EN Official Journal of the European Union L 176/1

COMMISSION DECISION

of 3 September 2013

State aid SA.32554 (09/C)

Restructuring aid for Hypo Group Alpe Adria implemented by Austria

(notified under document C(2013) 5648)

(Only the German text is authentic)

(Text with EEA relevance)

(2014/341/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 regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having called on Member States and other interested parties to submit their comments pursuant to those provisions (1),

Whereas:

1. PROCEDURE

(1) In December 2008, Hypo Alpe Adria Group (‘HGAA’ or ‘the bank’) received EUR 900 million in Tier-1 Partizipationskapital (2) from the Republic of Austria on the basis of the Austrian emergency bank support scheme (‘the bank support scheme’) (3).

(2) On 29 April 2009 Austria provided the Commission with a viability plan for HGAA.

(3) In its decision of 12 May 2009 in case N 254/2009 (‘the 2009 opening decision’) (4) the Commission instigated the formal investigation procedure pursuant to Article 16 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (5), raising doubts about the compatibility with the internal market of the restructuring aid which Germany had granted to HGAA’s majority stakeholder, BayernLB, in December 2008. In the same decision, the Commission questioned whether HGAA was fundamentally sound.

(4) HGAA was nationalised on 23 December 2009. In that context several aid measures were temporarily authorised by the Commission in its decision of 23 December 2009 in Cases C 16/2009 and N 698/2009 (6) (‘the December 2009 rescue decision’) on the basis of Article 107(3)(b) of the Treaty on the Functioning of the European Union (‘the Treaty’) until the submission of a credible restructuring plan for HGAA to the Commission. In the same decision the Commission extended the formal investigation procedure in relation to additional aid measures granted by Austria in favour of HGAA.

(5) On 22 June 2010, the Commission further extended the formal investigation procedure in particular due to the failure of the revised restructuring plan for HGAA, which had been submitted on 16 April 2010, to demonstrate the restoration of viability, proper burden-sharing and a sufficient degree of mitigation of competition distortions. The Commission also prolonged the authorisation of the aid it had temporarily found compatible with the internal market in the December 2009 rescue decision, until it had concluded its examination of the restructuring plan for HGAA (‘the 2010 extension decision’) (7).

(6) On 29 December 2010, Austria notified an additional measure in favour of HGAA in the form of an asset guarantee amounting to EUR 200 million. That aid measure was authorised by Commission Decision of 19 July 2011 in cases SA.32172 (2011/NN) and SA.32554 (2009/C) (8) (‘the July 2011 rescue decision’).

(7) On 7 February 2011, the Commission informed Austria and Germany that Case N 698/2009 (9) concerning HGAA would be split procedurally from Case C 16/2009 concerning BayernLB. Subsequently, the procedure relating to HGAA was registered under Case SA.32554 (2009/C). This Decision only concerns Case SA.32554 (2009/C).

(8) On 21 April 2011, Austria submitted a new restructuring plan for HGAA.

(9) On 3 December 2012, Austria notified an additional aid measure in favour of HGAA in the form of a capital injection via ordinary shares by the Republic of Austria and a State guarantee on subordinated debt instruments to be issued by HGAA. The notification contained a catalogue of commitments for HGAA. Those measures were temporarily authorised by Commission Decision of 5 December 2012 in case SA.32554 (2009/C) (10) (‘the December 2012 rescue decision’). The authorisation took place in light of certain commitments provided by Austria. However, Austria only partially respected those commitments.

(10) On 5 October 2012 Austria brought an action for the annulment of Commission Decision of 25 July 2012 in case SA.28487 (C 16/2009 ex N 254/2009) (11) (subsequently withdrawn and replaced by Commission Decision of 5 February 2013 (12) concerning BayernLB (‘the BayernLB decision’).

(11) For a detailed description of the procedure, reference is made to the 2009 opening decision, the December 2009 rescue decision, the 2010 extension decision, the July 2011 rescue decision and the December 2012 rescue decision.

(12) The various restructuring plans for HGAA and their amendments were discussed between the Austrian authorities and the Commission services in a series of meetings, phone conferences and other information exchanges between July 2010 and August 2013.

(13) On 29 June 2013 Austria notified a restructuring plan providing for the liquidation of HGAA which was subsequently completed by submission of 27 August 2013.

2. DESCRIPTION

2.1. THE BENEFICIARY

(14) HGAA is an internationally active finance group with headquarters in Klagenfurt, Carinthia, from where its banking and leasing activities including the wind-down part are controlled and steered via Hypo Alpe Adria Bank-International (‘HBInt’). HBInt carries out central group functions including group controlling, group accounting, overall risk management, legal matters and compliance, liquidity management, security issuance and refinancing of HGAA’s subsidiaries.

(15) At the end of 2012, HGAA had an overall balance sheet total of EUR 33,8 billion and risk weighted assets (‘RWA’) of about EUR 21 billion.

(16) HGAA is 100 % owned by the Republic of Austria (13).

(17) As of 31 December 2008 HGAA was present via banking and/or leasing subsidiaries in twelve countries, namely in Austria, Slovenia, Italy, Germany, Hungary, Bulgaria, Croatia, Serbia, Bosnia and Herzegovina, Montenegro, Ukraine and in the former Yugoslav Republic of Macedonia (‘FYROM’).

(18) Currently, HGAA is active in Austria with HBA. It is also active in Slovenia (with HBS and the leasing company HLS), Croatia (with HBC and the integrated leasing company HAALC), Bosnia and Herzegovina (with the two banking entities HBFBiH and — in the Republika Srpska — HBRS including the leasing company HLRS), Serbia (with HBSE) and Montenegro (with HBM) (collectively ‘the South-Eastern European (‘SEE’) countries’).

(19) A wind-down process has been launched for many of the bank’s industrial stakes and financial subsidiaries. The Italian HBI stopped new business by 1 July 2013. Other subsidiaries in wind-down are the Croatian leasing company (HLC) and a Croatian wind-down unit derived from transferred banking assets (H-ABDUCO), the Austrian leasing company (HLA), the German leasing company (HLG), in Montenegro the leasing company (HLM) and a wind-down unit derived from transferred banking assets (HDM), leasing in Hungary (HLHU), leasing in Bulgaria (HLBG), leasing in FYROM (HLMK), leasing in Ukraine (HLUA), in Bosnia and Herzegovina the leasing company HETA BiH as well as a wind-down unit derived from transferred banking assets (BORA), HLSE and HRSE leasing in Serbia, and in Slovenia TCK and TCV which are two entities derived from transferred banking and leasing activities and HLI leasing in Italy (14). The Alpe Adria Privatbank in Lichtenstein has already been liquidated.

(20) The following recitals provide an overview of the entities which are still active.

(21) The Austrian subsidiary HBA is present in the segment retail, corporate and institutional. It offers all classical services of a universal bank. HBA which has a regional focus on Carinthia with branches in Vienna and Salzburg has a national market share of below […] (15) % when measured in assets and of […] % in deposits.

(22) In Slovenia the group is present with the bank HBS (market share of about […] % in assets and […] % in deposits). As for the leasing company, HLS, it focuses on mobile and selected immobile leasing activities.

(23) The Croatian HBC is a universal bank (market share of around […] % in assets, […] % in deposits). HAALC is active in leasing and has a market share of around […] % in new financing volume.

(24) Two different banks are active in Bosnia and Herzegovina, HBRS in Republika Srpska (market share around […] % in assets and […] % in deposits) and HBFBiH in the Federation of Bosnia and Herzegovina (having a market share of […] % in assets). The leasing company HLRS, owned by HBRS, has a market share of around […] % on new finance volume.

(25) HBM in Montenegro has a market share of […] % in assets. The leasing business generated out of the bank has a market share of […] %.

(26) The Serbian HBSE focuses on the private and business segments (market share about […] % in assets and […] % in deposits).

2.2. THE AID MEASURES

December 2008 – Measures by BayernLB and State measures under the Austrian bank support package

(27) In 2008 HGAA received support by its shareholders at the time, BayernLB and the Republic of Austria. — In December 2008, HGAA received EUR 700 million from its then majority shareholder, BayernLB, which itself had received State aid in the same month from the Free State of Bavaria. — On 29 December 2008, HGAA received EUR 900 million in Tier-1 Partizipationskapital from the Republic of Austria and liquidity guarantees of EUR 1,35 billion for bond issues, both on the basis of the bank support scheme.

December 2009 – State recapitalisation and guarantees

(28) When HGAA was nationalised it received the following aid measures: — a temporary asset guarantee of EUR 100 million by Austria under the conditions for distressed banks under the bank support scheme, — a recapitalisation by Austria under the conditions for distressed banks under the bank support scheme in an amount of EUR 450 million,

January 2011 – Asset guarantee

(29) Following an additional need for write-downs, Austria granted HGAA an asset guarantee amounting to EUR 200 million from 31 December 2010 until 30 June 2013.

December 2012 – State recapitalisation and guarantee

(30) Following a decision by the Austrian supervisory authority, HGAA had to comply with an increased capital ratio of 12,04 % by 31 December 2012. To that end, HGAA received from the Austrian authorities — a capital increase of EUR 500 million in the form of shares and — a State guarantee on subordinated Tier-2 capital instruments with a nominal value of EUR 1 billion.

(31) For a detailed description of the bank and the aid measures authorised so far, reference is made to recitals 17 to 19 of the opening decision, recitals 13 to 15 and 27 to 40 of the December 2009 rescue decision, recitals 15 to 19 of the July 2011 rescue decision and recitals 10 to 12 of the December 2012 recue decision.

2.3. THE ADDITIONAL AID MEASURES NOT YET GRANTED

(32) The restructuring plan projects for the period 2013-17 additional capital needs for the wind-down unit amounting to approximately EUR 2,6 billion in the base case, EUR 4,7 billion in the pessimistic case and EUR 5,4 billion in the stress case. Under the assumption that the capital is provided in a liquid form the required additional liquidity needs of HGAA until 2017 would amount to EUR 2,5 billion in a base case and are estimated to reach EUR 3,3 billion in a stressed pessimistic case. (Should the measures not be granted in a liquid form liquidity measures in a higher amount might be necessary).

(33) Austria has sought, on a precautionary basis, the Commission’s authorisation of State aid measures which may be necessary to satisfy any additional capital or liquidity needs so as to satisfy all regulatory requirements or cover losses. Any capital granted will be limited to the amount necessary to fulfil the regulatory minimum capital requirements which have to be confirmed by the competent supervisory authority.

2.4. THE CONTRIBUTION OF THE FORMER SHAREHOLDERS OF HGAA

(34) Before its nationalisation HGAA had the following owners: BayernLB (67,08 %), Land Carinthia via Kärntner Landesholding (12,42 %), Grazer Wechselseitige Versicherung AG (‘GRAWE’) (20,48 %) and Mitarbeiterstiftung Hypo Alpe Adria (0,02 %).

(35) All owners ceded their shareholders’ rights by selling their shares to Austria for a symbolic price of one euro.

(36) BayernLB renounced all its shareholder’s rights including an existing EUR 300 million Ergänzungskapital (Tier-2) in HGAA and relieved HGAA from the obligation to repay EUR 525 million of existing credit lines it had previously been granted (16).

(37) In order to ensure liquidity for HGAA, BayernLB re-issued a liquidity line that had terminated in December 2009, amounting to EUR […]. Furthermore, it was agreed that the existing intra-group funding of EUR […] from BayernLB to HGAA would remain with HGAA until 31 December 2013. For 2014, BayernLB would leave funding amounting to EUR […] within HGAA, and for 2015 EUR […]. Those amounts are guaranteed by Austria in case HGAA is split up or another economically comparable measure is taken which does not ensure the viability of HGAA (17).

(38) In 2008 BayernLB had already injected capital amounting to EUR 700 million into HGAA, which has since been fully depleted as it was fully used to cover losses.

(39) GRAWE subscribed to EUR 30 million of non-convertible Tier-1 capital (Partizipationskapital) with a dividend of 6 % p.a. starting in 2013 in case of profits. Based on a decision by the Republic of Austria on 30 May 2011, the nominal amount of that capital has been reduced to EUR 9 million following a loss allocation (Kapitalschnitt).

(40) GRAWE also contributed EUR 100 million in terms of liquidity until 31 December 2013. The liquidity was fully collateralised (EUR 50 million by Austrian covered bonds, the remaining EUR 50 million by other assets eligible for issuing covered bonds).

(41) Carinthia contributed to the rescue operation in December 2009 via — a recapitalisation of EUR 200 million, which was made in two parts: (i) Carinthia converted EUR 50 million of Tier-2 capital into about EUR 31 million of Tier-1 Partizipationskapital and injected EUR 150 million in the form of Partizipationskapital. The Partizipationskapital has a profit-related dividend of 6 %, due for the first time for the business year 2013. The total amount of EUR 181 million of Partizipationskapital initially injected has in the meantime been reduced to about EUR 55 million via a capital cut (Kapitalschnitt); — liquidity measures amounting to approximately EUR 200 million provided by Land Carinthia in the context of existing business relationships.

(42) The following table provides an overview of the original amounts of Partizipationskapital in HGAA (all in HBInt) and its current amount. It should be recalled that Partizipationskapital has no voting rights. All shares with voting rights are held by the Republic of Austria. Table 1 Overview Partizipationskapital Partizipationskapital by old shareholders Original amount (in EUR) After Kapitalschnitt and other measures (conversion etc.) GRAWE 30 000 000 9 170 369 Land Carinthia 30 772 982 9 406 653 Land Carinthia 150 000 000 45 851 845 Intermediate sum 210 772 982 64 428 867 Republic of Austria 900 000 000 275 111 073 Total 1 110 772 982 339 539 940

(43) HGAA repurchased several hybrid and other capital instruments significantly below par or cancelled them altogether and thus increased its capital base: In April 2012 HGAA made a transaction which resulted in a Tier-1 increase of EUR 153 million. In August 2012 HGAA cancelled some hybrid instruments thus generating a further EUR 23,5 million in capital. In December 2012, HGAA offered a buy-back of other capital instruments resulting in an extraordinary profit of EUR […].

(44) In addition, the holders of own fund instruments (Partizipationskapital and other hybrid capital instruments) did not receive any profit-dependent dividends or coupons due to the losses of HGAA. For 2009 and 2010, HGAA could therefore retain more than EUR […].

2.5. THE CAUSES OF HGAA’S PROBLEMS

(45) HGAA’s problems were mainly caused by an aggressive growth strategy based on cheap State-guaranteed funding.

(46) HGAA bet massively on a rapid growth and catch-up in the markets in the SEE countries. In particular in the period 2000 to 2007 HGAA entered a large number of new markets. As a result, the balance sheet size of HGAA increased to EUR 43,3 billion on 31 December 2008, up from EUR 9,8 billion on 31 December 2002. Table 2 Expansion of HGAA, per country and business line

(47) The expansion strategy was made possible by favourable financing costs of HGAA due to State guarantees by Land Carinthia (Ausfallshaftung) which increased from EUR 4,9 billion by 31 December 2002 to EUR 20,7 billion by 31 December 2009. The access to cheap financing caused HGAA to neglect the generation of local deposits.

(48) The rapid balance sheet expansion in SEE markets, coupled with cheap State-guaranteed funding, generated short-term profits. From 2002 to 2006, HGAA made profits in every year except in 2004. However, the business model masked underlying risks of asset quality deterioration and refinancing, thus causing the bank to neglect the adequate overhaul and development of the procedures for internal control and risk management, which would have been required to cope with its changed needs following the expansion. With business volume considerations driving the bank’s strategy, leading it to taking high risks in particular in projects in the real estate and tourism segments, economic and business risks were systemically misjudged. The lack of adequate control mechanisms also rendered the bank vulnerable to fraud, causing several criminal investigations. Over time its portfolio became, partly due to a lack of proper collateralisation, plagued with a significant portion of non-performing loans. In many cases underlying collateral proved difficult or impossible to sell, necessitating large write downs.

(49) In addition, by granting a significant part of its retail and small and medium-sized enterprises (‘SME’) loans in SEE countries in Euros or Swiss Francs, the bank exposed itself to additional repayment risks. With the subsequent appreciation in particular of the Swiss Franc against the local currencies, those risks have partly materialized.

(50) Although within the regulatory limits at the time, in view of its risk profile resulting from its target client base and asset portfolio, the bank was operating with insufficient capital. That factor became a problem almost as soon as fortunes reversed. A calculation contained in the submitted liquidation plan shows that without the aid measures the bank would have had as from 2013 a negative capital ratio, both for the Tier-1 ratio […] and the overall own funds ratio […]. That calculation is fictional in so far as there would have been the need for a drastic downsizing or a liquidation of the bank even before. According to Austria liquidation would have had systemic financial stability effects in Austria, in particular due to the liability guarantees assumed by Land Carinthia, which might have been triggered in such scenario, but also in those SEE countries where HGAA has a significant market share.

(51) The bank realized too late that its business model was dysfunctional and reacted too slowly, partly due to the complex group structure and the difficulty of managing such a large and heterogeneous group.

(52) Even in early […], the asset quality relating to new business continued to be problematic and the margins inadequate, when taking appropriate risk and capital costs into account.

(53) Previously submitted restructuring plans did not demonstrate HGAA’s stand-alone viability.

(54) In addition, in the submissions by Austria on which this Decision is based (18) the base case scenarios of the restructuring plan show the group result being negative throughout the period 2013-17, whilst setting out an additional capital need of EUR […]. Even the ‘management case’, which does not contain adequate measures to limit potential distortions of competition, shows a return to a modest profitability (of […]) only in the year 2017, with losses before that. Moreover, potential costs for the prolongations of guarantees beyond 2013 are not included in that prognosis.

2.6. PARTIAL COMPLIANCE WITH COMMITMENTS

(55) In the December 2012 rescue decision the Commission authorised the measures notified by Austria in light of certain commitments made by the Member State which were intended to ensure that competition distortions would be limited as much as possible. The commitments aimed at limiting the bank’s business activities, e.g. in terms of return levels, risk categories of customers and maturities thus contributing to limiting risky behaviour and therefore the possibility to expand business to the detriment of competitors.

(56) In January 2013 Austria informed the Commission that for economic reasons it had not been feasible for the bank to comply with all of those commitments for some of its subsidiaries. It referred in particular to the restriction as regards foreign currency loans, the restriction to limit public finance and corporate credit engagements to clients with a credit rating of […] which Austria claimed could not be implemented in the SEE countries and, for HBA, the restriction to limit public finance engagements to […].

3. THE LIQUIDATION PLAN

(57) On 29 June 2013 Austria submitted a liquidation plan under which HGAA will be liquidated in an orderly manner with the necessary time available to sell potentially viable assets while the remaining parts will be wound down over time.

(58) Under the liquidation plan, the balance sheet size of HGAA will decrease by 85 % from EUR 43,3 billion at the end of 2008 to EUR 6,56 billion in 2017. In the same period its RWA will decrease by 85 % to EUR 4,75 billion from EUR 32,8 billion at the end of 2008.

(59) To implement that liquidation, the liquidation plan presents a strategy for the bank’s three remaining pillars, i.e. (i) the Austrian bank (HBA), (ii) the SEE network and (iii) the wind-down part.

(60) The liquidation process will be steered from the central group level, where meanwhile a number of improvements have taken place as regards – inter alia – risk management, reporting, collateral valuation and procedures relating to ratings (19).

(61) Overall, the liquidation plan puts the focus on completing the sale of HBA, which has already been instigated, and increasing the attractiveness of the SEE network with the aim of enabling a sale of all SEE entities by 30 June 2015 at the latest. To that end, Austria has given a number of commitments for any new business with the aim of ensuring an adequate balance of risk and profitability as long as the SEE entities have not been sold.

(62) In particular, HGAA will in principle only disburse new retail mortgages with a loan to value-ratio of […]% or higher, the internal funding cost matrix will be commensurate with the funding situation of the relevant branch or subsidiary and […] will, apart from certain exceptions, only be provided to clients if that client has a […].

THE SALE OF HBA

(63) On 31 May 2013 a contract for the sale of all HBA shares was signed with Anadi Financial Holdings Pte. Ltd, with the closure of that sale being currently expected to take place before 31 December 2013 (20).

(64) Until the closure of the sale, HBA will continue to focus on its position as a regional bank in Carinthia with branches in Vienna and Salzburg. The size of the bank has already been reduced significantly and a problematic portfolio amounting to EUR 1,99 billion was hived off before 31 December 2011. The balance sheet of HBA as of 31 December 2012 amounted to EUR 4,15 billion (while the balance sheet by 31 December 2008 amounted to EUR 7,05 billion).

SEE NETWORK

(65) The business activity of the SEE network has already been significantly reduced by focusing on core markets and core competences in Slovenia, Croatia, Bosnia and Herzegovina, Serbia and Montenegro. In addition, the operational entities in those countries were relieved by a portfolio of EUR 2,4 billion and a further portfolio hive-off in the amount of EUR […] is planned in 2013, pending approval by local supervisory authorities. The balance sheet size of the total SEE network amounts to EUR 10,11 billion as of 31 December 2012 and will decrease further to less than EUR […] after the envisaged additional portfolio transfer has been completed, amounting to about […] % of the balance sheet size when compared to 31 December 2008 (EUR 14,8 billion).

(66) Furthermore, there has been a change in the business strategy of those entities’ operation in the SEE countries, aiming at improving their saleability, with a focus on small-scale business and on retail and SME. Their funding strategy is also changing, with local SEE entities focusing on becoming more locally funded instead of relying too strongly on the funding provided by the group. New business is already now fully locally funded.

(67) In Slovenia the focus of the banking activities is on […] and […] clients […] with the aim of […]. […] will be reduced significantly with a planned exit from […] while the bank remains active in […].

(68) In Croatia the bank aims to […] with the objective of […]. For […], the aim is to focus more on […]. The focus of the […] is on […].

(69) In Bosnia and Herzegovina the focus will be increasingly on […] coupled with a stringent […], better […] and a […]. […] will be reduced with […] remaining the focus.

(70) In Serbia the focus is on […] with the aim of […]. As regards […], the focus is on […] as well as […]. The bank aims at […], even for performing portfolios […].

(71) In Montenegro the […] focus on a […], whereas focusses on […].

(72) The change in the focus and business strategy of the SEE banks aims at increasing the chances that the entities can be sold over time. The liquidation plan provides that the SEE network will be sold as a whole or in parts by 30 June 2015. Any sale will be done through open and transparent sale procedures where buyers will have the choice to acquire all or part of the network.

(73) Any part of the SEE network not sold by 30 June 2015 will immediately cease to undertake new business and be transferred to the wind-down unit (21).

THE WIND-DOWN UNIT

(74) The aim of the wind-down unit is to reduce all wind-down entities and portfolios as quickly as possible.

(75) The activities in Italy are already in wind-down. The aim is to steer an orderly wind-down process while avoiding an abrupt withdrawal of deposits (22).

(76) In addition, the wind-down part encompasses all other portfolios which have been identified to be wound down (including entities which have stopped new business including the subsidiaries in Macedonia, Ukraine, Bulgaria, Germany and Hungary), as well as stakes in industrial and touristic companies.

(77) In summary, the wind-down part includes in particular: (i) HBI, (ii) Non-strategic company stakes (industrial and touristic), (iii) Wind-down financials, namely (a) the portfolio of HBInt as well as the existing wind-down portfolios and refinancing lines remaining in various entities (in particular in HBI and SEE countries); (b) the portfolios which have been removed from some subsidiaries such as HBI and SEE-network banks or leasing companies; (c) the wind-down leasing companies, (iv) The vehicles Norica and HBInt Credit Management (CM) (23).

(78) Until 2017, the estimated cumulative capital needs (mainly due to write-downs of the book value of the entities to be sold, due to further losses on different portfolios and due to needed refinancing) amount to about EUR 2,6 billion in a base case and up to EUR 5,4 billion under an adverse stress pessimistic case. The liquidation plan also assumes additional liquidity needs depending on whether the capital would be provided in cash or via a guarantee. Under the assumption that the capital is provided in a liquid form the required additional liquidity needs of HGAA until 2017 would amount to EUR 2,5 billion in a base case and are estimated to reach EUR 3,3 billion in a stressed pessimistic case (24).

(79) However, as according to Austria different options are still being examined for the wind-down part, those estimates may still change. For instance, Austria has announced that it is exploring the option of installing an asset management company (‘AMC’), which would enable HGAA to transfer wind-down assets to that entity, operating without a banking licence. Such a transfer would affect the point in time at which the capital needs would arise.

COMMITMENTS PROVIDED BY AUSTRIA

(80) Austria has undertaken to ensure that the liquidation plan submitted on 29 June 2013, as last modified by Austria’s communication of 27 August 2013, is implemented in full, including the commitments set out in the Annex, and in accordance with the timetable laid down in that Annex.

4. GROUNDS FOR INITIATING THE PROCEDURE

(81) The Commission recalls that it opened the formal investigation procedure pursuant to Article 108(2) of the Treaty regarding the compatibility of the restructuring aid for HGAA with the internal market because it had, on the basis of the earlier submitted restructuring plans, serious doubts whether HGAA would be able to restore its long-term viability. The Commission had also expressed doubts whether adequate burden-sharing was ensured and the distortions of competition were sufficiently limited.

(82) The Commission has repeatedly questioned the ability of HGAA to restore its viability (25), with serious doubts explicitly raised regarding the business model (26). The Commission has also raised doubts as to whether HGAA would be able to remunerate its capital sufficiently, which is a precondition for a bank to be considered viable (27). In its December 2009 rescue decision the Commission has already requested the Member State to consider the option of an orderly winding down of the bank (28).

(83) In assessing viability, the Commission raised in particular doubts relating to the funding strategy (29), asset quality (30) and internal control structures (31). In recital 37 of its December 2012 rescue decision the Commission raised doubts about the quality of HGAA’s new business.

(84) As regards burden-sharing, the 2009 opening decision (32) and the December 2009 rescue decision (33) mention a possible lack of burden-sharing from BayernLB and HGAA’s previous owners (GRAWE and Land Carinthia). The 2009 opening decision mentions in recital 102 a lack of burden-sharing from HGAA’s hybrid capital owners.

(85) Recital 41 of the 2010 extension decision questions whether the injected capital into HGAA by Austria under the conditions of the Austrian scheme is sufficiently remunerated as the bank had been considered as fundamentally sound by Austria and thus benefitted from cheaper remuneration rates than would have been the case had it been considered as a distressed bank.

(86) On competition distortions, the Commission, based on the previous plans submitted by Austria, questioned whether the extent of the balance size reductions would be sufficient (34) and repeatedly called for measures which would address competition distortions (35). Against the background of an ever increasing aid amount the Commission has repeatedly called for additional measures for addressing competition distortions (36).

5. COMMENTS FROM INTERESTED PARTIES

(87) No comments from interested parties were received.

6. COMMENTS FROM AUSTRIA

(88) Austria’s comments deal mainly with the Commission’s treatment of State aid to BayernLB. The Commission concluded in its Decision of 25 July 2012 in case SA. 28487 (C16/2009) (37) regarding restructuring aid to BayernLB that the guarantee by the Republic of Austria on the liquidity amounting to EUR 2,638 billion which BayernLB, in the context of the 2009 rescue operation, has agreed to leave in HGAA, constituted State aid to the benefit of BayernLB and has subsequently authorised the aid measure as being compatible with the internal market. On 5 October 2012 Austria brought an action for annulment (38) against that decision, arguing in particular that the Commission had failed to demonstrate why the measure should be considered compatible with the internal market and insisting that the measure does not constitute aid to the benefit of BayernLB.

(89) Austria undertakes to ensure that the commitments laid down in the Annex are complied with in full.

7. ASSESSMENT

The assessment of the restructuring aid has to consider all aid granted to HGAA since 2008.

7.1. EXISTENCE OF AID

(90) According to Article 107(1) of the Treaty, 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, in so far as it affects trade between Member States, be incompatible with the internal market

(91) The qualification of a measure as State aid requires the following conditions to be met: (i) the measure must be financed through State resources; (ii) it must grant an advantage liable to favour certain undertakings or the production of certain goods; (iii) that advantage must be selective; and (iv) the measure must distort or threaten to distort competition and have the potential to affect trade between Member States. Those conditions being cumulative, they must all be present before a measure is characterized as State aid.

(92) Recitals 51 to 56 of the decision approving the bank support scheme confirm that any measure granted under that scheme constitutes State aid. The Commission furthermore recalls that it has already established in recitals 48 to 53 of the 2009 rescue decision, recital 25 of the July 2011 rescue decision and recital 16 of the December 2012 rescue decision that the conditions set out in Article 107(1) of the Treaty are met for the aid measures listed under a) and b) and that those measures therefore constitute aid. The Commission maintains its view as it will explain below.

a) The measures provided by Austria under the bank support scheme

(93) All measures granted under the bank support scheme, namely the EUR 900 million recapitalisation and the guarantees of EUR 1,35 billion received in 2008, constitute aid as set out in recitals 51 to 56 of the decision approving that scheme.

b) The further measures granted by Austria

(94) Outside the bank support scheme Austria has authorized a EUR 450 million recapitalisation, an asset guarantee of EUR 100 million (which has meanwhile been terminated), an asset guarantee of EUR 200 million, a capital increase of EUR 500 million in the form of shares and a guarantee on subordinated Tier-2 capital instruments with a nominal value of EUR 1 billion.

(95) Both the capital injection and the guarantees are granted from State resources within the meaning of Article 107(1) of the Treaty. They are granted to a single undertaking and are therefore selective. They are granted under conditions which would not be available to HGAA on the markets, which is not disputed by Austria. Given that HGAA is an undertaking active in the financial sector, which is open to intense international competition, any advantage from State resources to HGAA has the potential to affect intra-Union trade and to distort competition. Those findings were already set out in recital 16 of the December 2012 rescue decision and are confirmed in the present Decision.

c) The recapitalisation by BayernLB

(96) BayernLB was itself recapitalised by the Free State of Bavaria in 2008 and used part of the funds to recapitalise its subsidiary HGAA. According to recital 124 of the BayernLB decision the full amount of the recapitalisation granted by the Free State of Bavaria constitutes aid to BayernLB. As the amount of aid in one measure cannot be double-counted, the Commission concludes that the recapitalisation of HGAA by BayernLB does not constitute State aid to the benefit of HGAA. Moreover, it seems that at the time of the recapitalisation of HGAA BayernLB was acting in order to safeguard its investment in its subsidiary, in line with market economy considerations, and that its decision to recapitalise HGAA cannot be imputed to a Member State.

d) The contingent aid measures

(97) Austria seeks authorisation of aid measures to satisfy potentially arising capital and liquidity needs which in a stress scenario might amount up to EUR 5,4 billion for capital and up to EUR 3,3 billion for liquidity. Those potential future aid measures for the wind-down of HGAA will be granted from State resources within the meaning of Article 107(1) of the Treaty. They are granted to a single undertaking and are therefore selective. As they are granted under conditions which would not be available to HGAA on the markets they constitute an advantage. Given that HGAA is an undertaking active in the financial sector, which is open to intense international competition, any advantage from State resources to HGAA has the potential to affect intra-Union trade and to distort competition.

Conclusion as to the total aid amount

(98) The total amount of aid granted to HGAA by Austria through the reinforcement of capital is EUR 3,15 billion (including the EUR 300 million of asset guarantees having the same effect as a capital injection). That amount represents around 9,6 % of HGAA’s RWA in 2008. In addition, HGAA has received a total amount of EUR 1,35 billion in guarantees. Furthermore, Austria has requested the authorisation of potential aid measures which might become necessary to cover future capital needs within the wind-down of HGAA which in a stress case might go up to EUR 5,4 billion, leading to a total aid amount in terms of capital and asset guarantees of EUR 8,55 billion which equal 26 % of RWA. In addition, Austria requested the authorisation of liquidity measures amounting to EUR 3,3 billion.

7.2. COMPATIBILITY OF THE AID

7.2.1. Application of Article 107(3)(b) TFEU

(99) Article 107(3)(b) of the Treaty sets out that State aid may be considered to be compatible with the internal market where it is granted ‘to remedy a serious disturbance in the economy of a Member State’.

(100) On the basis of Article 107(3)(b) of the Treaty State aid can be found compatible with the internal market if it serves to ‘remedy a serious disturbance in the economy of a Member State’. Despite a slow economic recovery that has taken hold since the beginning of 2010, the Commission still considers that the requirements for State aid to be approved pursuant to Article 107(3)(b) of the Treaty continue to be fulfilled in view of the persisting stress in financial markets. In July 2013 the Commission confirmed that view by adopting the Communication from the Commission on the application, from 1 August 2013, of State aid rules to support measures in favour of banks in the context of the financial crisis (39).

(101) The Austrian Central Bank has already on an earlier occasion confirmed that HGAA was a bank with systemic importance for the financial market in Austria and in South-Eastern Europe and reiterated that view by letter of 3 December 2012. Without the aid measures the supervisory authorities might have closed HGAA due to the latter’s breach of capital requirements.

(102) The closure under such conditions of a bank considered by a Member State to be of systemic importance, such as HGAA, could directly affect the financial markets and thus the entire economy of a Member State. In the light of the current fragile situation of the financial markets, the Commission therefore continues to base its assessment of State aid measures in the banking sector on Article 107(3)(b) of the Treaty.

7.2.2. Compatibility of the aid measures

(103) All measures identified as State aid have been provided in the context of the restructuring and liquidation of HGAA. The Communication on the return to viability and the assessment of restructuring measures in the financial sector in the current crisis under the State aid rules (40) (‘Restructuring Communication’) sets out the rules applicable to the granting of restructuring and liquidation aid to financial institutions in the current crisis. According to the Restructuring Communication, in order to be compatible with the internal market under Article 107(3)(b) of the Treaty, the restructuring of a financial institution in the context of the current financial crisis has to (i) lead to the restoration of the viability of the bank, (ii) include sufficient own contribution by the beneficiary (burden-sharing) and ensure that the aid is limited to the minimum necessary and (iii) contain sufficient measures limiting the distortion of competition.

Restoration of viability

(104) As the Commission has indicated in the Restructuring Communication, the Member State needs to provide a comprehensive restructuring plan which shows how the long-term viability of the entity will be restored without State aid within a reasonable period of time and within a maximum of five years. According to point 13 of the Restructuring Communication long-term viability is achieved when a bank is able to compete in the marketplace for capital on its own merits in compliance with the relevant regulatory requirements. For a bank to do so, it must be able to cover all its costs and provide an appropriate return on equity, taking into account the risk profile of the bank. Point 14 of the Restructuring Communication stipulates that long-term viability requires that any State aid received is either redeemed over time or is remunerated according to normal market conditions, thereby ensuring that any form of additional State aid is terminated.

(105) Previously submitted restructuring plans for HGAA did not allow for the conclusion that a return to viability of the whole group is feasible.

(106) The Commission furthermore notes that the cheap funding stemming from the guarantees offered by Carinthia will come to an end over time and that the rapid catch-up process of the SEE economies has stopped.

(107) As a result, the bank is unable to adequately remunerate its capital or to repay the State capital and thus achieve a return to viability by the end of the restructuring period. Thus, it does not seem possible to restore viability for HGAA on a stand-alone basis. The Commission therefore concludes that its doubts as regards the restoration of viability have not been allayed.

(108) As set out in point 9 of the Restructuring Communication any restructuring plan should include a comparison with alternative options, including a break-up or absorption by another bank. In case a bank cannot be restored to viability, the restructuring plan should indicate how it can be wound up in an orderly fashion. Point 21 stipulates that an orderly winding-up or the auctioning off of a failed bank should always be considered where a bank cannot credibly return to long-term viability.

(109) The Austrian authorities have submitted a liquidation plan which provides for such an orderly wind-down strategy. The submitted plan sets out the sale of the operational entities, the Austrian HBA (for which a sales contract is already signed) and the SEE network, via an open procedure by end June 2015 at the latest. All the remaining parts are put into a controlled and orderly wind-down process. In that context Austria commits that as from 1 July 2013 the Italian entity HBI will not undertake new business. Should a sale of the operational SEE units not be feasible by 30 June 2015, they will also stop new business and be wound down. As a result, by 30 June 2015 at the latest HGAA will cease to be an active undertaking in the financial sector.

(110) The sale of the operational entities will be done through unconditional, transparent and open procedures, which will allow all interested market participants to make an offer for the entities. Such competitive procedures ensure that the best bid constitutes the market price, thus excluding aid to the buyer (41). Where the Commission finds that there is aid to a buyer, the Commission will assess the compatibility of that aid separately.

(111) As regards the issue of whether the entities to be sold might constitute an economic continuity of HGAA and the aid measures might therefore constitute aid to those entities, the Commission first notes that it is not yet clear whether the SEE network will be sold as a whole to a single buyer or whether various buyers will acquire parts of the current network.

(112) For a finding of economic continuity, inter alia, the following factors may be taken into consideration: the subject-matter of the transfer, the price of the transfer, the identity of the shareholders or the owners of the undertaking which takes over and of the initial undertaking or the economic logic of the operation (42).

(113) The Commission observes firstly that the aid granted was not assigned to tackle the problems of the individual operational entities in Austria or SEE countries but of HGAA as a group. None of the subsidiaries in the SEE countries or HBA represents the core of HGAA’s business and the entities to be sold only represent a part of HGAA’s assets. Furthermore, the business model of the entities to be sold is different from the business model of HGAA, which was an international banking group reliant on cheap financing largely based on State guarantees from Carinthia and focussing on rapid expansion benefitting from the catch-up potential of emerging markets. In the future, the funding of the subsidiaries in the SEE countries will no longer be dependent on State guarantees but will be based on local (and thus more expensive) funding, which will require a more prudent approach as regards margins and risk management. Whilst HGAA focussed rather on large-scale business and key clients, the entities to be sold will focus on SME business. In practice the entities to be sold will be oriented towards a different client base.

(114) The Commission furthermore notes that the sale of the operational entities is designed to maximise the value of HGAA’s assets before its liquidation in the interest of its creditors.

(115) On the basis of the subject-matter, of the fact that the shareholders of HGAA and the entities to be sold will not be identical, and of the economic logic of the sales operation, the Commission considers that once the operational entities are sold and HGAA has ceased to exist there will be no continuation of the economic activity of HGAA.

(116) The liquidation plan sets out that some assets will be taken out of the operational entities to be sold. That removal will both improve the entities’ funding ability and improve the average asset quality of the remaining balance sheet, thus contributing to the marketability of the respective entities.

(117) Point 21 of the Restructuring Communication points out that the creation of an autonomous ‘good bank’ from a combination of the ‘good’ assets and liabilities of an existing bank may also be an acceptable path to viability, provided any such new entity is not in a position to unduly distort competition. In that regard, the creation of a SEE holding or the regrouping of certain assets away from HBInt to the SEE holding with the aim of creating a viable and marketable SEE banking unit would be an acceptable solution (43).

(118) The problem of asset quality, stemming from both the legacy portfolio and more recent risky engagements, could not be solved on a going concern basis because of increasing risk costs and impairments. Therefore the Commission considers that the liquidation plan presented by Austria to increasingly transfer problematic assets into the wind-down unit as the appropriate strategy.

(119) As regards the funding envisaged in the liquidation plan, the entities to be sold will increasingly concentrate on local funding and seek to reduce their dependency on wholesale funding provided by HGAA. The Commission welcomes that change in funding strategy. It notes that there will be an on-going funding commitment of HGAA to the entities to be sold.

(120) Furthermore, the liquidation plan provides for a significant reduction in the leasing activities of HGAA, which have been a major source of HGAA’s problems in the past as leasing activities have a relatively low profitability compared to their risks and funding requirements. That reduction will also positively contribute to the marketability of the operational entities.

(121) The Commission concludes that the viability of HGAA cannot be restored and that the orderly wind-down strategy for HGAA as put forward by Austria is an appropriate means to deal with HGAA given that it is not possible to restore the viability of the bank as such.

Own contribution and burden-sharing

(122) The Restructuring Communication indicates that an appropriate contribution by the beneficiary is necessary in order to limit the aid to a minimum and to address distortions of competition and moral hazard. To that end, it provides that (i) both the restructuring costs and the amount of aid should be limited and (ii) a significant own contribution is necessary.

(123) The Restructuring Communication further provides that, in order to keep the aid limited to the minimum, the bank should first use its own resources to finance the restructuring. The costs associated with the restructuring should not only be borne by the State but also by those who invested in the bank. That objective is achieved in particular by absorbing losses with available capital.

(124) First, all previous shareholders of HGAA have sold their shares to the Republic of Austria for a symbolic price of one euro which reduced the risk that the aid measures benefit the former shareholders. The former owners have also provided HGAA with capital or liquidity, which have been used to cover losses and to improve the liquidity situation.

(125) The majority shareholder of HGAA at the time of that sale was BayernLB. In total, BayernLB has contributed about EUR 1,5 billion in capital whilst renouncing further ownership rights, not even any prospect of further remuneration. BayernLB also contributed about EUR 4,3 billion in liquidity to HGAA. Furthermore, BayernLB faced a significant write-down loss when selling its HGAA shares which contributes to addressing moral hazard in line with point 22 of the Restructuring Communication.

(126) The Commission therefore considers that the amount of burden-sharing from the former owner BayernLB is significant and adequate.

(127) That conclusion will not be affected by the final outcome of the on-going lawsuit on the repayment of the outstanding loans to BayernLB. If BayernLB were to lose the lawsuit, the amount of burden-sharing would be even higher. If BayernLB were to win the lawsuit, the amount of burden-sharing as assessed in this Decision would not change.

(128) The contribution of GRAWE consists of both capital and liquidity measures. The originally capital injection of GRAWE into HGAA amounting to EUR 30 million has in the meantime been reduced to about EUR 9 million through a decision by the Republic of Austria as the bank’s sole shareholder to allocate the capital for loss absorption (Kapitalschnitt). GRAWE also provided liquidity to HGAA.

(129) Based on the above considerations, the Commission concludes that the burden-sharing of GRAWE is sufficient.

(130) As regards the Land Carinthia, the Commission observes that the Land Carinthia has contributed to burden-sharing by injecting capital which has been significantly reduced in the meantime through the Kapitalschnitt.

(131) Based on the above considerations, the Commission concludes that the burden-sharing of Land Carinthia is sufficient.

(132) The fact that the remuneration on the Partizipationskapital for GRAWE and Land Carinthia is higher than the remuneration for the capital injected by BayernLB is justified because BayernLB provided a different kind of capital instrument. In contrast to GRAWE and Land Carinthia, they provided no Partizipationskapital, but simply renounced all rights deriving from capital instruments and some liquidity. Thus BayernLB provided a higher degree of burden-sharing which seems appropriate as BayernLB had been the dominant owner of HGAA before the acquisition of the bank by Austria.

(133) Another open issue is whether the injected Partizipationskapital capital into HGAA by Austria under the conditions of the bank support scheme is sufficiently remunerated. It has to be recalled that under the bank support scheme there were two different interest rates to be paid depending on whether the aided bank had been a distressed or a fundamentally sound bank. HGAA was considered as fundamentally sound by Austria and thus paid lower remuneration rates than if it would have done had it been considered a distressed bank.

(134) On that issue, the Commission observes that all the remaining Partizipationskapital remains with HBInt, and thus with the wind-down part of HGAA. Given that the wind-down part is no longer active on the market and that the viability of HGAA cannot be restored (so that HGAA will be liquidated), the Commission finds that the low remuneration can be accepted in the present case.

(135) The Mitarbeiterstiftung Alpe Adria was the smallest owner of HGAA with a 0,02 % stake. Its stake was also sold for one euro when the Republic of Austria acquired HGAA in December 2009. Given the complete loss of any shareholders’ rights without any consideration, the Commission considers the degree of burden-sharing is sufficient, in particular given its relative small size compared with the other owners.

(136) As regards the hybrid capital holders, HGAA has taken a number of steps to ensure their burden-sharing by buying back those instruments significantly below par or cancelling them altogether which has generated a significant capital effect.

(137) Furthermore, the Commission notes that many of the hybrid capital instruments as well as the Partizipationskapital instruments only yield dividends or coupon payments in case of profits. Given the lack of profitability of the bank in recent years, the holders of those instruments have not received such payments. In addition, there will be restrictions on dividend and coupon pay-outs in the future. As a result, the Commission considers that there is sufficient burden-sharing from the holders of those instruments.

(138) For those reasons, the Commission concludes that the liquidation plan of HGAA provides for an appropriate burden-sharing.

Limiting competition distortions

(139) Finally, section 4 of the Restructuring Communication requires that the restructuring plan contains measures limiting distortions of competition. Such measures should be tailor-made to address the distortions on the markets where the beneficiary operates after restructuring. In the present case it needs to be ensured that the entities which will remain active on the market before they will be finally sold do not use the State resources received in a manner which is detrimental to competitors and do not act in a distortive manner.

(140) To that end, Austria commits to the business restrictions set out in section 4 of the Annex which will ensure that until the sale competition distortions resulting from the existence and the activities of the operational entities are kept as much as possible to the minimum.

(141) The nature and form of competition measures depend on two criteria: first, the amount of the aid and the conditions and circumstances under which it was granted and, second, the characteristics of the markets on which the beneficiary will operate.

(142) The Commission recalls that HGAA has received State aid amounting to EUR 3,15 billion in capital and asset guarantees and EUR 1,35 billion in liquidity guarantees and, for purposes of the wind-down process, might receive additional State aid up to EUR 5,4 billion in capital and EUR 3,3 billion in liquidity in the future.

(143) The total aid amount in capital and asset guarantees would amount to EUR 8,55 billion which is equivalent to approximately 26 % of HGAA’s RWA of EUR 32,8 billion as of 31 December 2008. The amount of aid granted is therefore significant very large, requiring appropriate measures.

(144) Point 35 of the Restructuring Communication stipulates that structural measures such as divestitures should favour the entry of competitors while allowing for the exit process to take place within an appropriate time frame that preserves financial stability.

(145) The Commission observes that the liquidation plan provides for an orderly wind-down where by 30 June 2015 at the latest HGAA will cease to exist as an active economic actor on the markets and will just wind down the activities which have not been sold by that time.

(146) As regards the continued activity of the SEE entities until their sale, Austria has submitted a number of commitments as regards the new business to be pursued by those entities, avoiding any possible distortion of competition in the period until the sale.

(147) In that respect, the Commission in particular positively takes note of the restrictions on new business to which Austria and HGAA committed: After taking into account risk costs and funding costs a minimum return of […] % p.a. should be realised on new business. That minimum return on new business will ensure that operational entities do not enter into anti-competitive pricing practices while at the same time contribute to their long-term profitability. In the same spirit, the bank commits to limitations on the maturities of new business so that maturity transformation only contributes in a limited way to profitability. […] (44) […]. As regards […], Austria provided an additional commitment to limit the […] business to customers rated […] or better and not to exceed a total volume of EUR […]. That commitment mitigates the risks associated with currency devaluation and restricts the volume in which the bank can be active in that market segment. In summary, those restrictions both serve to ensure long-term viability and limit the competitive capacity of the respective entities.

(148) The Commission further views positively the commitments regarding an improved risk management, in particular as regards the annual re-rating of all exposures exceeding EUR […] and the commitment that in retail and public finance the bank will only do business with customers rated […] (45). Those commitments ensure that the business conduct will be prudent and the affected entities will abstain from a risky business strategy. Business will be conducted so that profitability needs are balanced with the necessary risk control considerations. At the same time, the commitments also preclude an aggressive market expansion strategy.

(149) The Commission notes positively the two-fold purpose of the commitments set out in recitals 147 and 148. Firstly, they contribute to increasing the saleability of the business as no overly risky business is conducted, and secondly, they diminish competition distortions by restricting aggressive behaviour and thus limiting new business.

(150) Under the liquidation plan all operational parts of HGAA will be either wound down or sold. Austria has provided a firm commitment as regards the sale of HBA and the SEE network (in parts or as a whole) in that the sale has to be done by 30 June 2014 respectively 30 June 2015 at the latest. After that date, all new business has to stop and HGAA will exit the market, either because all activities are in a wind-down process or because they have been sold to a third party in a transparent way. As such, the sales/wind-down process of HGAA contributes significantly to limiting the competition distortions of competition resulting from the aid, because HGAA as such will disappear from the markets.

(151) The Commission considers that the still fragile situation on the financial markets in particular in the SEE countries justifies the prolonged deadline of 30 June 2015 for the sale of the entities in those countries. It notes that the Austrian activities have already been sold and that if the sale is not completed by 30 June 2014 those activities will also be wound down.

(152) Overall, the Commission notes that by 2017 the remaining balance sheet size and the RWA of HGAA will decline by about 85 % (provided the sale succeeds as planned).

(153) In addition to those far-reaching measures, the Commission notes a ban on advertising State support and a ban on aggressive commercial practices to which Austria committed. It also welcomes an acquisition ban, which ensures that the State aid will not be used to take over competitors, but to serve its intended purpose, namely to finance the liquidation process.

(154) The Commission deplores Austria’s partial compliance with the commitments it entered into within the framework of the 2012 December rescue decision. The Commission considers, however, that the breach of some of those commitments which lasted for a restricted period of time is counterbalanced by the complete break-up and liquidation of the bank.

(155) Taking into account the commitments and in light of the appropriateness of the own contribution and burden-sharing as set out in recitals 122 to 138, the Commission considers that there are sufficient safeguards to limit potential distortions of competition despite the high amount of aid granted to HGAA.

CONCLUSIONS

(156) In view of the commitments made by Austria it is concluded that the wind-down strategy is in line with the Restructuring Communication, the liquidation aid is limited to the minimum necessary and competition distortions are sufficiently addressed. The liquidation aid is thus compatible with the internal market pursuant to Article 107(3)(b) of the Treaty,

HAS ADOPTED THIS DECISION:

Article 1

1. The following measures constitute State aid:

(a) the recapitalisation in the amount of EUR 900 million under the bank support scheme;

(b) the recapitalisation in the amount of EUR 450 million under the bank support scheme;

(c) the guarantees of EUR 1,35 billion under the bank support scheme;

(d) the asset guarantee of EUR 100 million;

(e) the asset guarantee of EUR 200 million;

(f) the recapitalisation in the amount of EUR 500 million;

(g) the State guarantee on subordinated Tier-2 capital instruments with a nominal value of EUR 1 billion;

(h) the contingent capital for the wind-up of HGAA up to a maximum amount of EUR 5,4 billion;

(i) The contingent liquidity support up to a maximum amount of EUR 3,3 billion.

2. The State aid referred to in paragraph 1 is compatible with the internal market, in the light of the commitments set out in the Annex.

Article 2

Austria shall ensure that the liquidation plan submitted on 29 June 2013 and complemented by submission of 27 August 2013 is implemented in full, including the commitments set out in the Annex.

Article 3

This Decision is addressed to the Republic of Austria.

Done at Brussels, 3 September 2013. For the Commission Joaquín ALMUNIA Vice-President

(1) OJ C 116, 23.4.2013, p. 13.

(2) Partizipationskapital has no voting rights.

(3) That scheme had been approved by Commission Decision of 9 December 2008 in case N 557/2008, OJ C 3, 8.1.2009, p. 2, Maßnahmen nach dem Finanzmarktstabilitäts- und dem Interbankmarktstärkungsgesetz für Kreditinstitute und Versicherungsunternehmen in Österreich.

(4) OJ C 134, 13.6.2009, p. 31.

(5) OJ L 83, 27.3.1999, p. 1.

(6) OJ C 85, 31.3.2010, p. 21.

(7) OJ C 266, 1.10.2010, p. 5.

(8) OJ C 31, 4.2.2012, p. 13.

(9) Thereafter referred to as SA.32554 (2009/C) ‘Restructuring Aid for Hypo Group Alpe Adria’.

(10) OJ C 59, 28.2.2013, p. 34.

(11) Not yet published.

(12) Not yet published.

(13) See recital (4) and the December 2009 rescue decision.

(14) The companies Norica and HBInt Credit Management (CM), each of which has external investors holding 49 %, are also in wind-down mode.

(15) Confidential information.

(16) The rescue of HGAA by Austria under those conditions implied that BayernLB had to write down the full book value of HGAA, amounting to EUR 2,3 billion and to renounce receivables from HGAA for funding already provided amounting to EUR 825 million.

(17) In the meantime, HGAA has stopped interest and principal payments relating to certain loans by BayernLB in line with its interpretation of the Austrian own funds substitution law (Eigenkapitalersatzgesetz). BayernLB disputes that decision and has instigated a lawsuit with the aim of getting back the loans plus interest payments as originally agreed. […].

(18) Kommunikation zur EU - Überarbeiteter Umstrukturierungsplan, Klagenfurt am Wörthersee, 29.6.2013.

(19) The plan explains that a legally independent SEE holding may be created or that parts of HBInt may be split away (including refinancing lines) so as to allow the SEE entities to become independently operating entities.

(20) Should the closing not occur as currently expected, HGAA will continue to try selling HBA by 30 June 2014. Should such a sale not be possible by that date, HBA will be transferred to the wind-down unit.

(21) See section IV of the Annex, point 3.2.2.

(22) The […] is to be implemented according to the […] set out in the table contained in section V. point 3.4 of the commitment catalogue contained in the Annex. In order to ensure a […] refinancing by own means HBI […] should it be necessary to prevent the deposits from falling below the […] or to compensate for any such drop.

(23) See footnote 14.

(24) As explained in FN 16 […].

(25) See for example the 2009 opening decision, recital 92; the December 2009 rescue decision, recital 66; the 2010 extension decision, recitals 31 to 39; the July 2011 rescue decision, recitals 39 to 43; the December 2012 rescue decision, recital 37.

(26) See for example the 2010 extension decision, recital 31; the July 2011 rescue decision, recital 40.

(27) See for example the 2010 extension decision, recital 39.

(28) See recital 65 of the December 2009 rescue decision.

(29) See for example recitals 34 and 38 of the 2010 extension decision.

(30) See for example recital 66 of the December 2009 rescue decision, recitals 35 and 37 of the 2010 extension decision and recital 43 of the July 2011 rescue decision.

(31) See for example recital 36 of the 2010 extension decision.

(32) See the 2009 opening decision, recital 102.

(33) See the December 2009 rescue decision, recital 67.

(34) See the 2009 opening decision, recital 98.

(35) See the 2009 opening decision, recital 98; the 2010 extension decision, recital 42.

(36) See the July 2011 rescue decision, recital 44; the December 2012 rescue decision, recital 38.

(37) Replaced by Commission Decision of 5 February 2013 under the same case number; not yet published.

(38) Registered as Case T-427/12.

(39) OJ C 216, 30.7.2013, p. 1, see in particular point 6.

(40) OJ C 195, 19.8.2009, p. 9.

(41) See point 20 of the Restructuring Communication and 49 of the Communication on 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’), OJ C 270, 25.10.2008, p. 8.

(42) See Joined Cases T-415/05, T-416/05 and T-423/05 Greece and Others v Commission [2010] ECR I-4749, paragraph 135.

(43) The Commission notes positively that Austria commits to ensure that the loan-to-deposit (‘LTD’) ratio of the entities not earmarked for wind-down will be geared to a successful sale either by steering the credit process or by measures to synthetically or effectively reduce the LTD ratio, see commitments section III, point 4.1.8.

(44) […].

(45) This relates to a 1-year default probability of […] % or less.