19 November 2009

Kroes’ speech: KBC, ING and Lloyds – one quarter of the job is done, but there are 28 cases to go

Each of these banks will be required to contribute substantially to the financing of their restructuring. The plans ensure that none of these banks will enjoy an unfair competitive advantage as a result of public support they have received.

Commissioner Kroes highlighted that it is very important to secure the long term viability of KBC, ING and Lloyds. They will also require each of these banks to contribute substantially to the financing of the restructuring. At the same time, the plans ensure that none of these banks will enjoy an unfair competitive advantage as a result of the very large-scale public support they have received. They also make sure that banks' customers will continue to enjoy a competitive choice of services.

She presented the following particular details for each bank:

1.    KBC

The Commission has approved two recapitalisations, an asset relief measure and restructuring package submitted by the Belgian authorities.

On asset relief our main concern was to verify whether the valuation, or write-down, of KBC's Collateralised Debt Obligation portfolio was correct and whether the remuneration paid by KBC to the Belgian authorities was sufficient. This is indeed the case.

As regards divestments to compensate for the distortion of competition caused by the state aid:

·   Europe-wide: KBC will sell its entire European Private Banking business.

·   In Belgium, KBC's home market, KBC will divest Centea (bank) and Fidea (insurer) - this will create more competition on the Belgian market.

·   In Central and Eastern Europe, KBC will divest or run-down a significant number of businesses. It will continue to retain an important presence in the region, however.

2.    ING

The restructuring needs to be in-depth because of the 15 billion euros of aid received by ING. The scale of the divestments of ING's insurance activities and of ING Direct US, plus the carve-out of a subsidiary active on the Dutch retail banking market, are indeed significant.

3.    Lloyds HBOS

Lloyds will exit the riskier and more volatile lending activities in which HBOS had engaged in recent years. Their new focus will be core corporate and retail banking activities and applying Lloyds TSB's more prudent risk management methods. This will be a sound business model.

She concluded by saying that “today's Commission decisions, and others that will follow, are now well on the way to putting the European banking sector back on a viable long-term footing. With today's Commission decisions, one quarter of the job is done, but there are 28 cases to go. So the job is far from over. We must continue to put the European banking sector back on a viable long-term footing.”

 

Full speech

 

 

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