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30 April 2008

Commission approves rescue aid for WestLB




The Commission authorised a risk shield granted by the State of North Rhine-Westphalia to protect WestLB against the volatility of its € 23 billion structured investment portfolio, following difficulties because of the subprime crisis. The Commission's investigation found that the risk shield constitutes state aid, but that the aid is in line with EU rules on rescue aid because strict conditions ensure that the aid is limited in time and reversible. The approval of the rescue aid does not prejudice the Commission's assessment of the restructuring plan Germany has committed to submit by 8 August 2008.

 

Competition Commissioner Neelie Kroes said: "The Commission has demonstrated again that it can move very fast in order to provide legal certainty and financial stability to banks in difficulty. I look forward to continuing the good cooperation with the German authorities on the forthcoming restructuring of WestLB."

 

The Commission concluded that the measure was in line with the EU Guidelines on state aid for rescuing and restructuring firms in difficulty. Under these rules, rescue aid must in principle take the form of loans or guarantees lasting no more than six months, with certain exceptions for the banking sector, in order for banks to meet special prudential requirements. To avoid undue distortions of competition, WestLB will either present a restructuring plan or reverse the economic effects of the risk shield after six months, including the repayment of any amounts drawn under the guarantee. The reversibility of effects distinguishes the aid to WestLB from other state-guaranteed risk shields which the Commission is currently investigating.

 

Press release



© European Commission


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