EU temporarily approves German recapitalization of largest state-owned bank
- Source: Xinhua
- [08:58 July 01 2009]
- Comments
The European Commission on Tuesday temporarily approved a German plan to provide 5 billion euros (7 billion US dollars) for recapitalization of the country's largest state-owned bank LBBW.
The commission, the competition guardian of the European Union (EU), said in a statement that the recapitalization complies with its state aid rules because it foresees an adequate remuneration.
However, the commission has doubts whether an asset relief measure contained in the German plan can be considered fully in line with its guidance.
Therefore, the commission will undertake a further in-depth analysis of the complex valuation of the impaired assets before taking a final decision.
"An impaired asset relief measure, like a recapitalization, can be a useful instrument for maintaining trust in financial markets. However, the commission has the duty to verify in detail that the valuation is done properly, to ensure that an asset relief measure does not unduly distort competition," said EU Competition Commissioner Neelie Kroes.
Therefore, the proposed plan has been temporarily approved for six months.
LBBW is a commercial bank which operates internationally but with a particular focus on several German states. With a balance sheet of about 450 billion euros (636 billion US dollars), the bank is the fifth largest bank in Germany, whose shareholders are either public entities or owned by public entities.