and activities
other than retail banking have been exited for good.
(257) The Commission also notes that the sale of the banking
(251) Therefore, the Commission can conclude that burden-
business via a tender procedure gave competitors the
sharing is adequate in light of the far-reaching restruc
opportunity to acquire the brand and business of BPN
turing of BPN.
thereby limiting the distortions of competition.
6.3.3 M e a s u r e s t o l i m i t d i s t o r t i o n s o f
c o m p e t i t i o n
(258) The Commission also takes a favourable view on the
dividend policy as described in paragraph ((56) (xiii)).
(252) As regards measures to limit distortions of competition,
the Restructuring Communication provides that the
nature and form of such measures will depend on the
amount of aid and the conditions and circumstances
under which it was granted and also on the character
(259) In addition, point 44 of the Restructuring Communi
istics of the market(s) on which the beneficiary bank will
cation also mentions that banks should not cite state
operate.
support as a competitive advantage when marketing
their financial offers. The Commission regards as
positive the commitment given by Portugal that BIC
will not refer to the use of state aid in its marketing
(253) While the amount of aid received by BPN is significant,
account should be taken of the limited size of BPN. As
campaigns and communication to investors.
indicated in point 32 of the Restructuring Communi
cation, the Commission will analyse the likely effects of
the aid on the markets where the beneficiary bank
operates after the restructuring. First of all, the size and
(260) In its Decision of 24 October 2011, the Commission
the relative importance of the bank on its market, once it
expressed doubts as to whether the envisaged measures
is made viable, will be examined.
were sufficient when account was taken of the significant
amount of aid and the fact that BPN had received a
recapitalisation, guarantees and impaired asset measures
which were not remunerated in accordance with the
(254) In that regard, the Commission notes that BPN will no
longer continue as the same economic entity as before
requirements of the relevant Communications.
the state intervention. ( 1 ) It has undergone nationalisation
and a profound in-depth restructuring. As a result, a
much smaller bank will compete on the market.
(261) In particular, the Commission noted that that the bank
would operate in the market with an initial core tier 1
(255) BPN was the seventh-largest financial institution in
capital ratio of [10-18] %, far above the minimum levels
Portugal by balance sheet size at the end of 2008.
of 9 % required at the end of 2011 and of 10 % at the
Since its nationalisation, it has been reduced in size, in
end of 2012.
particular as a result of a deposit outflow. It ranks 12th
as of mid-2011 with a market share for both deposits
and loans of less than 1 %. Deposits and loans nearly
halved in the period 2008-2011.
(262) In addition, BIC requested the right to sell back within
[…] months loans that were non-performing for at least
[…] days (up to […] % of the total nominal value of the
(256) In its observations on the Decision of 24 October 2011,
loan portfolio). It also requested the maintenance of
Portugal stated first that, already before the national
liquidity support from CGD in two forms. The first of
isation, BPN had a market share of around [1-2] %.
them is the maintenance of the commercial paper
Second, after nationalisation, BPN was significantly
programme line of credit for up to EUR [150-500]
restructured and its size continued to be reduced.
million with a state guarantee for three years and the
commitment by CGD to maintain the terms of the
credit line until […]. The second is a new credit line to
( 1 ) See, amongst others, Commission Decisions in Case N 61/2009,
be granted by CGD for up to EUR [150-350] million to
Rescue and Restructuring of Caja Castilla la Mancha, OJ C 289,
26.10.2010, p. 1 and in Case NN 19/2009, Restructuring aid to
compensate for a fall in deposits below EUR 1,8 billion,
Dunfermline Building Society, OJ C 101, 20.4.2007, p. 7.
with a remuneration of Euribor +[…] bps.

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EN
30.10.2012 Official
Journal
of
the
European
Union L
301/27
(263) This should ensure that the state aid is not used by the
(269) Thirdly, the Restructuring Communication also links an
combined entity to grow at the expense of competitors
acquisition ban to distortions of competition. In points
and that the competition distortions caused by the aid
39 and 40, the Communication explains that ‘state aid
are properly addressed.
must not be used to the detriment of competitors, which
do not enjoy similar public support’, and that ‘banks
should not use state aid for the acquisition of
competing businesses’. The Commission welcomes
(264) Given the tense situation in the market and the tight
Portugal’s commitment referred to in paragraph (236)
conditions imposed upon the banking sector by
to enforce an acquisition ban until 31 December 2016.
Portugal as a result of the events leading to the
signature of the MoU, the Commission considers that
these liquidity lines would significantly affect the extent
to which the combined entity will be able to compete on
(270) Lastly, the entitlement for BIC to give back non-
the market with other players that have not received state
performing loans to the State should end as of […]
aid.
and not […] months after the date of the sale. The
Commission considers that BIC has had the opportunity
to review BPN loans since the opening of the tender and
in particular after the signing of the Framework
(265) The state aid can therefore be declared compatible only if
Agreement on 9 December 2011. In addition the loan
there are sufficient measures in place ensuring that the
portfolio has already been cleaned twice: with the
state aid is not used to the detriment of competitors,
transfer of the least performing loans to the SPVs in
some of which have not received similar public
December 2010 and subsequently by BIC as the buyer
support. A level playing-field should remain in place
requested the right to give back to the State additional
between banks which have received public support and
amounts of loans to meet the [110-150] % LTD ratio.
those which have not. The state aid should not weaken
incentives for non-beneficiaries to compete, invest and
innovate, or create entry barriers which could
undermine cross-border activity.
(271) The Commission notes that any further possibility of
return offers BIC a protection against the risk of the
worsening economic situation. Any subsequent ‘non-
performance’ would in all likelihood reflect the
(266) It is necessary to ensure that the combined entity does
not benefit from a competitive advantage arising from
worsening of the economic situation, and thus affect
the shift of liquidity risk to the State and from the capital
the entire banking sector. The entitlement for BIC to
endowment.
give back non-performing loans to the State distorts

competition as no other banks will have that possibility.
The window for returns should therefore be reduced until
[…] as a maximum. In this respect, the Commission
welcomes the commitment given by Portugal to respect
(267) Firstly, the Commission considers that in order to limit
the […] deadline.
competition distortions resulting from the fact that the
bank would have a capital level above the minimum
requirement (see paragraph (261)), any reduction in
RWA resulting from the restitution of loans to the
State should be accompanied by a corresponding
6.3.4 C o n c l u s i o n
reduction in capital. Therefore, the commitment given
by Portugal on the maximum capital level of BPN is
(272) If all the commitments described in section 5.2 are
necessary to ensure the compatibility of the restructuring
correctly implemented, the January 2012 Restructuring
aid with the internal market.
Plan provides sufficient evidence that the long-term
viability of the combined entity has been restored, that
sufficient burden-sharing is achieved and that adequate
measures to limit undue distortions of competition are
taken. Therefore, the Commission can declare the January
(268) Secondly, the Commission considers that the duration of
the credit line of EUR [150-500] million linked to BPN’s
2012 Restructuring Plan to be in line with the Restruc
commercial paper programme should be limited to a
turing Communication.
period of […] years. Moreover, the remuneration for
the second liquidity line should be closer to market
conditions and set at Euribor +[…] bps. At the same
time, Portugal should request the prior approval of the
6.3.5 M o n i t o r i n g
Commission in advance of any granting of credit lines or
guarantees by CGD or the State until 31 December
(273) Point 46 of the Restructuring Communication indicates
2016, to ensure that those limitations are not circum
that, in order to verify that the restructuring plan is being
vented. In that respect, the Commission takes note of the
implemented properly, detailed regular reports from the
commitments given by Portugal on the liquidity lines;
Member State are necessary. Accordingly, Portugal should
they are necessary to ensure the compatibility of the
provide the Commission with such reports every six
restructuring aid with the internal market.
months, starting from the date of this Decision.

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L 301/28
EN
Official Journal of the European Union
30.10.2012
7. Conclusion
vi. Right for BIC to transfer deposits with a pricing above […]
bps to the State, or to have the State remunerate the
(274) The Commission regrets that Portugal unlawfully imple
difference; and
mented the state aid listed in section 6.1.2 ‘Quantifi
cation of the state aid’ in breach of Article 108(3) of
the Treaty. However, that aid, along with the other aid
measures considered in this Decision, can be found
vii. Transfer to the State of costs linked to litigation.
compatible if the commitments described in section 5.2
are implemented,
2. The
aid
measures
set
out
in
paragraph
1
are
compatible
with the internal market in light of the commitments set out in
HAS ADOPTED THIS DECISION:
Section 5.2.
Article 1
Article 2
1. The
following
measures
granted
by
Portugal
constitute
state aid:
Within two months of notification of this Decision, Portugal
shall inform the Commission of the measures it has taken to
comply with this Decision. Furthermore, Portugal shall submit
i. Loans granted by CGD before nationalisation;
detailed reports on the measures taken to comply with it,
starting six months from the date of this Decision.
ii. Loans and liquidity lines granted by CGD to BPN after
nationalisation and before the sale, with or without an
Article 3
explicit state guarantee;
This Decision is addressed to the Portuguese Republic.
iii. Transfer of assets from BPN to the SPVs at book value
before and after the sale;
Done at Brussels, 27 March 2012.
iv. Capital injection by the State of 15 February 2012;
For the Commission
v. Liquidity lines to be granted by CGD requested by BIC for
Joaquín ALMUNIA
the combined entity;
Vice-President

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