At the end of last week, the EU Commission approved the billion-euro rescue of Norddeutsche Landesbank (Nord/LB). EU Commissioner for Competition Margrethe Vestager said on Thursday that the bail-out was being carried out under normal market conditions and was therefore not in breach of EU state aid rules. Nord/LB had entered into difficult waters as a result of bad ship loans and is now to receive a capital increase and guarantees totalling €3.6 billion. The Land of Lower Saxony, the main owner, will contribute around €2.3 billion and Saxony-Anhalt €198 million. The savings bank group is to raise about 1.1 billion euros. After the EU Commission’s green light, the state parliaments in Hanover and Magdeburg still have to agree. In February 2019, the owners rejected the only private offer of the two US private equity funds Cerberus and Centerbridge who had shown interest in taking over the ailing Nord/LB. On the initiative of the Greens/EFA Group, the banking union working group of the Economic and Monetary Affairs Committee (ECON) in the European Parliament will now deal with Nord/LB and other cases of state aid of the recent past. The meeting could take place already next week in Strasbourg.
MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:
“The promise made in the aftermath of the financial crisis to never again use taxpayers’ money to rescue a bank will once again be broken. The decision of the European Competition Authority raises questions. There are many question marks behind the new Nord/LB business plan. As early as 2012, Nord/LB received state aid on the basis of a highly ambitious restructuring plan, which was intended to make the bank profitable again. However, the EU Commission’s optimistic business forecast failed to materialise at the time. It is now to be feared that the Commission is painting once again a rosy picture. The German banking market is still very competitive, margins are low and digitisation does not improve business prospects either. It is therefore questionable whether Nord/LB will ever be back in the black. It is also part of the truth that it is completely unknown who will benefit from a rescue by taxpayers’ money.
The months of negotiations behind closed doors between the EU Commission, the German Federal Ministry of Finance and the owners of Nord/LB did not build confidence in the final State Aid decision. In the past, the German government had repeatedly spoken out against new state aid for banks, for example in Italy. It is understandable that Germany and the European Competition Authority are now accused of double standards in Italy. In order to preserve the credibility of the banking union, the European rules on state aid must apply unrestrictedly throughout Europe. Margrethe Vestager has yet to provide a detailed explanation whether a private investor would have made a comparable offer under these circumstances. I am therefore pleased that Social Democrats, Liberals, the Left and right-wing conservatives support our proposal to invite Competition Commissioner Vestager and representatives of the ECB and the Directorate-General for Financial Services to a debate. We must ensure that the EU Commission does not apply double standards”.
Answer given by the Ministry of Finance of Lower Saxony to the question put by Stefan Wenzel (Bündnis 90/Die Grünen) on NORD/LB’s subordinated capital and equity: https://www.landtag-niedersachsen.de/ps/tools/download.php?file=/ltnds/live/cms/dms/psfile/docfile/54/18_013765b728a073edc9.pdf&name=18-01376.pdf&disposition=attachment