1.6.2013

EN

Official Journal of the European Union

L 148/1

(1)

By Decision of 12 May 2009 in case C 43/2008 (3) (hereinafter called "the May 2009 Decision"), the Commission conditionally approved a EUR 5 billion risk shield for WestLB AG (4) (hereinafter called "WestLB"), the Landesbank of North Rhine-Westphalia, on a portfolio of structured securities (hereinafter called "the Phoenix portfolio"), referring to a restructuring plan submitted on 30 April 2009 (hereinafter called "the April 2009 restructuring plan").

(2)

On 23 September 2009, Germany notified to the Commission additional aid to WestLB in the form of a temporary risk shield for tranches of the Phoenix portfolio in the amount of EUR 6,4 billion and committed to notify a revised restructuring plan.

(3)

By Decision of 7 October 2009 in case N 531/2009 (5) the Commission decided that the temporary risk shield was compatible with the internal market as rescue aid.

(4)

On 10 December 2009, Germany notified a support measure for WestLB in the form of an asset transfer to the newly created Erste Abwicklungsanstalt (hereinafter called "the EAA"). That measure is hereinafter called"the first asset transfer". At that stage, Germany also submitted a modified restructuring plan for WestLB (hereinafter called "the December 2009 restructuring plan"). The first asset transfer replaced the measure notified on 23 September 2009 and rendered the Decision of 7 October 2009 otiose.

(5)

By Decision of 22 December 2009 in case C 40/2009 (6) (hereinafter called "the December 2009 Decision"), the Commission temporarily approved the first asset transfer for a period of six months for reasons of financial stability. By the same Decision, the Commission opened a formal investigation under Article 108(2) of the Treaty on the Functioning of the European Union (TFEU) because of doubts regarding the compatibility of that measure with the internal market.

(6)

In December 2009, the Commission engaged Société Générale, Bangert Research and Professor Wim Schoutens as experts to evaluate the impaired assets that WestLB had transferred to the EAA.

(7)

On 1 February 2010, Germany submitted remarks on the reasoning underlying the December 2009 Decision.

(8)

By Decision of 22 June 2010, in case N 249/2010 (7) (hereinafter called "the June 2010 Decision"), the Commission extended the temporary approval of the first asset transfer for reasons of financial stability until the final decision on the first asset transfer and the December 2009 restructuring plan had been taken.

(9)

On 29 October 2010, the Commission provided Germany with a detailed valuation report on the assets that were the subject matter of the first asset transfer.

(10)

On 5 November 2010, the Commission adopted a decision to extend the formal investigation procedure regarding the first asset transfer in case C 40/2009 (8) (hereinafter called "the November 2010 Decision"). In the November 2010 Decision the Commission expressed further doubts regarding the compatibility of the first asset transfer with the internal market.

(11)

In November 2010, the German authorities submitted comments which were supplemented on 21 December 2010. The Commission received no comments from other interested parties.

(12)

On 21 December 2010, the Commission decided to postpone the date by which Westdeutsche ImmobilienBank AG (9) (hereinafter called "WestImmo") had to stop writing new business (10).

(13)

On 15 February 2011, Germany submitted a modified restructuring plan for WestLB (hereinafter called "the February 2011 restructuring plan").

(14)

On 15 April 2011, Germany submitted to the Commission a progress report of the divestiture trustee who had been appointed pursuant to the May 2009 Decision and a new restructuring plan for WestLB (hereinafter called ‘渢he new restructuring plan‘�.

(15)

On 23 June 2011, all important details of the winding-down of WestLB and of the burden-sharing between its shareholders were agreed between Germany's Federal Agency for Financial Market Stabilisation (hereinafter called "the FMSA"), all shareholders of WestLB and the EAA (the agreement is hereinafter called "the Eckpunktevereinbarung") (11).

(16)

On 30 June 2011, Germany transmitted a final version of the new restructuring plan based on the Eckpunktevereinbarung to the Commission (that final version is hereinafter called "the June 2011 restructuring plan").

(17)

On 28 October 2011, Germany requested the Commission to defer until 29 February 2012 WestLB's obligation to stop new business, because the May 2009 Decision requires WestLB to cease new business as of 1 January 2012. That request was submitted on a protective basis, in the event that the May 2009 Decision has not been replaced by a new decision by 1 January 2012.

(18)

On 28 October 2011, Germany submitted detailed information about a further state aid measure for WestLB, in the form of a second asset transfer to the EAA (that measure is hereinafter called "replenishment").

(19)

On 21 November 2011, Germany submitted updated information on the June 2011 restructuring plan.

(20)

On 1 December 2011, Germany submitted information on the amount of temporary short-term liquidity assistance that may be provided to WestLB up to 30 June 2012.

(21)

On 8 December 2011, Germany submitted a final catalogue of commitments to the Commission.

(22)

On 13 December 2011, Germany confirmed the intended take-over of an entity named Verbundbank, which will be carved out from WestLB in the context of the latter's restructuring, by Helaba Landesbank Hessen-Th眉ringen (hereinafter called "Helaba").

(23)

The beneficiary is WestLB. WestLB is the Landesbank of North Rhine-Westphalia with registered offices in D眉sseldorf. Its shareholders are the Savings Banks Association of Westphalia-Lippe (hereinafter called "SVWL"), the Savings Banks and Giro Association of the Rhineland (hereinafter called "RSGV"; SVWL and RSGV are collectively called "the savings banks associations"), the Land of North Rhine-Westphalia (hereinafter called "NRW") and the two regional associations of the Rhineland (hereinafter called "LVR") and Westphalia-Lippe (hereinafter called "LWL"). The Sonderfonds Finanzmarkstabilisierung (hereinafter called "SoFFin"), which is managed by the FMSA, has invested a silent participation in WestLB AG.

(24)

The main financial data of WestLB are summarised in the following table:

Table 1

Main financial data of WestLB

(25)

WestLB serves as the central institution for the savings banks and as a link to the financial markets for the regionally operating savings banks in NRW and Brandenburg. It offers a broad range of products and services, including lending, customised structured finance, capital markets business, asset management, and transaction services to its German and international clients which include corporates, as well as institutional and public-sector clients.

(26)

The focus of WestLB's business activities has changed over the years. While it was initially limited to its function of a central giro institution for the savings banks, WestLB has turned more and more into an investment bank. Since 2001, when its public mission activities were separated from its economic businesses, WestLB has been undergoing restructuring (12).

(27)

More recently, large investments in structured securities, partly booked in special purpose vehicles that had not been consolidated before 2007, caused significant losses and resulted in surging capital requirements, despite the relaxation of accounting standards that was adopted as a response to the financial crisis. Therefore, Germany and WestLB's shareholders granted the Phoenix risk shield in 2008 (13) and agreed in November 2009 on the establishment of a bad bank, the EAA, to which a nominal amount of around EUR 77.5 billion of assets and capital of approximately EUR 3 billion were transferred.

(28)

In 2008, WestLB transferred a portfolio of structured securities to a special purpose vehicle ("SPV") called Phoenix Light, a private limited company established under Irish law, ring-fencing securities (14) with a total nominal volume of approximately EUR 23 billion off WestLB's balance sheet. The SPV was secured by guarantees of WestLB's shareholders which were given on 8 February 2008 to cover actual payment defaults of up to EUR 5 billion (hereinafter called "the risk shield for the Phoenix portfolio") and which were approved by the May 2009 Decision (15). The risk shield consisted of two separate guarantees:

(29)

On 24 November 2009, Germany and WestLB's shareholders agreed on the details of the establishment of a bad bank called Erste Abwicklungsanstalt under the German Law on the Fund for Stabilisation of the Financial Markets (Finanzmarktstabilisierungsfondsgesetz - "FMStFG") in order to ring-fence a portfolio of risk positions and non-strategic business units. WestLB‘檚 shareholders met and formally approved the necessary contractual agreements on 11 December 2009.

(30)

The first asset transfer measure (16) comprised a EUR 3 billion capital injection, further guarantees from WestLB's shareholders and an asset transfer which was to take place predominantly by way of a spin-off. In addition, the EUR 5 billion Phoenix risk shield was not terminated but transferred to the EAA. If the risk shield had not been transferred, the EAA would have needed an additional EUR 5 billion of capital in order to take over the Phoenix portfolio.

(31)

The establishment of the EAA had to be preceded by a capital injection of EUR 3 billion by SoFFin into WestLB (hereinafter called "the capital injection"). That capital injection was made in three instalments, on 23 December 2009 (EUR 672 million), 4 January 2010 (EUR 1.5 billion) and 30 April 2010 (EUR 828 million). The capital was provided in the form of a non-callable silent participation, optionally convertible into ordinary shares after 1 July 2010. According to the terms agreed upon, SoFFin may not become majority shareholder of the company.

(32)

The contractual terms of the silent participation provide for a remuneration of 10 % per annum if WestLB shows a sufficient year-end profit according to HGB (17). In the case of a year-end loss, however, no remuneration will be paid and the silent participation will participate pari passu in the losses. Since the silent participation was injected, WestLB has either been loss-making (in 2009) or posted no year-end profits (in 2010) according to HGB. As a result, no remuneration has been paid to date and the silent participation has participated in the losses with approximately EUR 1 million.

(33)

The establishment of the EAA involves a guarantee from the WestLB's shareholders to cover further losses incurred by the transferred assets. In fact, all losses by the EAA that go beyond the transferred capital must, pursuant to the FMStFG, be covered by the shareholders of WestLB and the FMSA.

(34)

To that end the shareholders of WestLB provided an explicit guarantee in the total amount of EUR 1 billion, divided between NRW (EUR 482 million), the savings banks associations (EUR 501 million), and LVR and LWL (EUR 17 million). Moreover, regarding any additional loss coverage WestLB's shareholders agreed to cap the obligation of RSGV and WLSGV for further loss compensation to an amount of EUR 4 billion. Taking into account the EUR 501 million guarantee given by the savings banks associations, the maximum loss participation of RSGV and WLSGV is therefore capped at EUR 4,5 billion. In order to raise the EUR 4 billion, RSGV and WLSGV are permitted to build up adequate reserves for that obligation over a period of 25 years. Any losses exceeding both the equity of the EAA and the guarantees given will be borne by the FMSA and NRW (18).

(35)

The transfer of the toxic and non-strategic assets (and liabilities) took place in two steps. In a first step, securities (in particular mezzanine notes and other structured securities) with a total book value of approximately EUR 6,2 billion and liabilities with a book value of approximately EUR 5,5 billion were transferred (19) to the EAA by way of a spin-off that was recorded in the commercial register on 23 December 2009. In a second step, the remainder of the ring-fenced portfolio was spun off or synthetically transferred to the EAA on 30 April 2010 (20).

(36)

The transaction was structured in such a way that WestLB benefited from retroactive effects of the transfer. The book values of the securities transferred on 23 December 2009 were determined based on the effective spin-off date of 31 December 2008/1 January 2009, while the book values of the remainder of the portfolio transferred on 30 April 2010 were determined based on the effective spin-off date of 31 December 2009/1 January 2010.

(37)

The portfolio covers assets with a notional amount of EUR 77 billion (book value as of 31 December 2009 of EUR 68,117 billion (21)), containing a diverse range of lending products, plain vanilla bonds (22), structured securities and derivatives. The portfolio also includes grandfathered liabilities in the amount of EUR 22,1 billion (book value according to the ‘�span class="italic">Spaltungsvertrag