EN Official Journal of the European Union L 333/1

COMMISSION DECISION

of 5 April 2011

on the measures C 11/09 (ex NN 53b/08, NN 2/10 and N 19/10) implemented by the Dutch State for ABN AMRO Group NV (created following the merger between Fortis Bank Nederland and ABN AMRO N)

(notified under document C(2011) 2114)

(Only the English text is authentic)

(Text with EEA relevance)

(2011/823/EU)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) thereof,

Having called on interested parties to submit their comments (1) pursuant to Article 108(2) of the Treaty and having regard to their comments,

Whereas:

1. PROCEDURE

(1) On 3 October 2008, the Dutch State acquired Fortis Bank Nederland (‘FBN’) (namely the Dutch banking subsidiary of the financial holding company Fortis SA/NV (2)) including ABN AMRO Holding assets owned by FBN (‘ABN AMRO N’) for an amount of EUR 12,8 billion. In the same transaction, the Dutch State also replaced Fortis Bank SA/NV, the Belgian banking subsidiary of Fortis SA/NV, as obligee in loans to FBN with a nominal value of EUR 16,1 billion (3). The Dutch State also granted FBN a short-term liquidity facility of EUR 45 billion and agreed to indemnify Fortis SA/NV for costs and obligations which stemmed from the consortium shareholders agreement (‘CSA’). The CSA described the rights and obligations of the three financial institutions (Fortis SA/NV, Banco Santander and Royal Bank of Scotland (‘RBS’) or the three ‘consortium members’) which had jointly bid for ABN AMRO Holding via the newly created legal entity ‘RFS Holdings’. On 7 October 2008, the Dutch State notified the Commission of its measures of 3 October 2008 (namely the acquisition of FBN for EUR 12,8 billion, the novation of long-term loans with a nominal value of EUR 16,1 billion and the short-term liquidity facility of EUR 45 billion, hereafter ‘the integrated transactions of 3 October 2008’) as measures not constituting State aid in order to get legal certainty on those measures. Since the measures had already been implemented, the Commission registered the case as an NN-case (that is, NN53b/08).

(2) During the negotiations leading to the acquisition of FBN on 3 October 2008, the Dutch State relied on an external valuation report by […] (4), a copy of which was sent to the Commission on 15 October 2008.

(3) By letter dated 30 October 2008, the Commission informed the Dutch Ministry of Finance of its preliminary opinion that the measures of 3 October 2008 seemed to constitute State aid to FBN. On 20 November 2008, a meeting took place between the services of the Commission and the Dutch State.

(4) On 21 November 2008, the Dutch State officially decided that it would not keep FBN and ABN AMRO N apart, but instead would pursue a merger of the two companies (‘the merger’), in line with the earlier plans of Fortis SA/NV.

(5) On 3 December 2008, the Commission took a Decision (5) (‘the Decision of 3 December 2008’) declaring the measures by the Dutch State of 3 October 2008 in favour of Fortis Bank SA/NV as State aid compatible with the common market. However, recital 4 of that Decision stated explicitly that the Commission would judge in a separate procedure whether the measures implemented on 3 October 2008 also contained aid to FBN.

(6) On 17 December 2008, the Dutch State informed the Commission of its intention to acquire ABN AMRO N from FBN for EUR 6,5 billion. The acquisition took place on 24 December 2008. On 2 February 2009, the Dutch authorities notified that acquisition to the Commission as a measure not constituting State aid for reasons of legal certainty.

(7) On 24 December 2008, RBS, Banco Santander and the Dutch State signed an amendment to the CSA by which the Dutch State replaced Fortis SA/NV in the CSA.

(8) On 6 March 2009, the Dutch State sent to the Commission a due diligence report (6) of the acquired businesses which had been prepared by […] at the request of the Dutch State.

(9) By Decision of 8 April 2009 (‘the Decision of 8 April 2009’), the Commission initiated the procedure laid down in Article 108(2) of the Treaty under case number C11/09 (ex-NN53b/08), with respect to alleged aid granted to FBN and ABN AMRO N.

(10) On 6 May 2009, the Commission received a letter of complaint from Van Lanschot Bank (‘the complainant’), a Dutch competitor of FBN and ABN AMRO N. That letter was forwarded by the Commission to the Dutch State on 22 July 2009, asking for comments. The Dutch State asked for a deadline extension on 20 August 2009 and sent a detailed answer to the complaint on 22 September 2009. The complainant provided further information by letters of 21 August 2009 and 28 August 2009. These letters were forwarded to the Dutch State on 23 September 2009 and the Dutch State replied on 29 October 2009.

(11) On 15 May 2009, the Dutch State sent a letter to the Commission answering a number of questions raised in the Decision of 8 April 2009. A detailed reply on substance – for which the Dutch State had asked more time – was sent to the Commission on 11 August 2009.

(12) In a non-paper sent on 15 June 2009 and during a follow-up meeting with the Commission on 16 June 2009, the Dutch State informed the Commission of its intention to implement a EUR 2,5 billion recapitalisation plan enabling ABN AMRO N to separate from its parent company ABN AMRO Bank (7). During that meeting, the Dutch State indicated that, after the first injection of EUR 2,5 billion, additional but not yet quantifiable measures would be necessary.

(13) In the Decision of 8 April 2009, the Commission had invited the Dutch financial supervisor (‘DNB’) to comment on the soundness of FBN and ABN AMRO N respectively. The Commission received the requested information on FBN by letter of 18 June 2009 and an update on 5 January 2010. The Dutch State also forwarded a letter from DNB on ABN AMRO N on 20 January 2010.

(14) On 6 July 2009, ABN AMRO Bank – the parent company of ABN AMRO N – sent a letter to the Commission commenting on the Decision of 8 April 2009. That letter was forwarded to the Dutch State on 22 July 2009 and the Dutch State replied on 22 September 2009.

(15) On 9 July 2009, the Dutch State informed the Commission that FBN had redeemed all the short-term funding it had received from the Dutch State under the 3 October 2008 liquidity facility of EUR 45 billion.

(16) On 15 July 2009, the Dutch State informed the Commission of plans by FBN to acquire Fortis Clearing Americas (‘FCA’) from Fortis Bank SA/NV.

(17) On 17 July 2009, the Dutch State formally notified a plan with recapitalisation measures worth EUR 2,5 billion (8) consisting of a credit default swap (‘CDS’) with a capital relief effect of EUR 1,7 billion (‘the capital relief instrument’ or ‘CRI’) and a Mandatory Convertible Security (‘MCS’) of EUR 800 million. The measures were initially recorded under case number N429/09, but since the measures were implemented before the Commission had taken a decision on them, the case was moved from the register of notified aid to the non-notified aid register (under number NN 2/10).

(18) On 10 September 2009, the Dutch State sent a non-paper to the Commission with an update of the separation process and indications that additional (unquantified) State aid measures would be unavoidable.

(19) During a meeting with the Commission on 9 November 2009, the Dutch State indicated that FBN and ABN AMRO N would need additional measures worth EUR 4,39 billion, thereby bringing the total amount of measures (including the measures notified on 17 July 2009) to EUR 6,89 billion. The measures were further detailed in an addendum of 10 November 2009 to the non-paper of 10 September 2009, and in an additional explanatory note of 13 November 2009.

(20) On 26 November 2009, the Dutch State provided the Commission with a report of […] commenting on the transaction of 24 December 2008. The submission also contained some background material explaining […].

(21) On 4 December 2009, the Dutch State submitted to the Commission a first version (9) of a restructuring plan for ABN AMRO Group (the ‘December 2009 Restructuring Plan’), the new entity resulting from the merger between FBN and ABN AMRO N. That plan described the new entity’s strategy and also contained financial projections for a base case scenario.

(22) On 14 January 2010, the Dutch State formally notified the new State aid measures of EUR 4,39 billion in addition to the measures already notified in July 2009. The Commission registered the new measures under number N19/10.

(23) By Decision of 5 February 2010 (‘the Decision of 5 February 2010’), the Commission decided to extend the investigation procedure C11/09 to include the measures registered under NN2/10 and N19/10. In that Decision, the Commission temporarily approved those measures as rescue aid measures until 31 July 2010. The Dutch State sent the Commission a letter with a price leadership ban commitment applicable until the end of 2010.

(24) On 23 March 2010, the Commission received a reply by the Dutch State – which had asked for a deadline extension – to the Decision of 5 February 2010. The Dutch State also provided extra information on the December 2009 Restructuring Plan of the new ABN AMRO Group with, inter alia, financial projections for a worst case scenario.

(25) The Commission asked additional questions on 8 April 2010, which were answered on 7 May 2010. The Dutch State also provided the Commission with extra information on cross liabilities resulting from the implementation of the Merger Remedy (10) on 26 May 2010. On the same day, the Commission sent an electronic mail with follow-up questions, which were answered on 9 June 2010.

(26) On 20 July 2010, the Dutch State asked the Commission to extend the temporary approval of the rescue aid measures registered under NN2/10 and N19/10. The Dutch State also sent a letter extending the price leadership ban commitment until the earlier of 30 June 2011 or until the adoption date of the final Decision of the Commission.

(27) On 30 July 2010, the Commission decided to extend the temporary approval of the rescue aid measures registered under case numbers NN2/10 and N19/10 until the Commission had finalised its investigation C11/09.

(28) On 20 August 2010, the Dutch State sent to the Commission a document explaining in detail its exit strategy.

(29) On 5 October 2010, the Dutch State provided a business plan for the private equity division of ABN AMRO Group. A similar plan for the division ‘Energy, Commodities and Transportation’ of ABN AMRO Group was sent to the Commission on 10 January 2010.

(30) On 15 October 2010, ABN AMRO Group announced that it would exercise its call option to terminate the capital relief instrument as of 31 October 2010.

(31) On 8 November 2010, the Dutch State sent an update (‘the November 2010 Restructuring Plan’) – dated 29 October 2010 – of ABN AMRO Group’s restructuring plan of 4 December 2009. On 10 January 2011, the Dutch State sent a document explaining how the ABN AMRO Group updated forecasts of 8 November 2010 compared to the original forecasts of 4 December 2009.

(32) During the procedure, numerous information exchanges, teleconferences and meetings between representatives of the Dutch State, ABN AMRO N and FBN and the European Commission took place.

2. DETAILED DESCRIPTION OF THE BENEFICIARIES AND THE MEASURES

2.1. The creation of ABN AMRO Group

(33) In spring 2007, the consortium members created a new legal entity ‘RFS Holdings’ to acquire ABN AMRO Holding.

(34) The consortium members intended to separate ABN AMRO Holding into three parts and the arrangements for that separation process were set out in the ‘CSA’.

(35) In order to facilitate the break-up, the consortium members created so-called ‘tracking shares’ representing the economic ownership of the businesses attributed to each consortium member. As a result, RBS, Banco Santander and Fortis SA/NV became the economic (11) owners of respectively the so-called R-share, S-share and N-share (‘ABN AMRO R’, ‘ABN AMRO S’ and ‘ABN AMRO N’).

(36) ABN AMRO R comprised, inter alia, the business unit (‘BU’) Global Business & Markets, BU Asia, BU Global Transaction Services and the international network, while ABN AMRO S comprised, inter alia, BU Latin America and BU Antonveneta (Italy).

(37) ABN AMRO N comprised the BUs Netherlands and Private Banking and also the International Diamond and Jewelry Group.

(38) Items that were not allocated to the individual consortium members were brought together in the so-called ABN AMRO Z-share (‘ABN AMRO Z’), which remained responsible for head office functions for instance. Each consortium member held a pro-rata stake (12) in ABN AMRO Z.

(39) On 3 October 2008, the Dutch State acquired FBN from Fortis Bank SA/NV for EUR 12,8 billion. As a result of that acquistion, the Dutch State also became the indirect owner of ABN AMRO N, since FBN was – within Fortis Bank SA/NV – the legal owner of ABN AMRO N. On 3 October 2008, the Dutch State also committed itself to indemnify Fortis SA/NV for any charge Fortis SA/NV would face as a consequence of its continued presence in the CSA. On 24 December 2008, RBS, Banco Santander and the Dutch State signed an amendment to the CSA, by which the Dutch State replaced Fortis SA/NV in the CSA.

(40) On 24 December 2008, the Dutch State acquired ABN AMRO N from FBN for EUR 6,5 billion, thereby becoming the direct owner of ABN AMRO N. Prior to that acquistion, the Dutch State controlled ABN AMRO N indirectly via FBN.

(41) Chart 1: Separation of ABN AMRO N

(42) On 21 November 2008, the Dutch State decided that it would merge ABN AMRO N with FBN (which had been the unimplemented intention of Fortis SA/NV). The merger could only be implemented once ABN AMRO N was separated from ABN AMRO Bank, its parent company. As a first step, the activities of ABN AMRO N were transferred to a new legal entity within ABN AMRO Bank which was named ABN AMRO II.

(43) On 6 February 2010, ABN AMRO II was separated as described in recital 41 and renamed ABN AMRO Bank. At the same time, the legal entity formerly known as ABN AMRO Bank was renamed ‘The Royal Bank of Scotland NV’ (‘RBS NV’) (see chart above).

(44) Before the new entity, ABN AMRO Bank, could merge with FBN, it first had to implement a merger remedy. When Fortis SA/NV acquired ABN AMRO N in 2007, the Commission had concluded (13) (the ‘Merger Decision’) that a merger between ABN AMRO N and FBN would lead to concentration problems in the Dutch banking market, especially in the segments of commercial banking and factoring.

(45) To remedy those concentration problems, Fortis SA/NV committed to sell a number of activities (that is, the factoring division IFN and the commercial banking activities of ‘New HBU’) to Deutsche Bank. When the Dutch State acquired FBN and ABN AMRO N on 3 October 2008, Fortis SA/NV had not yet completed the intended sale of New HBU and IFN to Deutsche Bank. Once the Dutch State had decided to proceed with the merger between FBN and ABN AMRO N, it resumed negotiations with Deutsche Bank (14). The sale of New HBU and IFN to Deutsche Bank was closed on 1 April 2010.

(46) New HBU had total assets of EUR [10 - 20] billion and employed around [1 000 - 1 500] full time equivalents (‘FTEs’). New HBU included Hollandsche Bank Unie (‘HBU’) (a commercial bank owned by ABN AMRO N), some ABN AMRO sales offices (13 out of a total of 78) and some ABN AMRO Corporate Client Units (2 out of a total of 5).

(47) ABN AMRO Bank and FBN officially merged to form ABN AMRO Group on 1 July 2010, as is described in the Chart 2 in recital 49.

(48) The Dutch State transferred the management of its stake in ABN AMRO Z to the new ABN AMRO Bank as it did not want to dedicate resources to the day-to-day management of that participation. Nevertheless, the Dutch State has remained the legal owner of ABN AMRO Z and is entitled to all potential gains and liable for all potential losses of ABN AMRO Z (15).

(49) Chart 2: Creation of ABN AMRO Group

2.2. Beneficiaries

2.2.1. Economic activities of ABN AMRO N and ABN AMRO Z

(50) ABN AMRO N – on a stand-alone basis the third largest bank in the Netherlands behind Rabobank and ING – consisted of BU Netherlands and BU Private Banking.

(51) The first business unit, BU Netherlands offered retail and commercial banking services via a branch network of 510 bank shops and 78 advisory branches and also through alternative channels such as the Internet, ATMs (16) and call centres. BU Netherlands employed roughly 19 000 FTEs.

(52) In retail banking, BU Netherlands had a strong customer franchise segmented in ‘mass retail’ (more than [3,5 - 5] million customers) and ‘preferred banking’ (more than [250 000 – 420 000] customers) (17), which it offered a wide range of products (such as savings, investments, mortgages, insurance, credit card loans and payments).

(53) In commercial banking, ABN AMRO N serviced [300 000 – 400 000] SME (18) customers and [9 000 – 21 000] larger corporate customers (though under the terms of the CSA, ABN AMRO Bank’s larger customers were attributed to RBS) with a broad range of products (such as credits, payment & cash management, savings, treasury, risk and insurance management, complex financial solutions & products, leasing and factoring).

(54) The second business unit, BU Private Banking targeted individuals with net investable assets of more than EUR 1 million with various asset management and estate planning products. BU Private Banking had built up a well-developed network, through organic growth in the Netherlands and France and through acquisitions in Germany (Delbrück Bethmann Maffei) and Belgium (Bank Corluy). BU Private Banking also included the French insurance joint venture Neuflize Vie.

(55) The businesses acquired on 3 October 2008 by the Dutch State also included the International Diamond and Jewelry Group, which is a division dedicated to companies involved in jewellery manufacturing and the trading of diamonds.

(56) ABN AMRO Z did not contain operational assets but included, inter alia, tax assets, a number of participations (amongst others in the Saudi Hollandi Bank) and the remaining private equity portfolio. In terms of liabilities, there was a provision to settle obligations in respect of the United States Department of Justice, other provisions (partly personnel-related) and inter-company financing of company assets. As stated in footnote 11, the stake owned by the Dutch State represents 33,81 % of ABN AMRO Z.

(57) A number of pro-forma key financial data of ABN AMRO N are summarised in Table 1 below: Table 1 Key financial data ABN AMRO N (in million EUR) 2008 2009 Total operating income (19) 5 189 4 899 Net profit 471 (117) Return on equity 6,7 % –2,7 % Cost-income ratio 73 % 77,5 % Total assets 183 539 202 084 Total equity 7 044 4 278 (20) RWA (21) 91 700 74 973 (22) Tier 1 ratio 9,4 % 10,2 % (23) Total capital ratio or BIS-ratio 12,6 % 14,8 % Stable funding/non liquid assets 107 % 110 % Source: ABN AMRO Bank NV, Annual Review 2009, ex ABN AMRO Z and private equity consolidation, but including New HBU.

(58) For the financial year 2009, ABN AMRO N reported a loss of EUR 117 million. The loss was due to higher loan impairments, pressure on interest margins, higher charges related to the Dutch deposit guarantee scheme and separation and integration costs (24). Excluding separation and integration costs, ABN AMRO N would have recorded a small net profit for 2009 of EUR 52 million.

2.2.2. Fortis Bank Nederland (FBN)

(59) On a stand-alone basis, FBN was the fourth largest bank on the Dutch market (after Rabobank, ING and ABN AMRO N, but before SNS REAAL).

(60) The Dutch State (and previously Fortis SA/NV) held directly 92,6 % of FBN, with the investment vehicle Fortis FBN(H) Preferred Investments BV owning the remaining stake of 7,4 % in the form of preferred shares. The Dutch State owned 70 % of the shares in that investment vehicle, with the remaining 30 % in the hands of a number of private investors (25). The privately-owned preferred shares had a nominal value of EUR 210 million and a (non-cumulative) dividend of 5,85 % (26).

(61) FBN’s activities were subdivided in three segments – Retail banking, Private banking and Merchant banking.

(62) Retail Banking activities included the traditional retail banking activities (with a network of 157 branches, [2 - 3] million individual customers and [20 000 – 60 000] SME customers) but also Directbank (which offered mortgage solutions via intermediaries) and the consumer finance and payment card products of respectively Alfam and ICS.

(63) Private Banking was mainly developed under the Fortis Mees Pierson brand name and offered wealth management services (estate planning, investing, lending and insurance) on a segmented basis to [15 000 – 40 000] customers throughout the Netherlands.

(64) In Merchant Banking, FBN distinguished seven different sub-divisions. In the division ‘Commercial Banking’ (1), FBN had 23 business centres offering multiple products to companies with a turnover of up to EUR 250 million. Companies with a turnover of more than EUR 250 million as well as the public sector were serviced by another subdivision, ‘Corporate & Public Banking’ (2). There were also ‘Investment banking’ (3) (27), ‘Specialised Financial Services’ (4) (28), ‘Energy, Commodities & Transportation’ (5), ‘Global Markets & Institutional Banking’ (6) (29) and ‘Clearing Funds & Custody’ (7) (30) sub-divisions.

(65) A number of FBN’s key financial data are summarised in Table 2 below: Table 2 Key financial data FBN (in million EUR) 2006 2007 2008 (31) 2009 Total operating income 3 473 3 553 3 096 2 171 Net profit 1 157 1 296 –18 486 406 Return on equity (norm.) (32) 20,1 % 8,9 % 4,9 % 0,7 % Cost-income ratio 50,5 % 54,2 % 64,9 % 84,2 % Total assets 209 749 272 378 184 203 189 785 Total equity 5 910 21 763 2 944 4 716 RWA 66 995 75 850 70 932 53 730 (33) Tier 1 ratio 8,6 % 11,2 % 7,4 % 12,5 % Total capital ratio 10,5 % 11,2 % 11,2 % 16,7 % Loan-to-deposit ratio 167 % 237 % 208 % Source: FBN annual reports 2008/2009.

(66) In 2008, FBN made a loss of EUR 18,5 billion, but that loss was to a large extent linked to exceptional items. The company was obliged to report a net loss of EUR 16,8 billion on its stake in RFS Holdings and the sale thereof and it also incurred an impairment of EUR 922 million (net of taxes) in its division Prime Fund Solutions due to the Madoff fraud (34). Net underlying profit, excluding those elements, came in to EUR 604 million, almost exclusively realised in the first half of 2008.

(67) In 2009, FBN realised a net profit of EUR 406 million, helped by two exceptional gains (a EUR 362,5 million cash settlement with Fortis Capital Company) and a Madoff-related recovery of provisions of EUR 16 million. Net underlying profit decreased to EUR 27 million (35) (from EUR 604 million in 2008).

2.2.3. ABN AMRO Group

(68) ABN AMRO Group, which was created following the merger between FBN and ABN AMRO Bank (that is to say ABN AMRO N activities) on 1 July 2010 groups all the activities of FBN and ABN AMRO N in two separate BUs, ‘Retail and Private banking’ and ‘Commercial and Merchant banking’. The group had a 2008 pro forma operating income of EUR 7,15 billion and pro forma total assets of EUR 360 billion. According to the latest figures (36), ABN AMRO Group has total IFRS (37) equity of EUR 11,7 billion.

(69) ABN AMRO Group is well diversified with EUR 4,2 billion operating income in ‘Retail and Private banking’ and EUR 2,8 billion operating income in ‘Commercial and Merchant banking’. Geographically, the bulk of ABN AMRO Group’s revenues (namely [65 - 95] % of the total) originates in the Netherlands.

(70) In ‘Retail and Private banking’, the integrated ABN AMRO Group has market shares of [15 - 20] % and [15 - 20] % (38) in respectively ‘mass retail’ and ‘preferred banking’ (39), which makes it third-largest on the Dutch banking market in terms of market share. In private banking (branded ABN AMRO Mees Pierson), ABN AMRO Group is by far the largest in the Dutch market with a market share of approximately [30 - 40] % (40). In ‘Commercial and Merchant banking’, the market share of ABN AMRO Group is around [15 - 25] % (41).

(71) ABN AMRO Group no longer includes New HBU and the factoring activities of IFN which were divested in the framework of the Merger Remedy on 1 April 2010.

(72) As part of the restructuring process, two small divisions of FBN (namely Intertrust and Prime Fund Solutions (‘PFS’)) were also divested and are no longer part of the ABN AMRO Group.

(73) In September 2009, FBN (and its partner Banque Générale du Luxembourg (‘BGL’) (42) sold Intertrust to private equity specialist Waterland. Intertrust is one of the largest players in global trust and corporate management. It employs 1 000 experts in 19 countries and has operating income and RWA of respectively EUR […] million and EUR […] million.

(74) In May 2010, FBN also announced the sale of PFS to Credit Suisse. PFS provides fund services to the alternative asset management industry including, for example, administration, banking, custody and financing. Its customers range from boutique asset managers to large global institutions such as pension funds and sovereign wealth funds. PFS was responsible for the EUR 922 million post-tax provision related to the Madoff-fraud which FBN registered in 2008. PFS has income of EUR […] million and RWA of EUR […] million.

(75) On 4 March 2011, ABN AMRO Group published its results for the fiscal year 2010, showing a net loss of EUR 414 million. Excluding separation and integration costs, ABN AMRO Group reported an underlying profit of EUR 1 077 million. As at 31 December 2010, ABN AMRO Group’s Core Tier 1, Tier 1 and total capital ratio were 10,4 %, 12,8 % and 16,6 % respectively. In consultation with the Dutch State, ABN AMRO Group established a dividend policy targeting a dividend payout of 40 % of the reported annual profit.

2.3. Description of the Restructuring Plan of December 2009 and the updated Restructuring Plan of November 2010

(76) The Dutch State provided the Commission with the December 2009 Restructuring Plan on 4 December 2009. Further information was provided in March 2010 (43). A merger between FBN and ABN AMRO N is central to the business concept developed in the December 2009 Restructuring Plan. ABN AMRO Group, the new bank emerging from the December 2009 Restructuring Plan, will focus on the mid-market segment in the Netherlands (44) and will be active in ‘Retail and Private Banking’ and ‘Commercial and Merchant Banking’.

(77) The December 2009 Restructuring Plan starts from the diagnosis that the capital needs were not related to the underlying performance of FBN and ABN AMRO N, but rather to the need to finance their respective separation from their parent companies and the up-front integration costs of the merger.

(78) In a counterfactual scenario without State aid, the December 2009 Restructuring Plan acknowledges that, without the coordinated effort of the Benelux governments, Fortis SA/NV would have collapsed, which would also have dragged down FBN and ABN AMRO N.

(79) The December 2009 Restructuring Plan contains financial projections for the period 2009-2012 with a divisional breakdown into Retail Banking, Private Banking NL, Private Banking International and Commercial & Merchant Banking. Specifically for 2012, ABN AMRO Group has also calculated a ‘run-rate’ profit, which excludes transition costs and assumes that cost synergies were already accounted for the full year. Those projections were provided for a base case scenario and a worst case scenario.

(80) On 8 November 2010 in, the Dutch State updated the December 2009 Restructuring Plan’s financial projections for the period until 2012, including additional projections for 2013 in the November 2010 Restructuring Plan.

(81) In the base case scenario, the Dutch State starts from the assumption that business volumes will grow in line with inflation. Personnel costs are assumed to rise by [1 - 6] % per annum and other costs by a more moderate [1 - 5] % per annum The Dutch State also anticipates that ABN AMRO Group’s loan loss provisions will start to decrease from the high level reported in 2009.

(82) In the base case scenario in the November 2010 Restructuring Plan, ABN AMRO Group realises a negative net result of EUR […] million in 2010 before returning to profits from 2011 on (that is, EUR […] million profit in 2011).

(83) In 2012 and 2013, it is expected that ABN AMRO Group’s net profits increase to respectively EUR […] million and EUR […] million, translating in a Return on Equity (45) (‘RoE’) of around […] %. The improvement of the ABN AMRO Group’s profitability is driven by better operating income (which should recover after the weak 2009 figure), the cost-cutting programme which at cruise speed should lower costs by EUR 1,1 billion pre-tax per annum and a normalisation of loan loss provisions after a peak in 2009. In 2013, ABN AMRO Group’s cost-income ratio is projected to be […] %.

(84) Base case scenario Table 3 2009 (Actual) 2010 (E (46)) 2011 (E) 2012 (E) 2012 run rate (E) 2013 (E) Operating income 7 039 […] […] […] […] […] Net interest income 4 528 […] […] […] […] […] Net fee & comm. income 1 933 […] […] […] […] […] Other income 849 […] […] […] […] […] Operating expenses –5 568 […] […] […] […] […] Op. exp. – business as usual –5 258 […] […] […] […] […] Op exp. – transition – 310 […] […] […] Operating result 1 471 […] […] […] […] […] Loan impairments –1 585 […] […] […] […] […] Profit before taxes – 114 […] […] […] […] […] Taxes and minorities 45 […] […] […] […] […] Net profit –68 […] […] […] […] […] Underlying net profit (ex transition costs) 163 […] […] […] […] […]

(85) Under the worst case scenario in the November 2010 Restructuring Plan, the Dutch State started from more conservative assumptions than under the base case scenario. It used interest margins which were 7,5 % lower than in the base case, more cautious forecasts for commissions & fees (growth of 4 % per annum as opposed to 7 % in the base case), lower synergies (impact of – EUR […] million on 2013 profit) and 15 % lower recovery rate of loan loss provisions (impact of – EUR […] million on 2013 profit).

(86) While, those more conservative figures would lead to lower results, ABN AMRO Group would still be able to post a profit. The worst case scenario foresees an underlying net profit of EUR […] million and EUR […] million in respectively 2012 and 2013 (which compares to respectively EUR […] million and EUR […] million in the base case scenario).

(87) In its December 2009 Restructuring Plan, the Dutch State also touched upon its exit strategy, underlining that it does not have the intention to remain a long-term investor in ABN AMRO Group.

(88) By letter of 20 August 2010, the Dutch State provided the Commission with more details on its exit strategy. The Dutch State explained that it is contemplating a placement in the form of an IPO (47), but is keeping open other options such as a private sale to an investor or market participant. In its letter of 20 August 2010, the Dutch State indicates that a first stake of between [0 - 50] - [10 - 60] % might be made available for an IPO in […] at the earliest, followed by a secondary offering of another [0 - 50] - [10 - 60] % in 2015. The Dutch State wants to earn back its initial investment increased by its cost of funding of [2 - 5] %. It is the Dutch State’s intention to reduce its stake in ABN AMRO Group up to a maximum of [25 - 65] %, preferably before the end of [2014 - 2018]. Ultimately, the Dutch State is fully committed to a complete exit. The final decision on the IPO rests with the Dutch Minister of Finance and will depend on market circumstances, the ‘IPO readiness’ of ABN AMRO Group and the expected proceeds. On 24 January 2011, the Dutch government also publicly set out its exit strategy (48).

(89) The December 2009 Restructuring Plan (and also the updated November 2010 Restructuring Plan) show that – after implementation of all the State aid measures- ABN AMRO Group is sufficiently capitalised. During the restructuring period, the projected Tier 1 ratios should stay comfortably above […] % between 2009 and 2012, to increase further to […] % in 2013.

(90) In its December 2009 Restructuring Plan, the Dutch State explains that ABN AMRO Group has already divested a number of businesses. Apart from the sale of New HBU and IFN during the Merger Remedy process, ABN AMRO N and FBN also divested Intertrust and PFS.

(91) Compared to ABN AMRO Group, Intertrust and PFS jointly represent [0 - 5] %, [0 - 5] % and [0 - 5] % in terms of its projected total operating income, costs and RWA respectively.

(92) During the restructuring process, FBN also made an acquisition to correct a misalignment resulting from the break-up of Fortis SA/NV. FBN was the legal owner of the BU Brokerage, Clearing and Custody and all the offices related to that business except for the Chicago office, which had remained part of Fortis Bank SA/NV. To correct that separation-linked misalignment, FBN acquired the Chicago branch of Fortis Clearing Americas from Fortis Bank SA/NV on 31 July 2009 for a price of approximately USD […] million.

2.4. Description of the measures

(93) To identify the individual State aid measures, the Commission uses in this Decision the same letter codes as in its Decision of 5 February 2010.

2.4.1. Measures covered by the Decision of 8 April 2009

(94) On 3 October 2008, the Dutch State acquired FBN (including ABN AMRO N) from Fortis SA/NV for EUR 12,8 billion (‘Measure X’). The Commission did not open the procedure in respect of that measure, which as such did not provide State aid to FBN, even if it was part of a transaction providing State aid to FBN (see recital 32 of the Decision of 8 April 2009).

(95) At the time of the FBN’s acquisition by the Dutch State, FBN depended heavily on Fortis Bank SA/NV for its funding. To ensure full separation of FBN from Fortis Bank SA/NV, it was necessary for the Dutch State to end the funding relationship between FBN and Fortis Bank SA/NV. To cut the existing links, the Dutch State granted FBN a short-term liquidity facility of EUR 45 billion (‘Measure Y1’) on 3 October 2008. That liquidity facility allowed FBN to repay to Fortis Bank SA/NV short-term loans of EUR 34 billion. The Dutch State also replaced Fortis Bank SA/NV as a lender of long-term loans to FBN for a nominal amount of EUR 16,1 billion in a so-called ‘novation’ (‘Measure Y2’) (49).

(96) The short-term liquidity facility covered by Measure Y1 remained in place until the end of June 2009. While that measure was in place the remuneration changed a number of times. In the period between 6 October 2008 and 23 October 2008, the Dutch State provided FBN short-term funding at EONIA (50) (for overnight lending with a maximum amount of EUR 5 billion) or EURIBOR (51) (for longer-term liquidity with a maximum amount of EUR 40 billion) without any extra spread. After 23 October 2008, there was a short period (until 5 November 2008) during which the Dutch State applied EONIA + 50 basis points and EURIBOR + 50 basis points. During that second period, that arrangement was still for maximum amounts of EUR 5 billion for overnight liquidity and EUR 40 billion for longer-term liquidity. In the period between 5 November 2008 and 1 March 2009, the Dutch State changed the remuneration to EONIA + 25 basis points for overnight loans, EURIBOR + 25 basis points for loans with a maturity (52) of less than 3 months and EURIBOR + 50 basis points for loans with a maturity of more than 3 months (53). After 1 March 2009, the Dutch State developed a two-step system encouraging FBN to reduce its reliance on the State. A first tranche of funding (irrespective of the maturity) was made available at EURIBOR + 25 basis points but once that threshold was exceeded, FBN could only get extra liquidity at EURIBOR + 50 basis points (54). The amount of the total liquidity facility and the amount of the first threshold were gradually lowered. On 9 July 2009, the Dutch State informed the Commission that FBN had repaid all its short-term loans to the State.

(97) The long-term loans novated to the Dutch State (Measure Y2) amounted to EUR 16,1 billion, including EUR 8,15 billion of Tier 2 capital (of which EUR 3 billion upper Tier 2) and EUR 7,95 billion of senior loans.

(98) On 24 December 2008, the Dutch State acquired ABN AMRO N from FBN for EUR 6,5 billion (‘Measure Z’). The Dutch State did not pay in cash but paid for the purchase by cancelling EUR 6,5 billion of long-term debt it had obtained in the integrated transactions of 3 October 2008 as part of Measure Y2. In other words, the Dutch State waived EUR 6,5 billion of claims towards FBN to pay for ABN AMRO N (55).

2.4.2. Measures covered by the Decision of 5 February 2010

(99) Some of the measures covered by the Decision of 5 February 2010 (56) were notified to the Commission in July 2009 and the remainder in January 2010. In July 2009, the Dutch State notified a capital relief instrument or ‘CRI’ (‘Measure A’ with a capital relief effect of EUR 1,7 billion), a Mandatory Convertible Security (‘MCS’) of EUR 500 million (‘Measure B1’) and a second MCS-tranche of EUR 300 million (‘Measure B2’).

(100) In January 2010, the Dutch State notified additional capital measures worth EUR 4,39 billion. The Dutch State subscribed to additional MCS-instruments of EUR 2,28 billion to cover additional separation costs (EUR 780 million, ‘Measure B3’), the capital shortfall resulting from the sale of New HBU (EUR 300 million, ‘Measure B4’) and integration costs (EUR 1,2 billion, ‘Measure B5’). To bring FBN’s Tier 1 capital in line with regulatory requirements, the Dutch State also converted EUR 1,35 billion of FBN-Tier 2 capital it already owned into Tier 1 capital (‘Measure C’). The Dutch State also paid the other consortium members EUR 740 million in cash (‘Measure D’) as was foreseen in the CSA to settle issues that only emerged in the course of the separation process. Finally, the Dutch State also provided a guarantee on cross liabilities resulting from the sale of New HBU (‘Measure E’).

(101) The Dutch State sold credit protection via a CDS on a Dutch mortgage portfolio of ABN AMRO N, representing around [30 - 80] % of ABN AMRO N’s total home loan portfolio. That measure had the effect of reducing the risk weighted assets of ABN AMRO N.

(102) To remunerate the credit protection, the Dutch State received an annual fee of 51,5 basis points (calculated as a percentage of the portfolio value in the beginning of each reference period).

(103) That fee was calculated using the capital equivalent cost methodology. The Dutch State determined how much capital ABN AMRO N could free up due to the capital relief instrument (namely EUR 1,7 billion, based on Basel I requirements which were still applied at the time the CRI agreement was implemented) and then it calculated a return of 10 % on that capital relief (namely 10 % on EUR 1,7 billion), which was equivalent to 51,5 basis points of the initial portfolio value of EUR 34,5 billion.

(104) Each year, ABN AMRO N kept a first loss tranche of 20 basis points (calculated as a percentage of the initial portfolio value).

(105) ABN AMRO N kept a vertical slice of 5 % of the remaining risk.

(106) The pricing of the credit protection instrument would not be adjusted once ABN AMRO N fully adopted Basel II capital requirments, even though the capital relief effect of the CRI would then be substantially smaller.

(107) In principle, the CDS-contract had a maturity of 7 years, but ABN AMRO N had call options enabling it to terminate the contract on a number of pre-determined reference dates (for example October 2010, January 2011 and January 2012) (57).

(108) Under the CSA, the three consortium partners had to ensure that ABN AMRO Z remained sufficiently capitalised. In that context, the Dutch State had to contribute EUR 2,2 billion to the ABN AMRO Z capital shortfall. The aim of the CRI was to allow ABN AMRO N to make part of that EUR 2,2 billion contribution to ABN AMRO Z.

(109) The Dutch State preferred the unconventional CRI-solution over a traditional capital increase since, prior to the separation, it could not ring-fence capital contributions in ABN AMRO Bank. In other words, since ABN AMRO N was not a separate legal entity, a capital injection in ABN AMRO Bank could also have benefited the other two consortium members. That course of action could have had severe implications especially in scenarios of increased distress.

(110) When the separation took place, ABN AMRO N became a separate legal entity (the new ABN AMRO Bank). The Dutch State continued to bear the responsibility under the CSA to fill the EUR 2,2 billion capital shortage of ABN AMRO Z. The Dutch State decided that ABN AMRO N should use cash from MCS-instruments (namely Measure B3 insofar as it related to the prudential margin of EUR 500 million and EUR 1,2 billion of Measure B5) to inject EUR 1,7 billion in ABN AMRO Z, while it kept the CRI in place in the new ABN AMRO Bank to cover the prudential margin of EUR 500 million and the integration costs of EUR 1,2 billion.

(111) On 15 October 2010, ABN AMRO Bank and the Dutch State announced that the CRI would be terminated as of 30 October 2010. Indeed, as ABN AMRO Bank had in the meantime implemented the Basel II requirements, the CRI had become less interesting and less necessary (58).

(112) Since the CRI did not suffice to cover the entire EUR 2,2 billion capital shortfall of ABN AMRO Z, the Dutch State provided extra capital to ABN AMRO Bank via an MCS.

(113) That MCS was categorised as hybrid Tier 1 capital, it carried a coupon of 10 % and automatically converted into shares of ABN AMRO II at the time of the separation of ABN AMRO N from ABN AMRO Bank. From that moment on, it qualified as core Tier 1 capital. The conversion took place at nominal value (59). The measure allowed ABN AMRO II (renamed ABN AMRO Bank) to contribute EUR 500 million to ABN AMRO Z.

(114) In order to cover costs related to the separation of ABN AMRO N from ABN AMRO Bank, the Dutch State subscribed to additional MCS. A first tranche of roughly EUR 300 million (Measure B2) was notified in July 2009, with the remainder (namely EUR 780 million) notified in January 2010 (Measure B3).

(115) The full amount of EUR 1,08 billion (namely Measures B2 and B3 together) was needed to cover the following costs: — EUR 480 million of well-defined separation costs; — EUR 90 million to set up a money market desk; and — EUR 500 million to provide for a prudential margin.

(116) The Dutch State provided a further breakdown of the separation costs of EUR 480 million. They related to cross liabilities exposure (EUR [0 - 200] million), unwinding of risk allocation letters (EUR [0 - 200] million), repurchase of securitisation notes (EUR [0 - 200] million), the transfer from ABN AMRO R of trading-related market risk of ABN AMRO N customers (EUR [0 - 200] million), discontinuation of capital relief instruments (EUR [0 - 200] million) and sundry separation and unwinding costs (EUR [0 - 300] million).

(117) After the separation from its parent company ABN AMRO Bank, ABN AMRO II needed to set up a money market desk on its own, which cost EUR 90 million.

(118) Finally, the Dutch State injected another EUR 500 million in capital to ensure that ABN AMRO N could operate with some margin above the minimum regulatory requirements.

(119) FBN and ABN AMRO N could only merge once the concentration issues identified in the Merger Decision were resolved. Therefore, the Dutch State decided to sell New HBU and IFN to Deutsche Bank. That transaction resulted however in an additional capital need of EUR 470 million, which ABN AMRO N could not deal with entirely on its own. The Dutch State decided to help and injected EUR 300 million in the form of MCS (60).

(120) To implement the merger, ABN AMRO N and FBN (and after the merger ABN AMRO Group) had to pay for upfront integration costs of EUR 1,2 billion (after tax), related to redundancy costs, the integration of ICT platforms and the restructuring of the branch network. Since ABN AMRO N and FBN were not able to finance those costs themselves, the Dutch State decided to inject capital in the form of MCS (61).

(121) FBN was obliged to increase its Tier 1 capital after the DNB (62) had indicated that there was a Tier 1 capital shortage of approximately EUR 1,26 billion. After the separation from its parent company Fortis SA/NV, FBN also had to spend EUR 90 million to cover costs related to the set up of a treasury desk, Basel-related models, licenses and consultancy services.

(122) The Dutch State provided that extra capital by converting Tier 2 debt with a nominal value of EUR 1,35 billion into Tier 1 capital. Consequently, the transaction did not involve any new cash (63).

(123) When the consortium members negotiated the acquisition of ABN AMRO Holding in 2007, they realised that not all facts were already known at the time. Therefore, the CSA contained a number of general principles to settle certain payment obligations, which would only become apparent during the separation process. The exact amounts result from a negotiating process in which the Dutch State (and Fortis SA/NV before it) participated.

(124) The total amount of EUR 740 million relates to: […] Those cash outflows are partly compensated by the fact that the Dutch State received […] from the other consortium members related to stranded costs.

(125) The balance of the payment obligations in respect of other consortium members (namely EUR 740 million) was paid in cash, in part directly to the other consortium members and in part to ABN AMRO Bank (now RBS NV).

(126) Even after the divestment of New HBU, ABN AMRO Bank (now RBS NV) and ABN AMRO II (or its legal successors) will remain liable towards creditors of New HBU if New HBU is unable to meet its obligations towards its own creditors. Likewise New HBU will face cross liabilities towards creditors of ABN AMRO Bank and ABN AMRO II. Since the cross liabilities were rooted in the sale of New HBU which resulted from a decision of ABN AMRO II and its shareholders, it was also their responsibility to find a solution. The proposed solution implied that the Dutch State and Deutsche Bank (namely the purchaser of New HBU) agreed that new HBU and ABN AMRO II would indemnify each other for those cross liabilities by providing each other collateral, so as to reduce the induced regulatory capital requirements to a desired 20 %. As a result of that agreement, ABN AMRO II had to provide collateral to New HBU for an amount up to EUR 950 million (declining over time as underlying liabilities mature) for the liabilities of New HBU towards ABN AMRO II and towards ABN AMRO Bank (now RBS NV). Since ABN AMRO II did not have the means to provide the collateral needed in respect of the liability towards ABN AMRO Bank (now RBS NV), the State provided a counter-indemnity in the form of a guarantee on the debt of ABN AMRO Bank (now RBS NV).

(127) The Dutch State priced that risk as if it was a State guarantee on ABN AMRO Bank (now RBS NV) subordinated debt. The pricing – based on the European Central Bank (‘ECB’) Recapitalisation Recommendation (64)– was set at 200 basis points plus the median CDS-spread (65).

(128) Table 4 summarises the measures assessed in this Decision. The column ‘Reason’ is the same as that in Table 1 at point (57) of the Decision of 5 February 2010. As indicated in recital 110, following the separation of ABN AMRO N with ABN AMRO Bank on 6 February 2010, the measures and the objectives of the measures were reshuffled. More specifically, Measure A was used from that date on for the objectives of Measure B3 (insofar as it concerns the prudential margin) and Measure B5 and vice versa. Table 4 State support measures Description Size (in EUR billion) Reason Legal entity to which the measure is granted Measures covered by the Decision of 8 April 2009 Y1 ST funding 45 FBN Y2 LT funding 16,1 FBN (to allow repayment to Fortis Bank SA/NV) Z Acquisition of ABN AMRO N 6,5 FBN (purchase price paid by waiving debt) Capital measures notified in July 2009 and implemented in July/August 2009 Measure A Capital relief instrument CDS-protection on a EUR 34,5 billion portfolio (having a capital relief effect of EUR 1,7 billion) Filling the capital shortage of ABN AMRO Z ABN AMRO Bank (now RBS NV) and moved to ABN AMRO II (now ABN AMRO Bank) on separation date Measure B1 MCS 0,5 Measure B2 MCS 0,3 First tranche of separation costs ABN AMRO Bank NV (now RBS NV) and moved to ABN AMRO II (now ABN AMRO Bank on separation) Additional capital measures notified in January 2010 Measure B3 MCS 0,78 Second tranche of separation costs and prudential margin of EUR 0,5 billion EUR 967 million paid to ABN AMRO Bank (now RBS NV) and then moved to ABN AMRO II (now ABN AMRO Bank) on separation, the remainder directly paid to ABN AMRO II Measure B4 MCS 0,3 Capital impact from sale of new HBU Measure B5 MCS 1,2 Integration costs Measure C Exchange Tier 2 into common equity 1,35 Tier 1 shortage at the level of FBN FBN Measure D Cash payment to consortium partners 0,74 Payment obligations resulting from the CSA Other consortium partners/ABN AMRO Bank (now RBS NV) Measure E Guarantee on liabilities of EUR 950 million 0,95 Cross liabilities resulting from sale of new HBU ABN AMRO II (now ABN AMRO Bank)

3. GROUNDS TO OPEN

3.1. Grounds to open in the Decision of 8 April 2009

(129) In the Decision of 8 April 2009, the Commission opened proceedings because it had grounds to believe that Measures Y1, Y2 and Z (66) represented State aid in favour of FBN and ABN AMRO N. The Commission believed that those measures allowed FBN and ABN AMRO N to stay on the market and pursue their activities. It had reasons to believe that those measures were selectively advantageous to FBN and ABN AMRO N.

(130) In recitals 29 and 30 of the Decision of 8 April 2009, the Commission noted that Measures X, Y1 and Y2 were part of the same sale contract, which aimed at separating FBN from the rest of the Fortis SA/NV. The Decision of 3 December 2008 already concluded that by entering in that contract on 3 October 2008, the Dutch State had not acted as a normal investor in a market economy.

(131) In recital 33 of the Decision of 8 April 2009, the Commission argued that Measure Y1 was apparently advantageous to FBN as it had received an amount of funding, which it could not have found on the markets, the markets being at the time in complete disarray. Keeping in mind those extreme market circumstances, the Commission also doubted that the interest rates required by the Dutch State would have been acceptable to a private investor. The Commission also noted that the solidity of its new funding provider seemed advantageous to FBN. FBN was no longer dependent on a liquidity-constrained company in distress like Fortis SA/NV but received its funding from the Dutch State.

(132) The Commission doubted that Measure Y1 was compatible with the Communication from the Commission – The application of State aid rules to measures taken in relation to financial institutions in the context of the current global financial crisis (the ‘Banking Communication’) (67) as it was neither proportional nor limited to the minimum necessary. More specific concerns were raised in recital 52 of the Decision of 8 April 2009 on the compatibility of the following elements: (1) the remuneration that FBN paid, (2) the maximum period during which FBN could benefit from funding, (3) the maximum maturity of instruments concerned and (4) the volume of the liquidity facility.

(133) The Commission also indicated that Measure Y2 could contain elements of State aid if Fortis Bank SA/NV was at the time of the acquisition in a position to request the immediate redemption of the long-term loans should the ownership of FBN change. If there was indeed an ownership-related redemption clause, Measure Y2 allowed FBN to benefit from long-term loans at pre-crisis interest rates. Measure Y2 implied that FBN was not obliged to find alternative funding at the prevailing market conditions at that time. Moreover, since Fortis Bank SA/NV had the right to ask for redemption, the Dutch State choice to provide of long-term loans rather than short-term loans could be questioned. Therefore, in the Decision of 8 April 2009, the Commission voiced concerns that Measure Y2 contained State aid for a longer-term period than was strictly necessary. To be in a position to evaluate the State aid implications of Measure Y2, the Commission requested the Dutch State to provide more information on the contractual early redemption terms of the long-term loan contracts.

(134) In recital 54 of the Decision of 8 April 2009, the Commission also doubted whether the Dutch State had taken sufficient measures to limit undue distortions of competition, in line with point (27) of the Banking Communication.

(135) The Commission was also concerned that ABN AMRO N had – potentially indirectly – benefited from the liquidity measures provided to FBN. Therefore, it asked the Dutch State to provide more information on ABN AMRO N’s funding position and funding strategy.

(136) With respect to Measure Z, the Commission doubted that the Dutch State paid FBN the market price for the acquisition of ABN AMRO N. The Commission observed that the Dutch State paid more than the 3 October 2008‘current market conditions’ valuation of the Dutch State’s own valuation expert […] in its report which was mentioned in recital 2. Moreover, the Commission observed that the Dutch State had not applied a correction factor to reflect the stock market decline that occurred between October and December 2008 and which was especially pronounced for bank stocks. If the Dutch State overpaid when buying ABN AMRO N, Measure Z was equivalent to State aid helping to recapitalise FBN.

(137) In general, the Commission also observed in the Decision of 8 April 2009 that the Dutch State had not yet submitted an evaluation of FBN and ABN AMRO N by the DNB. Nor had the Dutch State provided a viability plan or a restructuring plan with detailed financial projections. Because neither a viability plan nor a restructuring plan were available, the Commission was unable to determine whether, as a result of Measures X, Y1, Y2 and Z, ABN AMRO N and FBN had sufficient capital and were able to realise an acceptable level of profitability.

3.2. Grounds to extend the proceedings in the Decision of 5 February 2010

(138) When on 17 July 2009 and on 15 January 2010, the Dutch State notified extra measures in favour of FBN and ABN AMRO N as measures not constituting State aid, the Commission was concerned that some of these additional measures represented extra State aid to FBN and ABN AMRO N.

(139) In the Decision of 5 February 2010, the Commission observed that under the CSA the Dutch State had a number of obligations, which were not obligations of ABN AMRO N. Measures taken by the Dutch State to comply with its obligations under the CSA (and in particular the obligation to bear the cost of ABN AMRO Z and the obligation to separate ABN AMRO N from ABN AMRO Bank) would at first sight not qualify as State aid to ABN AMRO N.

(140) The Commission indicated that the Measures A and B1 seemed primarily designed to cover the capital shortage of ABN AMRO Z, but at the same time it was not clear to the Commission whether there was not also an indirect benefit to the economic activities of ABN AMRO N. In that regard, the Commission wanted to know whether ABN AMRO N and ABN AMRO Z – with no separate legal status – were sufficiently ring-fenced vis-à-vis one another. The Commission also wanted to receive more information on the reasons behind the capital shortfall of ABN AMRO Z and for instance on the transfer of Unicredito shares from ABN AMRO Z to ABN AMRO N. The Commission also had questions as to the remuneration by ABN AMRO N to ABN AMRO Z for the performance of head office functions. The Commission suspected that – at least part of – the undercapitalisation of ABN AMRO Z was linked to the fact that ABN AMRO N did not pay a market price for the head office services of ABN AMRO Z.

(141) Even though the separation of ABN AMRO N from ABN AMRO Bank is an obligation of the Dutch State under the CSA, the Commission could not exclude that the State recapitalisation financing the separation costs could be State aid. The Commission observed that not all costs categorised as separation costs were strictu senso linked to the separation obligations as described in the CSA. The Commission noticed that the category ‘separation costs’ included an amount of EUR 500 million which was needed to provide ABN AMRO Group with a prudential margin over minimum prudential requirements.

(142) The Commission observed that the Dutch State helped FBN and ABN AMRO N to pay the costs related to the merger. To resolve concentration problems created by the merger, ABN AMRO N decided to sell IFN and New HBU, which led to a new capital shortfall. The Commission observed that FBN and ABN AMRO N were able to profit from the benefits of the merger (for example merger synergies, the advantages of being a stronger company with higher market shares on the Dutch market, …), while the Dutch State financed the upfront costs. In that regard, the Commission observed that there was no legal obligation for the Dutch State to pay those costs since they originated in the decision of the Dutch State of 21 November 2008 to merge FBN and ABN AMRO N and not in the CSA.

(143) The Commission took note of the fact that the merger and the specific conditions surrounding the separation resulted in cross liabilities (Measure E). Dutch corporate law implied that ABN AMRO Bank (now RBS NV) and ABN AMRO II remained liable for the debt-holders of New HBU should New HBU (or its new owner Deutsche Bank) fail to fulfil its payment obligations. New HBU had similar obligations vis-à-vis debt-holders of ABN AMRO Bank (now RBS NV) and ABN AMRO II). The Commission could not exclude that the indemnification solution, which implied that the Dutch State guaranteed the debt-holders of ABN Amro Bank (now RBS NV) at a premium of 200 basis points plus the median CDS-spread, implied State aid.

(144) The Commission also raised concerns about the design of the capital relief instrument (Measure A). The Commission acknowledged that Measure A was fundamentally different from other impaired asset measures as it was not put in place to protect ABN AMRO N against further declines in toxic assets with a highly uncertain valuation. Nevertheless, the Commission considered that to be compatible with the internal market, Measure A should comply with the general principles of the Communication from the Commission on the treatment of impaired assets in the Community banking sector (68) (the ‘Impaired Asset Communication’). More specifically, there should be sufficient evidence of appropriate pricing, meaning that the bank should not transfer expected losses to the State. In that regard, the Commission also wanted to understand what impact a number of specific contractual features (for example. the clawback mechanism and the vertical slice) would have on the actual cashflows and pricing. Finally, the Commission also doubted that there were insufficient incentives ensuring that ABN AMRO N would terminate the instrument as soon as it was no longer strictly necessary.

(145) The Commission doubted whether the December 2009 Restructuring Plan fulfilled the criteria set forward in the Communication for the Commission on the return to viability and the assessment of restructuring measures in the financial sector in the current crisis under the State aid rules (69) (the ‘Restructuring Communication’) in terms of viability, burden-sharing and undue distortions of competition.

(146) The Commission acknowledged that ABN AMRO Group would at first sight realise sufficient revenues to cover all its operational costs (including impairments) and earn an acceptable return on equity. However, the Commission also noted that the return on equity of ABN AMRO Group depended to a large extent on the realisation of a number of key assumptions. First, if ABN AMRO Group wants to become cost-efficient with an acceptable cost-income ratio, it is crucial that ABN AMRO Group implements the projected synergies (namely EUR 1,1 billion pre-tax which compares to a 2013 net profit of […] billion EUR). Second, as indicated in recital 118 of the Decision of 5 February 2010, it was also of crucial importance for the viability of ABN AMRO Group that it would be able to improve its net interest margin from the low levels of FBN and ABN AMRO N in the second half of 2008 and the first half of 2009. In its Decision of 5 February 2010, the Commission indicated that it needed more details on those issues, so as to evaluate whether long-term viability had truly been restored.

(147) The Commission also noted that the December 2009 Restructuring Plan did not yet include financial projections for a worst case scenario as required by point (13) of the Restructuring Communication. Therefore, the Commission asked for such worst case financial projections, allowing it to verify how ABN AMRO Group would perform in more stressful market conditions.

(148) The Commission also observed that the December 2009 Restructuring Plan contained little information on smaller sub-divisions, so that the Commission could not judge whether all viability issues at that level had been sufficiently addressed. More specifically, the Commission doubted whether viability of PFS, a division of FBN, which reported major Madoff-related losses in 2008, was sufficiently guaranteed.

(149) The Commission questioned whether the State aid was limited to the minimum necessary to restore the viability of ABN AMRO Group. In that respect, it noted that ABN AMRO Group had indicated that it wished to make small add-on acquisitions, which it deemed necessary to rebuild product competences lost during the separation processes from Fortis SA/NV and ABN AMRO Holding. In the Decision of 5 February 2010, the Commission argued that State aid should not be used to finance acquisitions or new investments unless essential for restoring the viability of an undertaking. The Commission asked the Dutch State to shed more light on the acquisition policy of ABN AMRO Group and to provide it with, inter alia, a detailed list of activities that ABN AMRO Group needed to rebuild for viability reasons.

(150) The Commission also doubted whether all hybrid capital providers of FBN and ABN AMRO N had paid their share of the restructuring. The Commission was concerned that, for instance, the preferred shareholders of FBN (70) had not sufficiently contributed to ensure that the intervention of the Dutch State was not limited to the minimum necessary.

(151) Also in terms of duration, the State aid should be limited to the minimum necessary. In that regard, the Commission observed that a number of measures were needed to address temporary problems, but the Commission doubted whether the Dutch State had taken sufficient steps ensuring that the measures would be unwound once they were no longer necessary.

(152) With regard to Measure A, the Commission observed that the CRI would become unattractive once ABN AMRO N was allowed to implement Basel II requirements. Although the CRI contained call features allowing for an early termination of the contract, the Commission observed that there was no clear timetable for the Dutch State’s exit.

(153) Also with regard to the prudential margin of EUR 500 million, the Commission noted that the intention was that ABN AMRO Group replaced that amount by self-financed capital. Again the Commission observed that there was no indication whatsoever on timing.

(154) With respect to the integration costs of EUR 1,2 billion (namely Measure B5), the Commission observed that the Dutch State claimed that these would lead to important synergies of EUR 1,1 billion (pre-tax) per year, which could in principle be used to repay the State aid. Yet, the Commission observed that the Dutch State had not put in place a mechanism ensuring such a repayment. On the capital needs related to the sale of New HBU, the Commission concluded that the capital requirements related to the credit umbrella would decline rapidly as loans would gradually mature. Again, the Commission underlined that the State aid should be repaid once it was no longer necessary.

(155) In terms of distortion of competition, the Commission noted that the capital needs of FBN and ABN AMRO N stemmed to a certain extent from their separation of their former parent companies and from upfront integration costs, and not from excessive risk-taking or mismanagement within FBN and ABN AMRO N themselves. Against that background, the Commission concluded that further divestments were unlikely to be necessary.

(156) At the same time however, the Commission expressed doubts that the December 2009 Restructuring Plan contained sufficient behavioural measures to ensure that FBN and ABN AMRO N would not use the State aid to grow at the expense of their competitors, for example by implementing an unsustainable pricing policy or acquiring other financial institutions, which could weaken the incentives of non-beneficiaries to compete, invest and innovate and could discourage entry in the Dutch banking market.

(157) In terms of exit, the Commission argued that it would be helpful if the Dutch State developed and clearly communicated an exit strategy. Indeed, the repeated and massive interventions of the Dutch State could be perceived by depositors as a sign of its permanent support.

4. COMMENTS FROM INTERESTED PARTIES

4.1. First set of comments from Van Lanschot (letter of 6 May 2009)

(158) The complainant argued that thanks to the State aid and State ownership, FBN and ABN AMRO N (including their subsidiaries such as MoneYou and Mees Pierson) offered unsustainably high interest rates on individual savings and deposit accounts, thereby destabilising the Dutch banking market.

(159) The complainant believed that interest rates offered by FBN and ABN AMRO N were loss-making. In that regard, it referred to the fact that EURIBOR rates declined from 5 % in September 2008 to less than 2 % in January/February 2009, while interest rates offered by FBN and ABN AMRO N on savings accounts actually rose.

(160) The complainant also points at the specificities in the Dutch private banking market when compared to the retail banking market, which tend to increase the distortive effect of the measures taken. Saving amounts in private banking are on average larger than in retail banking. For low savings amounts, customers care less about their bank’s risk profile as they are protected by the Dutch Deposit Guarantee Scheme (up to an amount of EUR 100 000). Risk awareness increases however once that threshold is passed, which is rather common in private banking.

(161) The complainant also argued that FBN and ABN AMRO N benefit from an implicit State guarantee. It argued that customers of FBN and ABN AMRO N are convinced that the Dutch State will not allow State-owned banks to go bankrupt.

(162) The complainant – which weathered the crisis without State aid – underlined that it was severely affected by FBN and ABN AMRO N distortive behaviour as it relied traditionally to an important extent on the Dutch savings market to fund its assets (71). In absolute figures, the complainant had savings & deposits of EUR 15 billion, which implied that a 1 % increase in interest rates could cost the company approximately EUR 150 million per year (72). In addition to that cost increase, there was also a volume effect as Van Lanschot lost customers.

4.2. Follow-up comments of Van Lanschot (letters of 21 and 28 August 2009)

(163) According to the complainant, the unusual behaviour of FBN and ABN AMRO N persisted over the summer months of 2009.

(164) As an additional argument, the complainant referred to unusually large volume and market share changes in the traditionally stable Dutch savings market. In that regard, the complainant pointed to FBN and ABN AMRO N press releases which reported deposit inflows of respectively EUR 9 billion and EUR 21 billion in the first half of 2009 (73). The complainant deemed those figures to be sizeable given the fact that the total Dutch savings market is worth approximately EUR 287 billion.

(165) As another illustration of unusual pricing, the complainant referred to the fact that savings interest rates in neighbouring countries such as Belgium, France and Germany had followed the decline in EURIBOR rates, while Dutch savings interest rates had remained stubbornly high.

4.3. Comments from ABN AMRO Bank (letter of 6 July 2009)

(166) Commenting on the Decision of 8 April 2009 launching the formal investigation procedure, ABN AMRO Bank (i.e. the parent company of ABN AMRO N) provided more information on its funding position and funding strategy. ABN AMRO Bank denied it had benefitted – directly or indirectly – from any funding aid given to FBN (Measures Y1 and Y2). ABN AMRO Bank pointed out that it had not needed help to fund itself throughout the crisis thanks to its diversified funding strategy. It also underlined that its liquidity statistics remained well within regulatory limits and within its own internal limits as well.

5. COMMENTS FROM THE DUTCH STATE

5.1. Comments from the Dutch State on the Decision of 8 April 2009

(167) The Dutch State acknowledged that FBN had been able to pursue its activities because of its acquisition by the State (74), but it argued that the acquisition was in line with the so-called ‘market economy investor principle’ (MEIP). As a result, according to the Dutch State there was no selective advantage and consequently no State aid. The Dutch State claimed that – even though the integrated transactions of 3 October 2008 were primarily meant to prevent the destabilisation of FBN and ABN AMRO N and the Dutch banking system in general – by purchasing participations in FBN and ABN AMRO N it aimed to make a positive long-term return. The Dutch State underlined that the price for FBN (including ABN AMRO N) was within the valuation range of its external valuation expert.

(168) The Dutch State claimed that it had paid a fair market price for FBN but it pointed out that even if it overpaid, that payment would have been State aid to Fortis SA/NV (which was the selling company) and not State aid to FBN.

(169) With respect to Measure Y1, the Dutch State claimed that it provided short-term funding to FBN at market conditions. It argued that before the crisis FBN received funding from its parent company at EONIA or EURIBOR rates without any extra spread. The Dutch State argued that the pricing it applied (as described in recital 96) was in line with market practice. More specifically, it also argued that its pricing system used for the period after 5 November 2008 (with a 50 basis points spread for loans of more than 3 months) was aligned with the Dutch Guarantee Scheme (75).

(170) With respect to the period during which FBN’s liquidity facility was made available, the Dutch State explained that it started negotiations on ending the liquidity facility in January 2009 with the aim of ending the liquidity facility as fast as possible. With that objective in mind, the Dutch State introduced in March 2009 a new two-step pricing system, which made funding more expensive if it exceeded a pre-defined threshold. The Dutch State assumed that FBN could repay the liquidity facility at a rate of EUR 4 to 5 billion a month and intended to end the liquidity facility by the end of 2009. In reality, FBN repaid the liquidity facility faster than anticipated. The liquidity facility was already ended on 1 July 2009.

(171) The Dutch State argued that the maximum maturity of the liquidity provided under the liquidity facility was proportional. In that regard, the Dutch State explained that in the first period (i.e. from 6 to 23 October 2008), it had granted liquidity with a maturity of not more than a few weeks. When the liquidity facility was subsequently adjusted, the maximum maturity was prolonged to 9 months to avoid redemption peaks.

(172) The Dutch State explained that the total volume of the liquidity facility (namely EUR 5 billion overnight and EUR 40 billion longer-term funding) was based on FBN’s real financing needs and was therefore the minimum necessary. The short-term liquidity facility of EUR 45 billion took into account the normal volatility of FBN’s cash position and it also allowed FBN to immediately repay approximately EUR 34 billion to Fortis SA/NV.

(173) With respect to the long-term loans (namely Measure Y2), the Dutch State acknowledged that Fortis Bank SA/NV could have requested the repayment of the fixed-interest rate loans (but not of the variable-rate loans) (76). The Dutch State argued however that it had only replaced Fortis Bank SA/NV leaving all the conditions of the existing contracts unchanged. According to the Dutch State, the contract between Fortis Bank SA/NV and FBN was a normal market contract between private market actors. The Dutch State argued that – because it had replaced a market economy investor – its behaviour was automatically in line with the MEIP. As such, the Dutch State considered it did not have to justify why rates could have been higher or why it should have replaced those long-term loans by shorter-term loans (77).

(174) The Dutch State also argued that it was quite common for companies, when pursuing acquisitions, to simultaneously provide liquidity to newly-acquired subsidiaries.

(175) As to whether direct or indirect State aid had been provided to ABN AMRO N, the Dutch State denied that ABN AMRO N received funding from the Dutch State or FBN. The Dutch State explained that ABN AMRO N, with its large retail and private banking franchise, had sufficient funding of its own.

(176) With respect to Measure Z, the Dutch State claimed that the transaction price of EUR 6,5 billion was a fair market price. It underlined that the price was between the ‘current market conditions’ valuation of EUR [4 - 6,5] billion and the ‘through the cycle’ valuation of EUR [6,5 - 9] billion as calculated by its external valuation expert at the beginning of October 2008 (prior to the 3 October 2008 transaction). As regards to the fact that the acquisition (Measure Z) took place two and a half months after that valuation was made, the Dutch State believed that no corrections were necessary since uncertainties were already reflected in the early October 2008 valuation (78). The Dutch State also argued that investment banking and toxic assets were usually at the basis of confidence problems in other banks, translating into important share price declines for those banks. ABN AMRO N, by contrast, with its stable retail and commercial bank profile, was fundamentally different to other banks. Given that context, the Dutch State argued that a price correction by analogy to other banks made no sense.

(177) The Dutch State also underlined that the other consortium members, and in particular RBS, had to approve the transaction and that […]. The Dutch State also refers to points (166) and (177) of the preliminary report of experts to the General Shareholders’ Meeting of Fortis SA/NV on 11 February 2009 in Brussels (79), claiming that those points support the Dutch State’s argument that it paid a fair price for FBN, ABN AMRO N, Fortis Insurance and Fortis Corporate Insurance on 3 October 2008, which constitutes therefore a valid reference price for the sale of December 2008.

(178) The Dutch State implemented Measure Z by waiving claims it had towards FBN. Furthermore, the Dutch State claimed that the Commission – if it were to come to the conclusion that Measure Z implied State aid – should apply a correction. Since similar instruments of other banks were trading at a substantial discount to par (80), it was logical that the market value of the debt instruments waived by the Dutch State was also below par. In other words, the prevailing market circumstances suggested that the Dutch State was not entitled to par value but to a lower market value. The Dutch State argued that, taking into account the then prevailing market circumstances, it was only entitled to a market value of EUR [4,55 - 5,85] billion (so the par value of the loans of EUR 6,5 billion corrected for a market discount of EUR [0,65 - 1,95] billion).

(179) On 18 June 2009, the Dutch Ministry of Finance forwarded to the Commission the evaluation of FBN by DNB as requested in the Decision of 8 April 2009. […] (81), (82), (83)

(180) DNB also informed the Commission on […] ABN AMRO N by letter of 20 January 2010. […]

5.2. Comments from the Dutch State on the Decision of 5 February 2010

(181) In general, the Dutch State argued that the measures taken did not constitute State aid because the measures: (i) did not benefit ABN AMRO N nor FBN, (ii) were necessary to separate ABN AMRO N and FBN from their respective former parent companies and followed from contractual obligations of the Dutch State as successor to Fortis SA/NV in the CSA, or (iii) were economically rational from the viewpoint of a private investor.

(182) The Dutch State argued that the Commission should apply the MEIP to every individual measure that the Dutch State had taken. Particularly concerning the merger-related measures (namely Measures B4 and B5), the Dutch State underlined that the merger was an investment with a positive net present value (‘NPV’) and therefore compatible with the MEIP.

(183) In other words, the Dutch State did not accept the Commission’s preliminary position, as developed in recital 96 of the Decision of 5 February 2010, that the MEIP did not apply to the measures following the integrated transactions of 3 October 2008 State, since those measures were part of a larger rescue and restructuring operation.

(184) The Dutch State acknowledged that the State aid rules imply that the MEIP does not apply when several interconnected capital injections are made in a short time period. Nevertheless it argued that this analysis did not hold true for FBN and ABN AMRO N as the integrated transactions of 3 October 2008 – in its view – did not contain State aid measures and, in addition, the follow-up measures were not connected to the initial transaction.

(185) The Dutch State argued that the Commission should take into account the very specific circumstances under which the Dutch State was obliged to buy FBN. The Dutch State also pointed out that the sale of New HBU had been very burdensome for the Dutch State and for ABN AMRO N with a negative capital impact of EUR 470 million.

(186) The Dutch State claimed to have based all its measures on the principles set forward in the Banking Communication (84) and the Communication from the Commission — The recapitalisation of financial institutions in the current financial crisis: limitation of aid to the minimum necessary and safeguards against undue distortions of competition (85) (the ‘Recapitalisation Communication’). In general, the Dutch State argued that its measures were well-targeted, proportionate to the challenges faced and designed so as to minimise negative spill-over effects to competitors.

(187) The Dutch State argued Measure A and Measure B1 did not qualify as State aid, since the State was contractually obliged to resolve capital problems faced by ABN AMRO Z. The Dutch State was contractually obliged under the CSA to implement the separation of ABN AMRO Holding. DNB only allowed the separation of ABN AMRO II to start if all the consortium members had paid their share in the capital shortage of ABN AMRO Z. The Dutch State admitted that it had provided capital to ABN AMRO Z via ABN AMRO N but it underlined that ABN AMRO N only acted as an intermediate vehicle. Ultimately, ABN AMRO N had only passed capital through to ABN AMRO Z and Measure A did not selectively advantage ABN AMRO N.

(188) As to whether the capital shortage of ABN AMRO Z was the result of selective advantages granted to ABN AMRO N, the Dutch State stated that the consortium members had already ensured at the time of the acquisition of ABN AMRO Holdings by the consortium (see recital 33) that the activities of the different tracking shares (as defined in recital 35) were sufficiently ring-fenced vis-à-vis one another. That arrangement meant that there was also a clear distinction between the activities of ABN AMRO N and ABN AMRO Z. It meant for instance that ABN AMRO N had its own corporate governance structure and its own reporting. The Dutch State also drew the Commission’s attention to the fact that ABN AMRO N had separate legal status as of 6 February 2010 (86).

(189) The Dutch State also provided evidence that the ABN AMRO Z capital shortfall already existed at the time of the acquisition of 3 October 2008. The opening balance of ABN AMRO Z was already a negative EUR 7,4 billion on 3 October 2008 and the share of Fortis SA/NV therein was approximately EUR 2,5 billion. With respect to the sources of the capital shortfall, the Dutch State admitted that there had been a transfer of EUR 1 billion worth of Unicredito shares from ABN AMRO Z to the operational tracking shares (including approximately EUR 300 million to ABN AMRO N), but it provided information showing that the Unicredito share transfer took place in February 2008, well before the Dutch State intervened. Therefore the Unicredito share transfer could not be considered as State aid.

(190) With respect to the costs borne by ABN AMRO Z related to head office functions, the Dutch State underlined that those costs decreased dramatically after the acquisition of ABN AMRO Holding by the consortium members described in recital 33. Since the consortium members had no interest in maintaining a large integrated head office, it was logical to keep those costs as low as possible. Figures provided by the Dutch State showed that group function costs borne by ABN AMRO Z were EUR [0 - 0,5] billion in 2008 and EUR [0 - 0,2] billion in 2009, which the Dutch State considered to be negligible. The Dutch State also underlined that it incurred the obligation to absorb those costs when it replaced Fortis SA/NV as a party to the CSA, following the acquisition of FBN (including ABN AMRO N) on 3 October 2008.

(191) Should the Commission consider Measure A as State aid, the Dutch State argued that the Impaired Asset Communication (87) should not apply. According to the Dutch State, there was no uncertainty on the valuation of the protected assets, which therefore could not be considered ‘impaired’ in the sense used in the Communication. Should the Commission not share its point of view, the Dutch government contended that ABN AMRO N’s CDS still complied with the general principles of that Communication. Moreover, it argued that the credit protection instrument was necessary and proportional, while keeping competition distortions to the minimum.

(192) The Dutch State asserted that the remuneration of the CRI – a 10 % return of the freed up capital – was sufficiently high. It also provided evidence that the first loss tranche of 20 basis points was substantially higher than the expected loss. The Dutch State contended that historical losses (namely [0 - 15] basis points) and 2010 projected losses (namely [0 - 30] basis points) on the mortgage portfolio of ABN AMRO N provided a good forecast for a range of future expected losses. Also market information from rating reports (88) confirmed that the first tranche loss exceeded expected losses. The Dutch State also referred to a document of the investment bank […], which simulated how the Dutch State cashflows could evolve under different stress scenarios.

(193) The Dutch State also believed that the CRI contained sufficient exit incentives. The Dutch State drew the Commission’s attention to the calls included in the CRI and to the fact that the CRI would become rather unattractive once ABN AMRO Group was allowed to operate under Basel II requirements. Against that background, the Dutch State believed that ABN AMRO N would probably call the CRI in January 2011, when the transition to Basel II requirements was expected to result in a reduction of the freed up capital.

(194) The Dutch State explained that the separation costs (namely Measures B2 and B3) were the result of the CSA, to which the Dutch State was de facto a party since 3 October 2008. According to the terms of the CSA, the State –as opposed to ABN AMRO N – was obliged to split ABN AMRO Holding in three parts. The Dutch State denied that those costs provided ABN AMRO N with a benefit and it also explained that it paid for the separation costs as it was the State’s contractual obligation to implement the separation.

(195) With respect to the prudential margin of EUR 500 million – also categorised under separation costs -, the Dutch State argued it was common banking practice. Banks cannot operate with only the minimum required capital but need an additional comfort margin. Otherwise, should banks face – even a small – setback, they would immediately run into financial trouble. The Dutch State indicated, however, that its contribution to the prudential margin should be temporary and that, in the longer-term, ABN AMRO N should generate the prudential margin itself without any help by the Dutch State.

(196) With respect to Measure B4, the Dutch State argued that the measure did not constitute State aid. The Dutch State argued that the decision to merge both banks was already taken and partly implemented when it acquired FBN. The Dutch State supported its claim by referring to the fact that ABN AMRO Asset Management had already been separated and integrated within Fortis SA/NV at the time of the integrated transactions of 3 October 2008. The Dutch State also underlined that the Commission had obliged it to implement a merger remedy to resolve outstanding concentration problems and that it inherited from Fortis SA/NV the New HBU Merger Remedy. The Dutch State also indicated that ultimately ABN AMRO N’s financial means would not increase and therefore it defended the position that Measure B4 did not constitute State aid.

(197) The Dutch State indicated that the State funds granted to finance integration costs (Measure B5) should be seen as a rational investment, leading to healthy returns in the form of synergies. The Dutch government estimated those synergies at around EUR 1,1 billion a year (pre-tax), while the upfront integration costs amount to EUR 1,2 billion (after-tax). According to the Dutch State, the total NPV of the merger (taking into account synergies, integration costs and the cost of the Merger Remedy) should amount to a positive EUR 2,88 billion (89).

(198) According to the Dutch State, the conversion of Tier 2 into Tier 1 capital (Measure C) did not selectively advantage FBN. The Dutch State claimed that the conversion was in the Dutch State’s interest as it was able to convert loans with an average coupon of 2,976 % into equity that, in its view, had an attractive remuneration. In that regard, the Dutch State referred to ABN AMRO Group’s projected normalised 2012 RoE of approximately […] % as put forward in the December 2009 Restructuring Plan.

(199) Should the Commission consider Measure C to be State aid, the Dutch State argued that the Commission should not consider all loans waived as State aid. It explained that the conversion could be broken down in a repayment of Tier 2 capital at par in combination with a core Tier 1 capital injection (with no net cash implications). According to the Dutch State, it could not have reasonably expected repayment of Tier 2 capital at par at that time, since comparable instruments of other banks were trading at a substantial discount to par reflecting fragile market circumstances. The Dutch State indicated that a discount of EUR [135 - 405] million was justified, based on comparable figures.

(200) The Dutch State indicated that the payment of EUR 740 million (Measure D) was one of its obligations stemming from the CSA. Moreover, the Dutch State underlined that there were only payments to the other consortium members and not to ABN AMRO N, so that there was also no State aid provided to ABN AMRO N.

(201) Regarding Measure E, the Dutch State argued that ABN AMRO II did not benefit from the counter-indemnity (described in recital 126), but that Measure E merely put ABN AMRO II in a position to provide a counter-indemnity to Deutsche Bank. It claimed that the counter-indemnity could not be used by the bank for development of new business and would therefore not give rise to any distortion of competition.

(202) The Dutch State considered the counter-indemnity to be in line with the Commission’s Recapitalisation Communication. The Dutch State underlined that it had based its pricing on the ECB Recapitalisation Recommendation.

(203) The Dutch State also commented on the Commission’s suspicion that the preferred shareholders of FBN (90) had not sufficiently contributed in terms of burden-sharing. The Dutch State explained that the investors in preferred shares had not received dividends in 2008 (neither in cash nor in accrual) and that preferred shares were trading below par. The Dutch State added that FBN’s ability to pay or reserve fixed dividends in the future depended on FBN having sufficient IFRS profits. The Dutch State noted that the dividend clause governing the FBN preferred shares included so-called dividend stopper/pusher language (91) and that the uncertainty around the dividend policy of the ABN AMRO Group reduced the comfort that the investors in preferred shares could derive from the dividend stopper/pusher language.

(204) As to whether capital would be repaid once the (temporary) capital needs disappear, the Dutch State argued that it intended to use the dividend policy of ABN AMRO Group in such a way that ABN AMRO Group would not have any excess capital which could result in a distortion of competition (92).

(205) Concerning distortions of competition, the Dutch State indicated that it did not agree with the Commission’s position that ABN AMRO N and FBN were reinforced in the Netherlands as a result of the merger nor that such a development threatened to create undue distortions of competition. It rather believed the contrary and pointed in that regard to the fact that the separation of FBN and ABN AMRO N from their respective parent companies and the subsequent merger were very labour-intensive and implied that the management of FBN and ABN AMRO N could dedicate less time to the day-to-day commercial business and therefore it argued that the separation and the subsequent merger had a negative impact on the competitive position of FBN and ABN AMRO N (or ABN AMRO Group post-merger).

5.3. Comments from the Dutch State on the comments of interested parties

5.3.1. Comments from the Dutch State on the complainant’s letter of 6 May 2009

(206) In general, the Dutch State underlined that in its view the measures in favour of FBN and ABN AMRO N did not meet the Union definition of State aid and therefore did not have distortive effects. It considered the market behaviour of FBN and ABN AMRO N on the savings and deposit market to be in line with that of a rational market player protecting its commercial interests. The Dutch State believed that the interest rates offered by FBN and ABN AMRO N were not distortive. As a result, it argued that there was no infringement of Union competition law.

(207) The Dutch State presented a number of comparative tables with interest rates offered on specific deposit and savings products. The Dutch State denied that FBN and ABN AMRO N were consistently offering the highest interest rates, especially when compared to smaller Dutch banks like SNS, NIBC and DSB. The Dutch State also pointed out that interest rates on savings accounts were already high in the Netherlands before the financial crisis, partly due to the behaviour of smaller banks with an aggressive pricing policy. The Dutch State believed that during the financial crisis banks tried to protect their savings franchises by offering relatively high interest rates on savings products for customers.

(208) The Dutch State also commented on the pricing strategy of MoneYou, the Internet brand of ABN AMRO N, which was introduced in the market in September 2008. The Dutch State argued that MoneYou is a dedicated Internet product, which differed considerably from more traditional products in terms of cost base and service level. The Dutch State indicated that MoneYou had to build up brand recognition in the first 6 months of its existence and therefore had to offer interest rates which were mostly slightly lower or equal than those offered by similar Internet-banking marketplayers (93). From the second quarter of 2009 onwards, the interest rates offered by MoneYou were lowered and MoneYou positioned itself within the so-called mid-tier segment (94). With respect to MoneYou, the Dutch State added that it only raised limited volumes of funds (namely EUR [0 - 5] billion), representing roughly [0 - 5] % of total volume on the Dutch savings market. The Dutch State added that ex-Van Lanschot customers only represented a small part of MoneYou’s business (namely [0 - 5 000] accounts or [0 - 5] % of MoneYou’s accounts).

(209) The Dutch State also denied that ABN AMRO N and FBN were solely relying on the Dutch savings market to fund themselves. The Dutch State provided new information showing that ABN AMRO N had issued a covered bond of EUR 2 billion on 6 July 2009 and that FBN had issued EUR 15,5 billion of State-guaranteed debt instruments. According to the Dutch State, the complainant’s allegations were incorrect and premature. It indicated that FBN just needed some time to set up treasury operations and issue State-guaranteed debt instruments. The Dutch State also indicated that deposits and saving products are also important to establish a customer relationship and have a different and broader purpose than that of other funding instruments. In that regard, the Dutch State pointed out that a loss in a bank’s savings and deposits market share could lead to market share losses in other banking products.

(210) The Dutch State also denied that the consumers and market participants perceived ABN AMRO N and FBN as safer banks than competitors. It referred to the ratings of FBN and ABN AMRO N at rating agencies, which were below the AAA-rating of Rabobank for example. Its relative CDS-spreads told a similar story. The Dutch State also believed that the State-ownership did not make ABN AMRO N or FBN more secure in the eyes of consumers and market participants. In that regard, it pointed out that the many ad-hoc State interventions had shown that the Dutch State would, if possible, intervene with respect to any privately-owned bank. Consequently, it believed that de facto there was no perceived difference between the security offered by Dutch privately-owned banks compared with that of Dutch State-owned banks.

(211) To calculate whether interest rates offered on savings products were loss-making, the Dutch State argued that they should not be compared with EURIBOR rates but rather with rates resulting from the so-called ‘replicating portfolio methodology’ (95). Using that methodology, the Dutch State acknowledged that for some products, there was a temporary negative margin. However, it argued that it was rational market behaviour and in line with market behaviour of (privately-owned) competitors at that precise point in time.

5.3.2. Comments from the Dutch State on the complainant’s arguments of 21 and 28 August 2009

(212) The Dutch argued that its earlier comments summarized in recitals 206 to 211 concerning the complainant were still valid.

(213) In addition, the Dutch State noted that the complainant’s claim that ABN AMRO N and FBN market share had increased was based on flawed statistics. With respect to the alleged EUR 21 billion increase in deposits collected by ABN AMRO N, the Dutch State argued that only EUR 5,1 billion was due to Dutch retail savings with the rest mainly due to corporate customer savings and foreign deposits. The Dutch State also provided data, showing that a large part of FBN’s volume increase of deposits and savings stemmed from corporate banking as opposed to retail and private banking.

(214) The Dutch State observed that that Dutch customers had invested more into their savings because of the uncertain macroeconomic environment. It pointed to data of the Central Bureau of Statistics (‘CBS’) which indicated that savings increased by 7,7 % year-on-year in the first half of 2009. ABN AMRO N’s customer savings increased by 7,5 % year-on-year, which indicated that the ABN AMRO N’s market share rather declined. FBN also presented evidence showing that its customer savings had evoled in line with the market.

5.3.3. Comments from the Dutch State on the comments of ABN AMRO Bank

(215) The Dutch State confirmed that it had not provided a liquidity facility to ABN AMRO N, thereby broadly confirming ABN AMRO Bank’s arguments.

6. ASSESSMENT

6.1. Existence of aid

(216) Article 107(1) of the Treaty provides that any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, insofar as it affects trade between Member States, be incompatible with the internal market. It follows that a State measure qualifies as State aid if it meets the following four (cumulative) criteria: — State resources; — selective advantage; — distortive impact on competition; and — impact on trade between Member States.

(217) The first criterion is met for Measures (Y1) to (E) in Table 4 in recital 128 as all those Measures are directly financed from the Dutch State’s resources.

(218) Whether a measure constitutes a selective advantage to FBN, ABN AMRO N or ABN AMRO Group post-merger (the second criterion) is analysed in the recitals 220 to 278, examining each measure separately.

(219) If a selective advantage exists in this case, the third and fourth criteria would also be fulfilled. All the measures distort or threaten to distort competition as they place FBN, ABN AMRO N or ABN AMRO Group after the merger in a beneficial position vis-à-vis other competing banks (third criterion). Moreover, the measures also have an impact on trade between Member States. FBN, ABN AMRO N and ABN AMRO Group post-merger are internationally-oriented banks with activities outside the Netherlands while also competing in their home market with subsidiaries of foreign banks (fourth criterion).

6.1.1. Measures Y1 and Y2 of 3 October 2008

(220) It is appropriate to recall that this Decision assesses only potential aid to FBN, ABN AMRO N or ABN AMRO Group post-merger. Potential aid to Fortis Bank SA/NV arising out of Measures Y1 and Y2 was assessed in the Decision of 3 December 2008.

(221) As indicated in recital 52 of the Decision of 3 December 2008 (96) and in the initial aid assessment of those measures in the Decision of 8 April 2009, the measures taken