When, after the bankruptcy of the US bank Lehman Brothers, the global financial world was on the brink of collapse, German banks also had to be rescued by taxpayers‘ money. According to estimates by the German Federal Minister of Finance, Olaf Scholz, the rescue operations of Hypo Real Estate, WestLB, Commerzbank and IKB have so far cost the federal government around 30 billion euros. The federal states had to contribute a similar amount of money to the capital injections of the state banks BayernLB, HSH Nordbank and Landesbank Baden-Württemberg.
More than ten years later, the rescue of a German bank with taxpayers‘ money is on the agenda again: due to unsuccessful ship financing, the public-law NordLB needs up to 3,7 billion euros in fresh capital. Following the rejection of the only offer from private investors, the Bank’s Supervisory Board is now negotiating a viable solution with the owners of the bank – the federal states of Lower Saxony, Saxony-Anhalt and the Sparkassen Group (DSGV).
So far, the Federal Republic of Germany has only held informal talks with the EU Commission on the compatibility of this public recapitalisation with the European rules on bank rescues. The Federal Republic of Germany has not yet notified the EU Commission of the planned state recapitalisation.
MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:
„NordLB needs a proper investigation procedure with an objective decision by the EU Commission whether the recapitalisation of the public-law bank constitutes harmful state aid. I call on Olaf Scholz to voluntarily notify the EU Commission of the planned recapitalisation as soon as possible and thus to dispel any suspicion of a national attempt to circumvent European rules.
When recapitalising the state-owned Caixa Geral de Depósitos (CGD), Portugal decided at the time to voluntarily notify the EU Commission of the planned support measure. And this despite the fact that the country itself held the legal view that the support measure was not subject to obligatory notification. It is not fair from the point of view of European policy and cannot be justified that wealthy Germany applies lower standards than comparatively poor Portugal. The Federal Government has for good reasons repeatedly spoken out against new state aid for banks, for example in Italy. Now any impression of double standards must be avoided“.
My letter to Federal Finance Minister Olaf Scholz on the notification of the planned recapitalisation of NordLB can be downloaded here:
https://sven-giegold.de/wp-content/uploads/2019/02/2019-02-21_Brief-an-Olaf-Scholz.pdf
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Background:
Unlike other cases of State support for bank rescue and restructuring, NordLB is a directly and indirectly publicly owned bank. More recently, there has been a similar case at the Portuguese bank Caixa Geral de Depósitos (CGD). When recapitalising the state-owned Caixa Geral de Depósitos (CGD), Portugal decided at the time to voluntarily notify the EU Commission of the planned support measure. On 10 March 2017, the Commission concluded that Portugal’s plans to increase the CGD’s equity position by €3.9 billion were in line with EU state aid rules. The measures would have been implemented on market terms and would therefore not constitute illegal state aid to the bank.
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Dear Federal Minister of Finance Scholz,
NordLB needs fresh capital of up to €3.7 billion due to unsuccessful ship financing. Even though the Landesbank recently succeeded in selling some of the bad loans, the crisis still persists. The offers of two private investors Cerberus and Centerbridge were turned down. No further offers appeared to have been received. Instead, the Bank’s Supervisory Board is now negotiating a viable solution with the federal states of Lower Saxony, Saxony-Anhalt and the German Savings Banks and Giro Association (DSGV). The savings banks want to make 1.2 billion euros available. The state of Lower Saxony wants to support the bank with up to 1.5 billion euros, another 200 million euros are to come from Saxony-Anhalt. So far, the Federal Republic of Germany has only held informal talks with the EU Commission on the compatibility of state recapitalisation with European bank rescue rules. A notification of the planned state recapitalisation to the EU Commission by the Federal Republic of Germany has not yet been received.
Unlike other cases of government support for bank bail-outs and restructuring, NordLB is a directly and indirectly publicly owned bank. More recently, there has been a similar case with the Portuguese bank Caixa Geral de Depósitos (CGD). When it recapitalised the bank, Portugal decided at the time to voluntarily notify the planned support measure to the EU Commission, even though the country itself held the legal view that the support measure was not subject to compulsory notification. On 10 March 2017, the Commission concluded that Portugal’s plans to increase the capital position of the state-owned bank Caixa Geral de Depósitos (CGD) by €3.9 billion were in line with EU state aid rules. The measures would have been given on market terms and would therefore not constitute illegal state aid to the bank.
NordLB also needs a proper investigation procedure with an objective decision by the EU Commission whether the recapitalisation of NordLB under public law constitutes is illegal state aid or not. It is not fair from the point of view of European policy and cannot be justified that wealthy Germany applies lower standards than comparatively poor Portugal. Moreover, a lack of private offers with a positive net bid at least indicates that recapitalisation is not carried out at market conditions. I therefore ask you to voluntarily notify the EU Commission of the planned recapitalisation as soon as possible, thus avoiding any suspicion of national attempts to circumvent European rules.
I would be very happy about a positive answer.
Respectfully,
Sven Giegold