EN Official Journal of the European Union L 357/112

COMMISSION DECISION

of 29 April 2014

on the State aid SA.34825 (2012/C), SA.34825 (2014/NN), SA.36006 (2013/NN), SA.34488 (2012/C) (ex 2012/NN), SA.31155 (2013/C) (2013/NN) (ex 2010/N) implemented by Greece for the Eurobank Group related to: Recapitalisation and Restructuring of Eurobank Ergasias S.A.; Restructuring aid to Proton bank through creation and capitalisation of Nea Proton and additional recapitalisation of New Proton Bank by the Hellenic Financial Stability Fund; Resolution of Hellenic Postbank through the creation of a bridge bank

(notified under document C(2014) 2933)

(Only the English text is authentic)

(2014/885/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

1.1. PROCEDURES RELATED TO THE EUROBANK GROUP (2) (‘THE BANK’ (3))

(1) By decision of 19 November 2008 the Commission approved a scheme entitled ‘Support Measures for the Credit Institutions in Greece’ (the ‘Greek Banks Support Scheme’) designed to ensure the stability of the Greek financial system. The Greek Banks Support Scheme allows for aid to be granted under its three constituent measures, a recapitalisation measure, a guarantee measure and a government bond loan measure (4). In May 2009, EFG Eurobank Ergasias S.A. (5) was recapitalised by Greece under the recapitalisation measure.

(2) Recital 14 of the decision of 19 November 2008 recorded that a restructuring plan would be notified to the Commission in respect of the beneficiaries of the recapitalisation measure.

(3) On 2 August 2010, the Greek authorities submitted a restructuring plan in respect of the Eurobank Group to the Commission. The Commission registered that plan and its subsequent updates as well as additional information submitted by the Greek authorities as Case SA.30342 (PN 26/2010) and then Case SA.32789 (2011/PN).

(4) The Bank has repeatedly benefited from State guarantees on debt instruments and government bond loans under the Greek Banks Support Scheme (6). It also benefited from State-guaranteed emergency liquidity assistance (‘State-guaranteed ELA’).

(5) On 20 April 2012, the Hellenic Financial Stability Fund (‘HFSF’) provided the Bank with a letter committing to participate in a planned share capital increase of the Bank. On 28 May 2012, the HFSF granted a bridge recapitalisation of EUR 3 970 million to the Bank (‘first bridge recapitalisation’).

(6) In May 2012, the Greek authorities notified to the Commission the commitment letter that had been provided by the HFSF to the Bank. The Commission registered it as a non-notified aid (Case SA.34825 (2012/NN)) as the measure had already been implemented.

(7) On 27 July 2012 the Commission opened a formal investigation procedure regarding the first bridge recapitalisation (‘the Eurobank Opening Decision’) (7).

(8) In December 2012, the HFSF granted a second bridge recapitalisation of EUR 1 341 million to the Bank (‘second bridge recapitalisation’). On 21 December 2012, the HFSF also provided the Bank with a commitment letter for its participation in a share capital increase of the Bank and in convertible capital instruments to be issued, for a total amount up to EUR 528 million (8). The Greek authorities notified those measures to the Commission on 27 December 2012.

(9) In May 2013, the HFSF participated in the Bank’s share capital increase which had been agreed in December 2012. It converted the first and second bridge recapitalisations into equity and injected a further EUR 528 million of capital into the Bank (the ‘Spring 2013 recapitalisation’).

(10) On 19 December 2013, the Greek authorities submitted information to the Commission regarding the terms of the Spring 2013 recapitalisation.

(11) On 31 March 2014, the HFSF provided the Bank with a commitment letter for its participation in a planned share capital increase of the Bank.

(12) On 16 April 2014 the Greek authorities submitted a final restructuring plan for the Bank (‘the restructuring plan’) to the Commission. They also notified the Commission of the HFSF’s commitment to fully underwrite the Bank’s upcoming recapitalisation. On the same date they provided information on the State-guaranteed ELA. They indicated that they wanted to continue providing the Bank with such liquidity support, as well as State guarantees on debt instruments and government bond loans under the Greek Banks Support Scheme (9).

(13) The Commission had numerous meetings, teleconferences and electronic mail exchanges with representatives of the Greek authorities and the Bank.

(14) Greece accepts that exceptionally the present decision is adopted in the English language only.

1.2. PROCEDURE RELATED TO THE ACQUIRED BUSINESSES

1.2.1. Procedure related to Nea Proton Bank

(15) On 26 July 2012, the Commission adopted a decision regarding State aid SA.34488 (2012/C), ‘Aid to Nea Proton Bank through creation and capitalisation of Nea Proton Bank’ (10) (‘Nea Proton Opening Decision’). By that decision the Commission opened a formal investigation procedure regarding: (i) the financing by the Resolution Scheme of the Hellenic Deposit and Investment Guarantee Fund (‘HDIGF’) and the HFSF of the EUR 1 121,6 million funding gap between the assets and liabilities of Proton Bank which had been transferred to Nea Proton Bank; (ii) an injection of initial share capital of EUR 250 million by the HFSF into Nea Proton Bank; and (iii) an injection of additional share capital of EUR 300 million by the HFSF into Nea Proton Bank which was anticipated at the time the Nea Proton Opening Decision was adopted. The Commission invited Greece to submit comments and provide all such information as might help it to assess the aid measures. Section 1 of the Nea Proton Opening Decision described in detail the procedure regarding Proton Bank, including the resolution of Proton Bank, the creation of Nea Proton Bank, the financing of the funding gap and the initial share capital injected by the HFSF into Nea Proton Bank.

(16) On 1 August 2012, the HFSF subscribed additional share capital in Nea Proton Bank, an increase which amounted to EUR 230 million.

(17) On 5 September 2012, Greece submitted comments on the Nea Proton Opening Decision which had been prepared by the Bank of Greece and the HFSF.

(18) On 31 December 2012, the HFSF subscribed further share capital in Nea Proton Bank which amounted to EUR 35 million.

(19) In May 2013, the HFSF launched the process for the sale of Nea Proton Bank.

(20) On 12 July 2013, the Greek authorities informed the Commission of the Bank’s intention to acquire Nea Proton Bank. The Commission replied on 15 July 2013.

(21) On 15 July 2013, the Bank signed a binding agreement with the HFSF to acquire 100 % of the shares and voting rights of Nea Proton Bank for a purchase price of EUR 1 and the HFSF committed to recapitalise Nea Proton Bank prior to its sale with EUR 395 million in cash.

(22) On 29 July 2013, the Greek authorities notified the Commission of that capital injection of EUR 395 million into Nea Proton Bank.

1.2.2. Procedure related to New TT Bank

(23) On 6 May 2013, the Commission adopted a decision regarding State aid SA.31155 (2013/C), ‘State aid to TT Hellenic Postbank S.A. through the creation and the capitalisation of the bridge bank New TT Hellenic Postbank S.A.’ (‘New TT Opening Decision’) (11). In that decision the Commission opened the formal investigation procedure regarding: (i) a EUR 500 million capital injection by the HFSF into New TT Hellenic Postbank S.A. (‘New TT Bank’); (ii) a EUR 4,1 billion (12) financing of the funding gap (13) resulting from the transfer of Hellenic Postbank S.A. (‘TT Bank’) activities to New TT Bank; (iii) a EUR 224,96 million capital injection by Greece in the form of preference shares under the Greek Banks Support Scheme into TT Bank; and (iv) a EUR 0,68 billion intervention by the HDIGF in favour of the assets of T Bank S.A. (‘T Bank’) which had been transferred to TT Bank. The Commission invited Greece to submit comments and provide all such information as might help it to assess the restructuring aid. Section 1 of the New TT Opening Decision describes in detail the procedures regarding the resolution of T Bank by sale to TT Bank and the resolution of TT Bank by the creation of New TT Bank.

(24) In June 2013, the HFSF launched the process for the sale of New TT Bank.

(25) On 15 July 2013, the Greek authorities informed the Commission of the HFSF’s decision to sell New TT Bank to the Bank and the reasons for that decision.

(26) On 15 July 2013, the Bank signed a binding agreement with the HFSF to acquire 100 % of the shares and voting rights of New TT Bank.

(27) On 19 July 2013, Greece submitted comments on the New TT Opening Decision.

2. DESCRIPTION

2.1. THE BANK AND ITS DIFFICULTIES

2.1.1. General context of the Greek banking sector

(28) Greece’s real gross domestic product (‘GDP’) fell by 20 % from 2008 to 2012, as shown in Table 1. As a result, Greek banks have faced a rapidly raising default rate on loans to Greek households and companies (14). Those developments have adversely affected the performance of the assets of Greek banks and given rise to capital needs. Table 1 Real GDP Growth in Greece, 2008-2013 Greece 2008 2009 2010 2011 2012 2013 Real GDP growth, % –0,2 –3,1 –4,9 –7,1 –6,4 – 4 (estimate) Source: Eurostat, available online at http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&plugin=1&language=en&pcode=tec00115

(29) In addition, in February 2012, Greece implemented a private sector bond exchange known as Private Sector Involvement (‘the PSI programme’). Greek banks were involved in the PSI programme, in the course of which the Greek government offered existing private bondholders new securities (including new Greek government bonds (‘GGBs’), GDP-linked securities and PSI payment notes issued by the European Financial Stability Fund (‘EFSF’)) in exchange for existing GGBs, with a nominal discount of 53,5 % and longer maturities (15). The Greek authorities announced the results of that exchange of bonds on 9 March 2012 (16). The exchange resulted in significant losses for the bondholders (estimated by the Bank of Greece at 78 % of the face amount of old GGBs on average for the Greek banks) and capital needs which were retroactively booked in the Greek banks’ 2011 financial statements. Table 2 Total PSI losses of the main Greek banks (EUR million) Banks Face amount of GGBs Face amount of state related loans Total face amount PSI loss of GGBs PSI loss of PSI-Verlust der PSI-Verlust der Total gross PSI loss Total gross PSI loss/Core Tier 1 (17) (%) Total gross PSI loss/Total assets (%) NBG 13 748 1 001 14 749 10 985 751 11 735 161,0 11,0 Eurobank 7 001 335 7 336 5 517 264 5 781 164,5 7,5 Alpha 3 898 2 145 6 043 3 087 1 699 4 786 105,7 8,1 Piraeus 7 063 280 7 343 5 686 225 5 911 226,0 12,0 Postbank (TT Bank) 4 197 175 4 372 3 306 138 3 444 618,3 24,8 Nea Proton Bank 934 0 934 216 0 216 378,8 12,6 Source: Bank of Greece, Report on the Recapitalisation and the Restructuring of the Greek Banking Sector, December 2012, p. 14.

(30) Since the Greek banks faced substantial capital shortfalls as a result of the PSI programme and the continuing recession, the Memorandum of Economic and Financial Policies (‘MEFP’) of the Second Adjustment Programme for Greece between the Greek government, the European Union, the International Monetary Fund (‘IMF’) and the European Central Bank (‘ECB’) dated 11 March 2012 made funds available for the recapitalisation of those banks. The Greek authorities estimated the total bank recapitalisation needs and resolution costs to be financed under that programme at EUR 50 billion (18). That amount was calculated on the basis of a stress test performed by the Bank of Greece for the period starting December 2011 and ending December 2014 (‘the stress test of 2012’), which relied on the loan losses forecast performed by Blackrock (19). The funds for the recapitalisation of the Greek banks are available through the HFSF. Table 3 summarises the calculation of capital needs for the main Greek banks as they result from the stress test of 2012. Table 3 Stress test of 2012: Capital needs of the main Greek banks (EUR million) Banks Reference Core Tier 1 (Dec 2011) Total gross PSI loss (Dec 2011) Provisions related to PSI (June 2011) Gross Cumulative Loss Projections for credit risk Loan loss reserves (Dec 2011) Internal capital generation Target Core Tier 1 (Dec 2014) Capital needs NBG 7 287 –11 735 1 646 –8 366 5 390 4 681 8 657 9 756 Eurobank 3 515 –5 781 830 –8 226 3 514 2 904 2 595 5 839 Alpha 4 526 –4 786 673 –8 493 3 115 2 428 2 033 4 571 Piraeus 2 615 –5 911 1 005 –6 281 2 565 1 080 2 408 7 335 Postbank (TT Bank) 557 –3 444 566 –1 482 1 284 – 315 903 3 737 Nea Proton Bank 57 – 216 48 – 482 368 34 115 305 Source: Bank of Greece, Report on the Recapitalisation and the Restructuring of the Greek Banking Sector, December 2012, p. 8.

(31) According to the MEFP of March 2012, ‘banks submitting viable capital raising plans will be given the opportunity to apply for and receive public support in a manner that preserves private sector incentives to inject capital and thus minimises the burden for taxpayers’ (20). The Bank of Greece found only the four largest banks (Eurobank, National Bank of Greece, Piraeus Bank and Alpha Bank) to be viable (21). They received a first recapitalisation by the HFSF in May 2012.

(32) Domestic deposits in the banks in Greece decreased by 37 % in total between the end of 2009 and June 2012 due to recession and political uncertainty. Those banks had to pay higher interest rates to try to retain deposits. The costs of deposits increased, reducing the net interest margin of the banks. As Greek banks were shut out from wholesale funding markets, they became entirely dependent on Eurosystem (22) financing, a growing portion of which was in the form of emergency liquidity assistance (‘ELA’) granted by the Bank of Greece. The amounts those banks obtained were particularly large in the second half of 2012.

(33) After elections were held in June 2012, the stock of deposits began to increase again. Total Eurosystem funding of Greek banks has decreased since 31 December 2012.

(34) On 3 December 2012, Greece launched a buy-back programme on the new GGBs received in the framework of the PSI programme, at prices ranging from 30,2 % to 40,1 % of their nominal value (23). The Greek banks participated in that buy-back programme which crystallised further losses on their balance sheet, since the accounting loss (that is, the difference between market value and nominal value) booked at the time of the PSI programme became definitive and irreversible (24).

(35) In December 2012, the four largest Greek banks received a second recapitalisation from the HFSF.

(36) In autumn 2013, the Bank of Greece launched a new stress test exercise to assess the robustness of the Greek banks’ capital position under both a baseline and an adverse scenario.

(37) In July 2013, the Bank of Greece commissioned an advisor to carry out a diagnostic study on the loan portfolios of all Greek banks. That advisor carried out credit loss projections (‘CLPs’) on all domestic loan books of the Greek banks as well as on loans carrying Greek risk in foreign branches and subsidiaries over a three-and-a-half-year and a loan-lifetime horizon. The analysis provided CLPs under two macroeconomic scenarios; a baseline and an adverse one. The CLPs for foreign loan portfolios were estimated by the Bank of Greece using some input from the advisor.

(38) Based on the advisor’s assessment of the CLPs, the Bank of Greece conducted the capital needs assessment with the technical support of a second advisor.

(39) The key components of the capital needs assessment under the stress test of 2013 were (i) the CLPs (25) on banks’ loan portfolios on a consolidated basis for Greek risk and foreign risk, net of existing loan reserves, and (ii) the estimated operating profitability of banks for the period from June 2013 to December 2016, based on a conservative adjustment of restructuring plans which had been submitted to the Bank of Greece during the fourth quarter of 2013. Table 4 summarises the calculation of capital needs for the main Greek banks on a consolidated basis on the baseline scenario for that stress test of 2013. Table 4 Stress test of 2013: Capital needs of the Greek banks on a consolidated basis in the baseline scenario (EUR million) Banks Reference Core Tier 1 (June 2013) (1) Loan Loss reserves (June 2013) (2) CLPs for Greek risk (3) CLPs for foreign risk (26) (4) Internal Capital Generation (5) Stress test Core Tier 1 ratio (December 2016) (6) Capital needs (7)=(6)– (1)– (2)– (3)– (4)– (5) NBG (27) 4 821 8 134 –8 745 –3 100 1 451 4 743 2 183 Eurobank (28) 2 228 7 000 –9 519 –1 628 2 106 3 133 2 945 Alpha 7 380 10 416 –14 720 –2 936 4 047 4 450 262 Piraeus 8 294 12 362 –16 132 –2 342 2 658 5 265 425 Attica 225 403 – 888 0 106 243 397 Panellinia 61 66 – 237 0 –26 31 169 Source: Bank of Greece, 2013 Stress Test of the Greek Banking Sector, March 2014, p. 42.

(40) On 6 March 2013, the Bank of Greece announced the results of the stress test of 2013 and requested the banks to submit their capital raising plans by mid-April 2014 to cover the capital needs under the baseline scenario.

2.1.2. The economic activities of the Bank

(41) The Bank provides universal banking services mainly in Greece and in Eastern and South-Eastern Europe (Cyprus, Romania, Bulgaria, Serbia, and Ukraine). It offers a full range of banking and financial products and services to households and businesses. It is active in retail, corporate and private banking, asset management, insurance, treasury, capital markets and other services. The Bank is incorporated in Greece and its shares are listed on the Athens Stock Exchange. On 31 December 2012, the Bank employed a total of 17 427 people, approximately half of whom were employed in Eastern and South-Eastern Europe with the other half employed in Greece (29).

(42) The Bank participated in the PSI programme, exchanging GGBs and State-related loans with a face value of EUR 7 336 million. Its total PSI-related charge amounted to around EUR 5 781 million before tax and was entirely booked in its 2011 accounts (30). During the buy-back programme of December 2012, the Bank sold the new GGBs it had received in the framework of the PSI at a deep discount to nominal value. That sale crystallised its losses on the new GGBs.

(43) The key figures of the Bank in December 2010, December 2011, December 2012 and December 2013 (consolidated data) are presented in Table 5. Table 5 Eurobank key figures, 2010, 2011, 2012 and 2013 Profit and loss (EUR million) 2010 2011 2012 2013 (includes New TT Bank and Nea Proton Bank from the date of their acquisition) Net Interest Income 2 103 2 965 1 461 1 294 Total Operating Income 2 730 2 226 1 755 1 587 Total Operating Expenses –1 280 –1 123 –1 052 –1 071 Pre Provision Income 1 450 1 103 703 516 Credit Risk Losses –1 273 –1 328 –1 655 –1 920 PSI losses –6 012 – 363 Other Losses – 737 – 373 – 522 Net Profit/Loss 84 –5 496 –1 440 –1 157 Selective Volume figures (EUR million) 31 December 2010 31 December 2011 31 December 2012 31 December 2013 (includes New TT Bank and Nea Proton Bank) Total Loans and Advances to Customers 53 412 48 094 43 171 45 610 Total Deposits 41 173 32 459 30 752 41 535 Total Assets 87 188 76 822 67 653 77 586 Total Equity (31) 6 094 875 – 685 4 523 Sources: 2013: Financial results2013 – Consolidated financial statements, p. 3 and p. 4: http://www.eurobank.gr/Uploads/pdf/EN%20Consol%20AR%202013.pdf; 2012 and 2011: Financial results2012 – Consolidated financial statements, p. 3 and p. 4: http://www.eurobank.gr/Uploads/pdf/Annual%20Report%202012.pdf; 2010: EFG Eurobank-Press Release, Full Year 2011 Results, pp. 5 and 6: http://www.eurobank.gr/Uploads/pdf/Annual%20Report%20AQ2011.pdf

(44) Table 5 illustrates that, apart from the huge losses it booked in 2011 due to the PSI programme (EUR 5 781 million (32)), the Bank suffered from declining income (due, among other reasons, to the higher costs of deposits) and from high and rising impairment losses on its loan portfolios in Greece and abroad. The liquidity position of the Bank was badly hit by deposit outflows and its loan-to-deposit ratio reached 148 % at 31 December 2011, while 42 % of its balance sheet was funded by the Eurosystem at that date.

(45) Under the stress test of 2013, the results of which were announced on 6 March 2014, the Bank of Greece estimated the capital needs of the Bank at EUR 2 945 million for the baseline scenario. That amount was net of mitigating measures, that is to say, it already assumed that the Bank would carry out mitigating measures in the form of divestments, which were assumed to contribute to the reduction of capital needs.

(46) To cover the identified need for EUR 2 945 million of capital, the Bank proposed enhanced mitigating measures, which will, however, in total generate only slightly more than assumed by the Bank of Greece when calculating the capital needs. Those mitigating measures include the sale of additional assets (sale of […] (33), sale of […] % of the insurance subsidiary and the reduction of the participation in the real estate activities to 20 % by […]) (34).

(47) Since those enhanced mitigating measures are able to cover only a very small part of the identified capital needs, the extraordinary general meeting of shareholders decided on 12 April 2014 to proceed with a capital increase of EUR 2 864 million. It takes the form of a non-pre-emptive equity offering (that is to say, a capital increase with cancellation of pre-emption rights) to international investors and a public offering in Greece. If the demand from private investors is insufficient to cover the entire capital increase, the HFSF will cover the gap by subscribing the remaining new shares, subject to prior conversion of the existing subordinated capital instruments of the Bank into shares.

2.2. THE BANK’S ACQUISITIONS OF GREEK BANKING ACTIVITIES

(48) On 15 July 2013, the Bank signed two binding agreements with the HFSF to acquire 100 % of the shares and voting rights of Nea Proton Bank and New TT Bank.

2.2.1. Acquisition of Nea Proton Bank

Resolution of Proton Bank and Nea Proton Bank

(49) On 9 October 2011, the Bank of Greece proceeded with the resolution of Proton Bank. The license of Proton Bank was recalled by the Bank of Greece which put it into liquidation (35).

(50) On a proposal from the Bank of Greece and following the decision of the Minister of Finance (36), Nea Proton Bank was created as an interim credit institution and all the deposits (retail, bank and government), the branch network and selected assets (loans and securities portfolios) of Proton Bank were transferred to it. Equity claims, subordinated debt, and high-risk loans remained with Proton Bank. HFSF injected initial share capital of EUR 250 million (37) into Nea Proton Bank and was its only shareholder. The size of the opening balance sheet of Nea Proton Bank was approximately EUR 3 billion.

(51) At the end of 2011, Nea Proton Bank’s risk weighted assets (‘RWA’ (38)) amounted to EUR 1,2 billion.

Acquisition of Nea Proton Bank by the Bank

(52) The Greek law on bank resolution requires that the HFSF must dispose of its shares in an interim credit institution within two years from the date of the Ministerial decision establishing that interim credit institution (39). In line with that obligation and pursuant to the MEFP, the HFSF proceeded with the sale of its shares in Nea Proton Bank. The financial advisor of the HFSF contacted a wide range of potential investors (including Greek banks, foreign banks and financial sponsors) but only two parties, the Bank and a US hedge fund, submitted final offers. Only the offer made by the Bank was considered to be compliant with the process letter of the HFSF and was therefore valid.

(53) At 31 May 2013, Nea Proton Bank’s RWA were EUR 811 million and its regulatory capital was EUR – 203 million. At the same date, Nea Proton Bank needed a total recapitalisation of EUR 276 million to reach a 9 % Core Tier One capital ratio. The Bank paid cash consideration of EUR 1 in exchange for 100 % of the shares and voting rights of Nea Proton Bank. The Bank requested the HFSF to recapitalise Nea Proton Bank by EUR 395 million which, apart from the EUR 276 million needed to bring the capital adequacy ratio of Nea Proton Bank back to 9 %, would allow for an additional EUR 119 million of provisions to deal with additional loan loss provisions and expected pre-tax losses until 2016. Under the terms of the sale, the HFSF committed to cover the capital needs of Nea Proton Bank prior to the completion of the transaction by contributing EUR 395 million in cash.

2.2.2. Acquisition of New TT Bank

Resolution of TT Bank and New TT Bank

(54) On 18 January 2013, the Greek authorities proceeded with the resolution of TT Bank. The license of TT Bank was recalled by the Bank of Greece which put it into liquidation (40).

(55) On a proposal from the Bank of Greece and following the decision of the Minister of Finance (41), New TT Bank was created as an interim credit institution and EUR 10,8 billion of assets (in the form of cash, T-bills, performing loans, retail deposits, central funding and GGBs (42)) were transferred to New TT Bank. A total amount of EUR 1,2 billion of net assets remained in TT Bank: ‘in the form of’ equity claims, non-performing loans, tax assets and liabilities of TT, and levies and duties of any kind. HFSF injected initial share capital of EUR 500 million into New TT Bank and was its only shareholder. The size of the opening balance sheet of New TT Bank after the capital injection was approximately EUR 15,1 billion.

Acquisition of New TT Bank by the Bank

(56) As part of the MEFP commitments, the HFSF proceeded with the sale of its shares in New TT Bank. In that way, it also fulfilled its obligation to dispose of its shares in that interim credit institution within two years of the latter’s creation. Its financial advisor contacted a wide range of potential investors, including Greek banks, foreign banks and financial sponsors. Only the four largest Greek banks submitted final offers, of which the Bank’s offer was preferred.

(57) The Bank agreed to pay a total of EUR 681 million in the form of newly issued ordinary shares to purchase New TT Bank. According to the Subscription Agreement, the initial consideration paid by the Bank was subject to further adjustments based on a Net Asset Value evaluation (43).

(58) Consequently, the Bank’s extraordinary general meeting of shareholders of 26 August 2013 approved the increase of the Bank’s share capital by EUR 425 625 000, by issuing 1 418 750 000 new ordinary shares (44) with a nominal value of EUR 0,3 each and an offer price of EUR 0,48 each. The capital increase was subscribed entirely by the HFSF by way of contribution in kind. That contribution in kind took the form of all the shares of New TT Bank owned by the HFSF, with a total value of EUR 681 million. Following that transaction, the shareholding of HFSF in the Bank increased from 93,5 % to 95,2 %.

2.3. AID MEASURES

(59) The Bank benefited from capital support measures A, B1, B2, B3, B4 and C and liquidity support measures L1 and L2. Proton Bank and Nea Proton bank benefited from following measures: Pr1, Pr2 Pr3, NP1, NP2 and NP3. T Bank, TT bank and New TT bank benefited from measures T, TT, NTT1 and NTT2.

2.3.1. Aid measures granted to the Bank under the Greek Banks Support Scheme

(60) The Bank has obtained several forms of aid under the Greek Banks Support Scheme, under the recapitalisation measure, the guarantee measure and the government bond loan measure.

2.3.1.1. State liquidity support granted under the guarantee measure and the government bond loan measure (measure L1)

(61) The Bank has benefited and continues to benefit from aid under the guarantee measure and the government bond loan measure. That aid will be described in this Decision as ‘measure L1’. As of 30 November 2013 (45), the guarantees granted to the Bank amounted to around EUR 13,9 billion. At that date, there was no outstanding loan of government bonds to the Bank. As of 15 April 2011, the Bank had received loans of government bonds amounting to EUR 1 737 million and benefited from EUR 13,6 billion of State guarantees granted under the Greek Banks Support Scheme.

(62) In the restructuring plan for the Bank submitted by the Greek authorities to the Commission on 16 March 2014 the Greek authorities signalled their intention to continue granting guarantees and lending government bonds under the scheme during the restructuring period.

2.3.1.2. State recapitalisation granted under the recapitalisation measure of the Greek Banks Support scheme (measure A)

(63) In May 2009, the Bank received a capital injection of EUR 950 million (46) (measure A) under the recapitalisation measure of the Greek Banks Support scheme. That capital injection was equivalent to around 2 % of the RWA the Bank had at that time.

(64) The recapitalisation took the form of preference shares subscribed by Greece which had a coupon of 10 % and a maturity of five years. In 2010 the duration of the preference shares was extended while their remuneration was increased. From this point forward, if the preference shares are not redeemed within five years from their issue and no decision has been taken by the general meeting of shareholders as to the redemption of those shares, the Greek Minister of Finance will increase the coupon by 2 % per year on a cumulative basis (that is to say, a coupon of 12 % for year six, 14 % for year seven, etc…).

2.3.2. State-guaranteed ELA (measure L2)

(65) ELA is an exceptional measure enabling a solvent financial institution, facing temporary liquidity problems, to receive Eurosystem funding without such operation being part of the single monetary policy. The interest rate paid by such financial institution for ELA is […] basis points higher than the interest it pays for regular Central Bank refinancing.

(66) The Bank of Greece is responsible for the ELA programme, which means that any cost of, and the risks arising from, the provision of ELA are incurred by the Bank of Greece (47). Greece granted to the Bank of Greece a State guarantee which applies to the total amount of ELA granted by the Bank of Greece. The adoption of Article 50, paragraph 7 of law 3943/2011, which amended Article 65, paragraph 1 of law 2362/1995, allowed the Minister of Finance to grant guarantees on behalf of the State to the Bank of Greece in order to safeguard the Bank of Greece’s claims against the credit institutions. The banks benefiting from ELA have to pay a guarantee fee to the State amounting to […] basis points.

(67) As of 31 December 2011, the Bank had benefited from EUR 14,95 billion of State-guaranteed ELA (48), while as of 31 December 2012, the Bank had benefited from EUR 12 billion of State-guaranteed ELA.

2.3.3. Aid measures granted to the Bank through the HFSF

(68) Since 2012, the Bank has benefited from several capital support measures granted by the HFSF. Table 6 provides an overview of those aid measures. Table 6 Capital support measures granted to the Bank through the HFSF 1st bridge recapitalisation — May 2012 (EUR million) 2nd bridge recapitalisation — Dec 2012 (EUR million) Commitment letter — Dec 2012 (EUR million) Spring 2013 recapitalisation — May 2013 (EUR million) Recapitalisation commitment — April 2014 (EUR million) Measure B1 B2 B3 B4 C Amount (EUR million) 3 970 1 341 528 5 839 2 864

2.3.3.1. The first bridge recapitalisation (measure B1)

(69) Recitals 15 to 32 of the Eurobank Opening Decision give a detailed description of the first bridge recapitalisation of May 2012 (measure B1). The background and main features of that measure are set out in this section.

(70) On 20 April 2012, the HFSF provided a letter to the Bank committing to participate in a planned share capital increase of the Bank for an amount of up to EUR 4,2 billion.

(71) Under measure B1, the HFSF transferred EUR 3,97 billion of EFSF bonds to the Bank on 28 May 2012, in line with the provisions for bridge recapitalisations laid down in the law 3864/2010 establishing the HFSF (‘HFSF Law’). The EFSF bonds transferred to the Bank were EFSF floating notes with maturities of six and 10 years and an issue date of 19 April 2012. The Commission has already established in recital 48 of the Eurobank Opening Decision that ‘The bridge recapitalisation finalised on 28 May 2012 is the implementation of the obligation undertaken in the commitment letter and thus a continuation of the same aid’. Both the amounts provided in the commitment letter and in the first bridge recapitalisation were calculated by the Bank of Greece to ensure the Bank reached a total capital ratio of 8 % as of 31 December 2011, the date of retroactive booking of the bridge recapitalisation in the Bank’s records. As can be seen from Table 3, measure B1 only covered a limited part of the total capital needs identified by the stress test of 2012. The Bank was supposed to raise the capital through a future capital increase and the bridge recapitalisation was intended only to preserve the Bank’s eligibility for ECB financing until that capital increase had taken place.

(72) For the period between the date of the first bridge recapitalisation and the date of the conversion of the first bridge recapitalisation into ordinary shares and other convertible financial instruments, the pre-subscription agreement between the Bank and the HFSF stipulated that the Bank had to pay the HFSH a 1 % annual fee on the nominal value of the EFSF notes and that any coupon payments and accrued interest to the EFSF notes for that period would count as an additional capital contribution by the HFSF (49).

2.3.3.2. The second bridge recapitalisation (measure B2)

(73) The Bank booked further losses in the autumn of 2012. Its capital therefore again fell below the minimum capital requirements for it to remain eligible for ECB refinancing.

(74) A second bridge recapitalisation became necessary as a result. On 21 December 2012, the HFSF implemented a second bridge recapitalisation of EUR 1 341 million (measure B2), which was again paid by transferring EFSF bonds to the Bank.

2.3.3.3. The commitment letter of 21 December 2012 (measure B3)

(75) In addition to the second bridge recapitalisation, on 21 December 2012 the HFSF provided the Bank with a commitment letter for its participation in the share capital increase of the Bank and in the convertible instruments to be issued, for a total amount up to EUR 528 million (measure B3).

(76) The total of the two bridge recapitalisations (measures B1 and B2) and of the additional amount committed in December 2012 (measure B3) meant that the HFSF had committed the total capital needs identified under the stress test of 2012 (EUR 5 839 million (50)).

2.3.3.4. The Spring 2013 recapitalisation (measure B4)

(77) On 30 April 2013, the general meeting of shareholders approved an increase in the share capital of the Bank for an amount of EUR 5 839 million (‘the Spring 2013 recapitalisation’). The Bank therefore issued 3 789 317 357 new shares with a nominal value of EUR 0,30 at a price of EUR 1,54 per share.

(78) On the same date the general meeting of shareholders also decided that the full amount of capital would be provided by the HFSF and would be paid in kind, in the form of EFSF bonds.

(79) As a result, the HFSF injected a total of EUR 5 839 million into the Bank in the form of ordinary shares in May 2013 (measure B4). That amount is equal to the sum of measures B1, B2 and B3.

(80) By means of the Spring 2013 recapitalisation the first and second bridge recapitalisations (measures B1 and B2) were converted into a permanent recapitalisation, and the commitment to grant additional capital aid (measure B3) was implemented.

(81) The price of new shares was set at 50 % of the volume-weighted average stock price over the 50 trading days preceding the determination of the offer price. As a result of a reverse stock split decided by the general meeting of shareholders on 30 April 2012 (51), the price of new shares was set at EUR 1,54 per share.

(82) Immediately after the Spring 2013 recapitalisation, the HFSF became the major shareholder of the Bank with a stake of 98,56 %. However, after the Bank completed another liability management exercise, that stake decreased to 93,55 % in June 2013 (see section 2.4.5). In August 2013, the Bank issued new shares to the HFSF in order to purchase New TT Bank as a result of which the HFSF stake increased to 95,23 % (52).

2.3.3.5. The 2014 recapitalisation commitment (measure C)

(83) On 6 March 2014, the Bank of Greece reported the results of a stress test exercise carried out in the second half of 2013. The Bank of Greece indicated that in the baseline scenario the capital needs of the Bank for the period 2014-2016 would reach EUR 2 945 million.

(84) On 31 March 2014 the HFSF sent a letter to the Bank indicating that it had the intention and ability to backstop any share capital increase implemented under the HFSF law 3864/2010 as amended on 30 March 2014 required to comply with capital needs identified during the stress test. The HFSF law provides that if, at the end of the subscription period, there is insufficient demand of private investors at a price determined by the General Council of the HFSF based on two independent valuations, the HFSF would subscribe any remaining shares, subject to prior conversion of the existing subordinated capital instrument of the Bank into shares as stated in Article 6a.

(85) On 12 April 2014 the extraordinary meeting of shareholders approved a share capital increase amounting to EUR 2 864 million under the HFSF law and indicated that the offer price could not be lower than the nominal price of EUR 0,30 per share and the minimum price to be set by the HFSF (53).

(86) In line with the HFSF Law, the HFSF appointed two independent advisors to determine the value of the Bank. On 10 April 2014, the two advisors concluded their work by each providing a range for the value of the Bank. The two ranges overlap to a significant extent. Based on those valuations, the General Council of the HFSF determined on 14 April 2014 the price that corresponds to the minimum price at which the Bank’s new shares may be offered to investors and the price at which it will back stop the equity offering if required (54). On 15 April 2014 it approved the offer made by a consortium of investors to subscribe EUR 1,3 billion of new shares at a price of EUR 0,30 per share (‘cornerstone investor’ (55) (56)).

(87) On 24 April 2014 Eurobank announced the beginning of the book building at a price ranging from EUR 0,30 to EUR 0,33 (57). If there is sufficient demand to cover the entire EUR 2 864 million at a price higher than EUR 0,30, the cornerstone investor will have to adjust its price to the higher price or to cancel its orders, in which case it will receive a compensation fee. If there is sufficient demand from private investors (including demand from the cornerstone investor) to cover the entire EUR 2 864 million at a price of EUR 0,30, the cornerstone investor will receive priority allocation. If there is insufficient demand (including demand from the cornerstone investor) at a price of EUR 0,30, subordinated debt will be converted into new shares. As foreseen under the HFSF law, any unsubscribed shares after the conversion of subordinated debt will be subscribed by the HFSF at the same price, namely EUR 0,30 per share.

2.3.4. Aid measures to the acquired businesses

2.3.4.1. Aid measures to Proton Bank and Nea Proton Bank

(88) Since 2008, Proton Bank and Nea Proton Bank have benefited from several aid measures. Table 7 provides an overview of those aid measures. Table 7 Overview of the capital support measures to Proton and Nea Proton Bank Aid beneficiary Measure Nature of aid Entity which granted the aid Date of disbursement Amount (in EUR million) Proton Bank’ s activities Pr1 Capital under recapitalisation measure: Greek State’s preference shares State May 2009 80 Pr2 Lending of Greek government securities under Greek bond loan measure State April 2009 78 Pr3 State guarantee for issued bonds under the Greek guarantee measure State July 2010 149,4 Nea Proton Bank’s activities NP1 Funding gap from PB to NPB Financing of funding gap from PB to NPB (part 1) HDIGF 9.10.2011 862 After the finalisation of the calculation of the funding gap, financing of the balance of the funding gap from PB to NPB (part 2) HFSF 14.5.2012 259,6 Total amount of NP1 1 121,6 NP2 Share capital injections to NPB in 2011 and 2012 Initial share capital HFSF 9.10.2011 220 Initial share capital HFSF 3.2.2012 30 Total initial capital 250 Additional share capital HFSF 1.8.2012 230 Additional share capital HFSF 31.12.2012 35 Total additional capital 265 Total amount of NP2 515 NP3 Recapitalisation prior its sale to Eurobank Share capital HFSF 28.8.2013 395

2.3.4.1.1. Aid measures to Proton Bank

(i) State recapitalisation received by Proton Bank (measure Pr1)

(89) In May 2009, Greece injected EUR 80 million into Proton Bank, which was equivalent to around 4,6 % of its RWA at that time. That capital injection was made under the recapitalisation measure which is part of the Greek Banks Support Scheme. The recapitalisation took the form of preference shares.

(ii) State liquidity support received by Proton Bank (measures Pr2 and Pr3)

(90) Proton Bank has also benefited from aid measures under the guarantee and government bond loan measures which are part of the Greek Banks Support Scheme. In April 2009 Proton Bank received Greek government securities amounting to EUR 78 million (measure Pr2) and in July 2010 it received a State guarantee for issued bonds with a nominal value of EUR 149,4 million (measure Pr3). The State-guaranteed bonds were transferred to Nea Proton Bank on the resolution day but they were cancelled on 5 January 2012. The Greek government securities matured in December 2011 and were not renewed.

2.3.4.1.2. Aid measures to Nea Proton Bank

(i) Coverage of Nea Proton Bank’s funding gap of EUR 1 121,6 million (measure NP1)

(91) In the context of the resolution of Proton Bank, the Greek authorities identified a funding gap in Nea Proton Bank In line with a decision of 9 October 2011 of the Bank of Greece, the Resolution Scheme of the HDIGF paid EUR 862 million to Nea Proton Bank in December 2011. After the Bank of Greece finalised the calculation of the funding gap on 19 January 2012 at EUR 1 121,6 million, in line with a decision of the Bank of Greece of 9 April 2012 (58) the HFSF (59) paid the remaining amount of EUR 259,6 million on 14 May 2012. The Resolution Scheme of the HDIGF and the HFSF thereby closed that funding gap.

(ii) Capital injections by the HFSF into Nea Proton Bank in 2011 and 2012 (measure NP2)

(92) The HFSF provided State aid to Nea Proton Bank in the form of the initial share capital (common shares) of EUR 250 million, paid out in two tranches on 9 October 2011 and 3 February 2012.

(93) According to the updated restructuring plan of Nea Proton Bank submitted on 16 July 2012, which was the latest version of the plan which had been notified to the Commission at the time of the Nea Proton Opening Decision, Nea Proton Bank needed additional capital of EUR 300 million. That additional capital was required in part because Nea Proton Bank had suffered losses as a result of the PSI programme (impairment losses for 2011 amounted to EUR 146,5 million in relation to the GGBs and additional impairments of EUR 22 million were incorporated in the results of the first quarter of 2012). Additional capital was also needed by Nea Proton Bank because the provision charges from 2011 until 2016 had risen from the levels assumed when Nea Proton Bank was established.

(94) According to the updated restructuring plan of Nea Proton Bank submitted on 16 July 2012, those anticipated capital needs were to take the form of an expected capital injection of EUR 285 million in 2012 and an expected capital injection of EUR 15 million in 2014. In fact, the HFSF ultimately injected EUR 230 million into Nea Proton Bank on 1 August 2012 and EUR 35 million on 31 December 2012.

(iii) Capital injection by the HFSF into Nea Proton Bank before the sale to Eurobank (measure NP3)

(95) Under the sale contract of 15 July 2013, the HFSF had already committed to inject the amount of EUR 395 million into Nea Proton Bank (60). The HFSF paid out the amount of EUR 395 million on 28 August 2013.

2.3.4.2. Aid measures to New TT Bank

(96) T Bank, TT Bank and New TT Bank have benefited from several aid measures since 2008. Table 8 provides an overview of those aid measures. Table 8 Overview of the aid measures to T Bank and TT bank Aid beneficiary Measure Description Entity which granted the aid Date State aid amount (in EUR million) T Bank’s activities transferred to TT Bank (61) T Financing of funding gap from T Bank to TT Bank (part 1) HDIGF December 2011 450 After the finalisation of the calculation of the funding gap, financing of the balance of the funding gap from T Bank to TT Bank (part 2) HFSF 14.2.2013 227 Total amount of T 677 TT Bank TT Capital injection Capital under recapitalisation measure: Greek State’s preference shares State May 2009 224,96 New TT Bank (bridge bank) NTT1 Funding gap from TT to NTT Financing of funding gap from TT Bank to New TT Bank (part 1) HFSF 29.1.2013 2 730,8 After the finalisation of the calculation of the funding gap, financing of the balance of the funding gap from TT Bank to New TT Bank (part 2) HFSF 14.6.2013 1 001,7 Total amount of NTT1 3 732,6 NTT2 Initial share capital injection Initial share capital of New TT Bank HFSF 29.1.2013 500

2.3.4.2.1. Aid measure to T Bank

Intervention by the Resolution Scheme of the HDIGF in favour of T Bank of EUR 677 million (measure T)

(97) The Resolution Scheme of the HDIGF and the HFSF financed the funding gap resulting from the transfer of activities from T Bank to TT Bank, representing the difference between the fair value of the assets transferred from T Bank to TT Bank and the fair value of the transferred liabilities. In line with a decision of the Bank of Greece of 17 December 2011, the Resolution Scheme of the HDIGF paid the amount of EUR 450 million (62), which corresponded to around two-thirds of the estimated funding gap. After the finalisation of the calculation of the funding gap at approximately EUR 677 million, in line with a decision of the Bank of Greece of 9 April 2012 (63), on 14 February 2013 the HFSF (64) paid the balance of EUR 227 million (65) to New TT Bank.

2.3.4.2.2. Aid measure to TT Bank

State recapitalisation received by TT Bank (measure TT)

(98) In May 2009, TT Bank received a capital injection of EUR 224,96 million, equivalent to around 2,9 % of its RWA at that time, from Greece TT Bank received the capital injection under the recapitalisation measure which is part of the Greek Banks Support Scheme. The capital injection took the form of preference shares.

2.3.4.2.3. Aid measures to New TT Bank

(i) Coverage of the funding gap of New TT Bank of EUR 3 732,6 million (measure NTT1)

(99) The HFSF financed the funding gap in New TT Bank, representing the difference between the value of the assets transferred from TT Bank to New TT Bank and the nominal value of the transferred liabilities. In line with a Bank of Greece decision of 18 January 2013, the HFSF paid on 29 January 2013 the amount of EUR 2 730,8 million (66), which corresponded to around two-thirds of the estimated funding gap. After the Bank of Greece finalised the calculation of the funding gap at EUR 3 732,6 million (67), in line with a Bank of Greece decision of 21 May 2013 the HFSF paid on 14 June 2013 the remaining amount of EUR 1 001,7 million to New TT Bank.

(ii) Capital injections by the HFSF into New TT Bank (measure NTT2)

(100) The HFSF constituted the sole shareholder of New TT Bank and provided it with State aid in the form of the initial share capital (common shares) of EUR 500 million.

2.4. THE RESTRUCTURING PLAN AND THE NEW BUSINESS MODEL

(101) On 16 April 2014 Greece submitted the restructuring plan of the Bank, which explains how the Bank, as a combined entity resulting from the acquisition of Nea Proton Bank and New TT Bank, intends to restore its long-term viability.

2.4.1. Domestic operations

(102) Through the restructuring plan, the Bank will focus on its core banking activities in Greece. While its international operations accounted for around 26 % of loans in 2010 (68), that share had already fallen to 20 % at the end of 2012 and will further decrease to […] % by the end of 2018 (69).

(103) The key priority of the Bank is to bring its Greek banking operations back to profitability and viability by the end of the restructuring period (31 December 2018). To that end, the restructuring plan includes a number of measures aimed at improving the Bank’s operational efficiency and net interest margin, as well as measures enhancing its capital position and balance sheet structure.

(104) As regards operational efficiency, the Bank had already started a vast programme of rationalisation well before the acquisitions of New TT Bank and Nea Proton Bank. Since 2010 the Bank has reduced its physical footprint in Greece. On a stand-alone basis (excluding the acquisitions of New TT Bank and Nea Proton Bank), it has reduced its branches from 564 in June 2008 to […] in 2014 and also reduced its Greek workforce (from 10 142 in 2008 to 9 037 in 2012) (70).

(105) Until the end of the restructuring plan, the Bank plans to further decrease both the number of branches, from 645 pro-forma at 31 December 2012 to […] at 31 December 2018, and the number of employees, from 12 430 to […] on a pro-forma basis, that is to say taking into account Nea Proton Bank and New TT Bank (71).

(106) The increased efficiency in terms of branches and personnel will help to bring down the total cost of the combined Greek banking activities by […] % from EUR 913 million on an annual basis in 2013 (72) to EUR […] million in 2018 (73). As a result, the expected cost-to-income ratio of the Bank’s Greek banking activities will fall below […] % at the end of the restructuring period, down from 60 % in 2012.

(107) The restructuring plan also describes how the Bank will improve its funding costs, which is key to the restoration of viability. The Bank expects to be able to pay lower interest rates on its deposits on the back of the more stable environment and in particular the foreseen stabilisation and recovery of the Greek economy, which is expected to grow again from 2014 onwards. Spreads on deposits (average of time deposits, sight deposits and savings rates) are expected to decrease in Greece from 223 basis points in 2012 to […] basis points in 2018 (74). That decrease in spreads would be mainly achieved by paying much lower rates on time deposits. Similarly, the Bank’s reliance on the emergency liquidity assistance and wider Eurosystem funding will decrease from 42,9 % of its total assets at group level in 2012 to […] % in 2018 (75).

(108) The restructuring plan anticipates that the Bank will also strengthen its balance sheet. Its net loan-to-deposit ratio in Greece will decrease to […] % in 2018 (down from 160 % in 2012 and 115 % in 2013) (76), while its capital adequacy will improve with a Core Tier One ratio of […] % at group level in 2018 (77) (instead of negative equity prior to the first bridge recapitalisation).

(109) Another strategic priority of the Bank is the management of non-performing loans. In addition to enhanced credit processes regarding both the origination of loans and the restructuration of non-performing loans, the restructuring plan focusses on the handling of impaired exposures, with the creation of a new remedial unit. That unit will be dedicated to the restructuring of impaired exposures. It will benefit from the expertise of 30 to 50 remedial relationship managers (78). The rate of non-performing loans will reach […] % at Group level in 2015 ([…] % in 2015 for the Greek domestic market (79)) and then start to decrease, with an expected rate of […] % at the end of the restructuring period (80) (30 % in Greece before debt write-offs). The loan impairments of the Bank in Greece will decrease from EUR 1 652 million in 2013 to EUR […] million in 2018 (81), due to the recovery of the Greek economy.

(110) The improvement of operational efficiency, the reduction of the net interest margin, and the decreasing cost of risk will enable the Bank to be profitable in Greece from 2015 onwards. The Bank anticipates that, at consolidated level, its losses will amount to EUR […] million in 2014 and EUR […] million in 2015, while its profits will amount to EUR […] million, EUR […] million, and EUR […] million in 2016, 2017 and 2018 respectively (82). Its consolidated return on equity will reach […] % in 2018 (83). That level of profitability will be mainly driven by the Greek market (with a return on equity of […] % at the end of the restructuring period) while […] and […] will report lower levels of profitability (at […] % and […] % respectively).

2.4.2. International banking activities

(111) The Bank has already started to deleverage and restructure its international network. It has already sold subsidiaries in Turkey (Eurobank Tefken) and Poland (EFG Poland). The commercial gap, that is to say the difference between the outstanding amount of deposits and the outstanding amount of loans for a given subsidiary, of the remaining international network has fallen from EUR 1,7 billion in 2010 to EUR 0,8 billion, while operating costs were reduced by 9 % between 2010 and 2012 (84).

(112) The Bank will continue to restructure and deleverage its international network. In particular, the Bank has committed to reduce the size of its portfolio of international assets to EUR 8,77 billion by 30 June 2017. The Bank has also committed to further downsize that portfolio to EUR 3,5 billion should the HFSF need to inject more than one billion euros in the upcoming share capital increase.

(113) One option explored by the Bank in the restructuring plan to comply with that target is to sell its activities in […] (85).

(114) Those divestments represent […] % of the Bank’s foreign assets as of 31 December 2012. Foreign assets would therefore amount to EUR […] billion as of 31 December 2018, with an international network focussed on […] and […].

(115) The restructuring plan highlights the need to reduce the reliance of the foreign subsidiaries on their Greek mother company as regards their funding needs and to continue safeguarding the capital position of the Bank.

(116) To that end, the Bank is planning to implement a significant cost reduction programme in the international network, […]. In […] for instance, […] branches will be closed while the workforce will decrease by […] employees from 31 December 2012 until the sale of the subsidiary in […] (86).

(117) The Bank will reduce its total funding to the foreign subsidiaries from EUR 2 billion in 2012 to […] in 2018 (87), while the return on equity will reach […] % and […] % in […] and […] respectively.

2.4.3. Non-banking activities: sale of insurance business and real estate activities

(118) The Bank has reduced its ownership in its real estate subsidiary Eurobank Properties below 35 % by means of a share capital increase, with a positive impact on the Core Tier One ratio of the Bank (88). The Bank will fully divest that subsidiary by 31 December 2018.

(119) The Bank also plans to sell its insurance subsidiaries by […].

2.4.4. Private capital raising and contribution by existing shareholders and subordinated creditors

(120) The Bank succeeded in raising capital on the market and thereby reduced the State aid which was needed by the Bank.

(121) The shareholders were heavily diluted by the Spring 2013 recapitalisation, since the HFSF received 98,56 % of the Bank’s shares, leaving the pre-existing shareholders with only a 1,44 % shareholding. Therefore, the HFSF took full control over the Bank in June 2013. No dividend has been paid in cash since 2008.

(122) In February 2012 the Bank offered to buy back hybrid instruments from private investors at a price between 40 % and 50 % of their nominal value. That buy-back price was determined on the basis of the market value of the instruments and contained a premium of not more than ten percentage points, which was added to encourage investors to participate in the buy-back. The offer was accepted for almost 50 % of the instruments’ total nominal value which, after taking the costs of the transaction into consideration, left the Bank with a profit of EUR 248 million (89).

(123) In May 2013 the Bank announced another liability management exercise. The Bank offered debt holders the opportunity to convert their lower tier one and lower tier two securities, with an outstanding amount of EUR 662 million, into ordinary shares, at par. The conversion price was set so as to equal the subscription price paid by the HFSF in the Spring 2013 recapitalisation (90). The acceptance rate was 48 %. Since the lower tier one and lower tier two bond holders converted their securities into lower subordinated instruments with no cash consideration, the capital raised reached EUR 317 million.

(124) As a result of the two buy backs, the stock of subordinated and hybrid debt decreased from EUR 1 045 million at 31 December 2011 to EUR 283 million at 31 December 2013 (91).

2.5. COMMITMENTS OF THE GREEK AUTHORITIES

(125) Greece gave a commitment that the Bank and its affiliates will implement the restructuring plan submitted on 16 April 2014 and gave further commitments regarding the implementation of the restructuring plan (‘the Commitments’). The Commitments, listed in the Annex, are summarised in this section.

(126) First Greece has given a commitment that the Bank will restructure its commercial operations in Greece, setting a maximum number of branches and employees as well as a maximum amount of total costs to be complied with at 31 December 2017 (92).

(127) Greece has also given a commitment that the Bank will reduce the cost of deposits collected in Greece and will comply with a maximum ratio of net loans to deposits by 31 December 2017 (93).

(128) Regarding the Bank’s foreign subsidiaries, Greece has given a commitment that the Bank will not provide additional capital support unless predefined conditions are met. Greece has also given a commitment that the Bank will significantly deleverage its international assets by 30 June 2018 (94).

(129) Greece has given a commitment that the Bank will divest its insurance activities, its real estate subsidiary and a number of securities and will reduce the size of its private equity portfolio. In addition, the Bank will not purchase non-investment grade securities, with limited exceptions (95).

(130) Greece gave a number of commitments related to the corporate governance of the Bank. It committed to limit the remuneration of the Bank’s employees and managers, to make the Bank comply with Greek laws on corporate governance and set up an efficient and adequate organisational structure (96).

(131) Greece has also given a commitment that the Bank will enhance its credit policy, in order to prevent any discrimination at any stage of the credit process and to ensure decisions on granting and restructuring loans aim at maximising the profitability of the Bank. Greece has given a commitment that the Bank will improve the monitoring of credit risk as well as the restructuring of loans (97).

(132) A number of commitments deal with the operations of the Bank with connected borrowers. Those commitments aim at ensuring that the Bank does not deviate from prudent banking practices when granting or restructuring loans to its employees, managers and shareholders, as well as to public entities, political parties and media companies (98).

(133) Finally Greece has given a commitment to impose further restrictions for the Bank, such as a coupon and dividend ban, an acquisition ban and an advertising ban (99).

(134) Those commitments will be monitored until 31 December 2018 by a monitoring trustee.

(135) Separately, in the framework of the current capital increase of the Bank, since the HFSF is backstopping the capital increase, Greece gave a commitment that it would implement the measures provided for in Article 6a of the HFSF Law as amended on 30 March 2014, a provision which aims at allocating the residual amount of the capital shortfall of a credit institution to the holders of its capital instruments and other subordinated liabilities, as may be necessary, prior to any injection of capital by the HFSF.

3. GROUNDS FOR INITIATING THE FORMAL INVESTIGATION PROCEDURES

3.1. GROUNDS FOR INITIATING THE FORMAL INVESTIGATION PROCEDURE REGARDING THE FIRST BRIDGE RECAPITALISATION

(136) On 27 July 2012, the Commission opened the formal investigation procedure in order to verify whether the conditions of the 2008 Banking Communication (100) were met regarding the appropriateness, necessity and proportionality of the first bridge recapitalisation provided by the HFSF in favour of the Bank (measure B1).

(137) Regarding the appropriateness of the measure, given the fact that the aid came after prior recapitalisation and liquidity aid and given the protracted rescue period, the Commission expressed doubts as to whether all actions possible had been taken by the Bank to avoid a need for aid in the future (101). In addition, the Commission was not clear who would control the Bank once the first bridge recapitalisation was replaced by a permanent recapitalisation (102) as the Bank might come under the control either of the State or of minority private owners. The Commission noted that it would wish to ensure that the quality of the Bank’s management and notably its lending process should not deteriorate in either case.

(138) Regarding the necessity of the first bridge recapitalisation, in recital 66 of the Eurobank Opening Decision the Commission questioned whether all the measures possible had been taken to avoid that the Bank again would need aid in the future. Moreover, since the duration of the bridge recapitalisation period was uncertain the Commission could not conclude whether it was sufficient and complied with the remuneration and burden-sharing principles under State aid rules. Furthermore, as the terms of the conversion of the first bridge recapitalisation into a permanent recapitalisation were not known at the time the Eurobank Opening Decision was adopted, the Commission could not assess them.

(139) Regarding the proportionality of the measure, the Commission expressed doubts as to whether the safeguards (advertisement ban, coupon and dividend ban, call option ban and buy-back ban as described in recital 71 of the Eurobank Opening Decision) were sufficient in relation to the first bridge recapitalisation. Furthermore, in recital 72 of the Eurobank Opening Decision the Commission stated that distortions of competition could be caused by the lack of rules preventing the HFSF from coordinating all the four largest Greek banks (namely, the Bank, Alpha Bank, NBG and Piraeus) and the absence of adequate safeguards to avoid them sharing commercially sensitive information. The Commission, therefore, proposed the appointment of a monitoring trustee who would be physically present in the Bank.

3.2. GROUNDS FOR INITIATING THE FORMAL INVESTIGATION PROCEDURE REGARDING NEA PROTON BANK

(140) On 26 July 2012, the Commission opened the formal investigation procedure in order to verify whether the EUR 1 122 million intervention by the Resolution Scheme of the HDIGF (measure NP1), as well as the EUR 250 million capital injection by the HFSF and the capital injections by the HFSF amounting to a total of EUR 300 million (measure NP2), in favour of Nea Proton Bank complied with the general criteria for compatibility and the requirements of the 2008 Banking Communication, the Recapitalisation Communication (103) and the Restructuring Communication (104) (restoration of long-term viability, burden-sharing and limitation of the aid to the minimum necessary, and limitation of distortions of competition).

(141) Regarding the appropriateness of the measures, the Commission stated that those measures were appropriate as rescue aid.

(142) Regarding the necessity of the measures, the Commission noted that the intervention of the Resolution Scheme of the HDIGF was necessary in both its amount and form, while the capital injections by the HFSF were necessary only in their form. However, as regards the amount of capital injections by the HFSF, in recital 59 of the Nea Proton Opening Decision the Commission expressed doubts as to whether Nea Proton Bank would be able to restore its long-term viability on a stand-alone basis and whether a stand-alone restructuring was the cheapest option available. Furthermore, in recitals 60 and 61 of the Nea Proton Opening Decision the Commission stated that the inability of Nea Proton Bank to sufficiently remunerate the recapitalisation by the HFSF created doubts as to whether it was a fundamentally sound bank and therefore triggered the need for in-depth restructuring.

(143) As regards the proportionality of the measures, the Commission considered that they were proportionate as rescue aid.

(144) Regarding the restoration of long-term viability of Nea Proton Bank, in recital 65 of the Nea Proton Opening Decision the Commission expressed doubts as to whether that bank could be made viable on a stand-alone basis.

(145) The Commission doubted that the restructuring proposed was sufficient compared to the depth of the restructuring required given the absence of sufficient remuneration.

3.3. GROUNDS FOR INITIATING THE FORMAL INVESTIGATION PROCEDURE REGARDING NEW TT BANK

(146) On 6 May 2013, the Commission opened the formal investigation procedure in order to verify whether the EUR 4,1 billion financing of the funding gap to the transferred activities from TT Bank to New TT Bank (measure NTT1), the EUR 500 million capital injection by the HFSF into New TT Bank (measure NTT2),the EUR 224,96 million capital injection in the form of preference shares under the Greek Banks Support Scheme to TT Bank (measure TT) and the EUR 0,68 billion intervention by the Resolution Scheme of the HDIGF in favour of T Bank’s assets which were transferred to TT Bank (measure T) complied with the general criteria for compatibility and the requirements of the 2008 Banking Communication, the Recapitalisation Communication and the Restructuring Communication (restoration of long-term viability, burden-sharing and limitation of the aid to the minimum necessary, and limitation of distortions of competition).

(147) The Commission considered that both measures NTT2 and NTT1 were appropriate and necessary in their form as rescue aid. As regards the necessity of measure NTT2 in terms of its amount, the Commission, doubting the long-term viability of New TT Bank on a stand-alone basis, considered that restructuring on a stand-alone basis might not be the only and the cheapest option available (105). As regards the remuneration of both measures, the Commission stated that the coverage of the funding gap was a definitive cost without offsetting future revenues which triggered a need for in-depth restructuring (106).

(148) Regarding the proportionality of both measures, the Commission considered that measures NTT2 and NTT1 were proportionate as rescue aid in the short-term but in recital 79 of the New TT Opening Decision required measures to be introduced rapidly that would limit negative spill-over effects.

(149) Regarding the compatibility of measure T, the Commission had already temporarily approved it as rescue aid on 16 May 2012 in its Decision on the resolution of T Bank (‘T Bank Decision’) (107) but could not give a definitive approval of the aid to T Bank’s activities which were transferred to TT Bank. The Commission prolonged in the New TT Opening Decision (108) the authorisation of the measure as rescue aid until such time as it would take a final decision on an updated version of the restructuring plan for TT Bank.

(150) Regarding the compatibility of those measures with the Restructuring Communication, the Commission doubted whether New TT Bank would restore its long-term viability on a stand-alone basis. That scepticism was based on the limited number of the proposed measures to be taken by New TT Bank to generate profits in the future, the uncertainty of the voluntary retirement scheme as regards the timing and the acceptance rate by the employees, the absence of further measures to reduce personnel costs, the lack of measures for rationalisation of the branch network after the acquisition of T Bank and a concomitant failure to exploit potential synergies (109).

(151) In recitals 90 and 91 of the New TT Opening Decision the Commission raised concerns about whether the ambitious decrease in interest margins on existing deposits and increase in loan margins on new loan production could be implemented without New TT Bank losing a significant amount of customers and without making risky lending. Moreover, the Commission doubted whether New TT Bank would double its corporate loan book as planned and whether, given the lack of expertise, it could achieve the planned strong growth rate of the net interest income.

(152) Therefore, in recital 95 of the New TT Opening Decision the Commission took the view that the reintegration of TT Bank into a larger viable financial company would increase the viability prospects of the New TT Bank, as it would allow for rationalisation of costs, repricing of deposits and new loans, and the offer of a wider range of products.

(153) As New TT Bank harboured the economic activities previously carried out within TT Bank, including those of T Bank, the Commission opened a formal investigation procedure regarding whether measures T and TT offered a long-term solution for the viability of New TT Bank and invited interested parties to submit comments.

(154) Regarding burden-sharing, the Commission considered that restructuring on a stand-alone basis inflated the restructuring costs and therefore it doubted that State aid was limited to the minimum. Moreover, the Commission noted that, despite the fact that sufficient burden-sharing of shareholders and subordinated debt holders was achieved, which was probably the maximum feasible, the absence of remuneration triggered the need for in-depth restructuring, both in terms of viability measures and in terms of measures to limit distortions of competition. The Commission also observed that the fact that a large part of the losses incurred stemmed from the waiver of debt in favour of the State justified a lower remuneration (110).

(155) Regarding distortions of competition, the Commission noted that the huge amount of aid received by TT Bank and transferred activities of T Bank and the lack of remuneration called for a deep restructuring and reduction of the market presence of New TT Bank. Moreover, while the losses stemmed mainly from the holding of GGBs, the Commission observed that TT Bank had held more GGBs than other Greek banks in proportion to its size and considered that it reflected inappropriate risk taking (111). Lastly, it noted that, although New TT Bank remained on the market almost as TT Bank had been before, the distortions of competition would be limited given the former’s relatively small size and the absence of foreign activities. However, the Commission doubted whether sufficient measures had been taken to limit undue distortions of competition and took the view that a price leadership ban and other behavioural measures might be necessary (112).

4. COMMENTS FROM INTERESTED PARTIES ON THE FORMAL INVESTIGATION PROCEDURE REGARDING THE FIRST BRIDGE RECAPITALISATION

COMMENTS FROM A GREEK BANK

(156) On 3 January 2013, the Commission received comments submitted by a Greek bank on the Eurobank Opening Decision. That Greek bank commented that the recapitalisation of Greek banks by the HFSF constituted, in principle, a welcome step towards a healthier and more viable banking system and expressed no objection to the recapitalisation of Eurobank.

(157) However, while expressing its entire support for the principle of the recapitalisation of Greek banks by the HFSF, that Greek bank explained that, in order to minimise distortions of competitions and to avoid discrimination, it expected that recapitalisation by the HFSF to be open to all banks operating in Greece under similar conditions.

5. COMMENTS FROM GREECE ON THE FORMAL INVESTIGATION PROCEDURES

5.1. COMMENTS FROM GREECE ON THE FORMAL INVESTIGATION PROCEDURE REGARDING THE FIRST BRIDGE RECAPITALISATION

(158) On 5 September 2012, Greece submitted comments which had been prepared by the Bank of Greece and the HFSF on the Eurobank Opening Decision.

5.1.1. Comments prepared by the Bank of Greece

(159) Regarding the appropriateness of the first bridge recapitalisation, the Bank of Greece noted that the amount of EUR 18 billion of capital with which the HFSF recapitalised the four largest Greek banks in May 2012 was less than the final amount which was needed in order for those banks to gradually reach and maintain a Core Tier One capital ratio set at 10 % by June 2012 and a Core Tier One capital ratio set at 7 % under a three-year adverse stress scenario. It also noted that the first bridge recapitalisation was temporary, given that the recapitalisation process would be concluded with share capital increases by those four banks.

(160) The Bank of Greece also observed that the recapitalisation of the largest Greek banks is part of the longer term restructuring of the Greek banking sector. It noted that where a bank remains in private hands, the management will most probably remain the same, while if a bank becomes State-owned (that is to say, owned by the HFSF), the HFSF may appoint new management which, in any case, will be assessed by the Bank of Greece. The Bank of Greece noted that it assesses the corporate governance framework, the adequacy of management and the risk profile of every bank on an ongoing basis in order to ensure that excessive risks are not taken. It also pointed out that the HFSF had already appointed representatives in the Board of Directors of the recapitalised banks.

(161) Regarding the necessity of the first bridge recapitalisation, the Bank of Greece observed that the Bank’s recapitalisation was limited so as to ensure that the then applicable minimum capital requirements (8 %) were met. It also stated that the protracted period of time prior to the recapitalisations was due to the sharp deterioration of the operating environment in Greece and the impact of the PSI programme, to the complexity of the whole project and to the need to maximise private investors’ participation in the share capital increases.

(162) Regarding the proportionality of the first bridge recapitalisation, the Bank of Greece pointed out that the full implementation of the restructuring plan to be submitted to the Commission is safeguarded by the fact that the suspension of the voting rights of the HFSF will be lifted if, inter alia, the restructuring plan is substantively violated. The Bank of Greece also observed that the Bank’s difficulties were not due either to an underestimation of risks by the Bank’s management or to commercially aggressive actions.

5.1.2. Comments prepared by the HFSF

(163) Regarding the appropriateness of the first bridge recapitalisation, to address the issue of potential State interference if the State provides high amounts of State aid through the HFSF and the HFSF has full voting rights, the HFSF stated that the HFSF-funded banks are not considered to be public entities or under State control and that they would not be controlled by the State after they have been permanently recapitalised by the HFSF. The HFSF pointed out that it is a fully independent private-law legal entity with autonomy of decision. It is not subject to government control, pursuant to Article 16C, paragraph 2 of the HFSF Law, according to which the credit institutions to which the HFSF has provided capital support are not part of the broader public sector. It also referred to the governing structure of the HFSF.

(164) As regards the intervention of the HFSF in the Bank’s management, the HFSF noted that it would respect the Bank’s autonomy and not interfere with its day-to-day management given that its role is limited to that laid down in the HFSF Law. It stated that there would not be any State interference or coordination and that the decisions of the Bank regarding the lending process (inter alia on collateral, pricing and solvency of borrowers) would be taken on the basis of commercial criteria.

(165) The HFSF pointed out that the HFSF Law and the pre-subscription agreement set appropriate safeguards in order to prevent existing private shareholders from excessive risk-taking. It pointed to elements such as (i) the appointment of HFSF representatives as independent non-executive members of the Board of Directors of the Bank and their presence at committees, (ii) the HFSF carrying out due diligence in the Bank and (iii) the fact that, after the final recapitalisation, its voting rights would be restricted only for as long as the Bank complied with the terms of the restructuring plan.

(166) Regarding the necessity of the first bridge recapitalisation and specifically regarding the level of the remuneration of aid, the HFSF stated that the remuneration had been agreed with the representatives of the Commission, the ECB and the IMF. That agreed level took into account that the first bridge recapitalisation would be converted into a permanent recapitalisation before 30 September 2012, a deadline which was set in March 2012 in the MEFP between the Commission, the ECB and the IMF and Greece.

(167) Regarding the proportionality of the first bridge recapitalisation, the HFSF noted that the measures it adopted, such as those described in recital 165 of the present decision, are sufficient safeguards in view of the large amounts of aid received and the protracted rescue period. Moreover, the HFSF stated that there are appropriate measures in place in order to ensure that banks in which the HFSF participates do not share commercially sensitive information between them. Such measures include the appointment of different HFSF representatives to those banks, the mandates addressed to those representatives which specifically safeguard against the flow of information from one representative to another and clear internal instructions to those officers not to transmit commercially sensitive information of the banks. Moreover, the HFSF stated that it does not exercise its rights in relation to the banks in a manner which may prevent, restrict, distort or significantly lessen or impede effective competition. Lastly, the HFSF pointed out that the members of its Board of Directors and its employees are subject to strict confidentiality rules and fiduciary duties and are bound by provisions concerning professional secrecy with regards to its affairs.

5.2. COMMENTS FROM GREECE ON THE FORMAL INVESTIGATION PROCEDURE REGARDING NEA PROTON BANK

(168) On 5 September 2012, Greece submitted comments which had been prepared by the Bank of Greece and the HFSF on the Nea Proton Opening Decision.

5.2.1. Comments prepared by the Bank of Greece

(169) The Bank of Greece observed that Nea Proton Bank, as an interim credit institution owned by the HFSF, could not provide a longer term business plan on a stand-alone basis. Moreover, the Bank of Greece noted that it is closely following the implementation of the business plan prepared by the HFSF for Nea Proton Bank and submitted to the Commission in order to ensure that Nea Proton Bank could be sold within the period laid down by law.

(170) Regarding the profitability growth rate, the Bank of Greece pointed out that the biggest part of the growth was anticipated to occur during 2013 (when net interest income was expected to rise to EUR 55,3 million, compared to EUR 22,7 million for 2012), would stem mainly from the reduction of total interest expenses and would be the result of two factors: a roll-over of term deposits that used to bear high yields at better terms and a reduction by 30 % of the total outstanding amount of deposits during the first half of 2012. Moreover, the Bank of Greece stressed the fact that from 2013 onwards net interest income figures would move quite smoothly and would raise no doubts about the ability of Nea Proton Bank to meet the target.

5.2.2. Comments prepared by the HFSF

(171) Regarding the necessity of the measures in favour of Nea Proton Bank, the HFSF noted that the Bank of Greece is the pertinent authority to decide on any resolution measure and that the HFSF injected the minimum capital required for regulatory purposes.

(172) Regarding the restoration of long-term viability of Nea Proton Bank, the HFSF referred to the resolution framework under which the HFSF had to sell Nea Proton Bank within two years and agreed with the Commission that Nea Proton Bank could be a part of larger and viable entity. Although the restructuring plan for Nea Proton Bank was based on a ‘stand-alone basis’ model, the HFSF explained that its objective was to facilitate the sale of that bank by improving its attractiveness to investors and its financial results. The HFSF commented that the capital injections not only allowed Nea Proton Bank to respect the minimum capital adequacy ratio but also improved its financial position and its attractiveness for any future merger with other small banks. The HFSF also noted that the additional capital injection had been needed to cover impairment losses related to the PSI programme and the increased provision charges for loans.

(173) The HFSF observed that Nea Proton Bank had improved its cost of funding and the loyalty of deposits. Nea Proton Bank’s reliance on the Eurosystem fell during 2012 and it had improved its liquidity position. The additional capital injection had helped to reduce interest rates on deposits and to improve interest rate margins. Nea Proton Bank had already re-priced some of its loan portfolio, using risk-based pricing with interest rates well above the cost of funding. Moreover, the planned growth rate of the net interest income would occur with a conservative expansion in the corporate market segment and by enhancing portfolio quality.

(174) The HFSF observed that in 2012 Nea Proton Bank had significantly reduced its operating costs, that its two only subsidiaries would cease operations, that its participation in insurance brokers was being greatly reduced and that its proprietary trading activities would end.

(175) Finally, the HFSF noted that distortions of competition would be limited given the small share of Nea Proton Bank in total banking assets in Greece and the fact that it was not considering aggressive deposit-taking.

5.3. COMMENTS FROM GREECE ON THE FORMAL INVESTIGATION PROCEDURE REGARDING NEW TT BANK

(176) On 19 July 2013, the Ministry of Finance submitted comments on the New TT Opening Decision.

(177) Regarding the necessity of measure NTT1, the Ministry of Finance added that the exact value of the assets and liabilities that were transferred to New TT Bank was defined based on the external auditors’ report in accordance with Article 63E, paragraph 6, of Law 3601/2007.

(178) Regarding the necessity of measure NTT2, the Ministry of Finance commented that the Second Adjustment Programme for Greece (second Review-May 2013) required the sale of New TT Bank to a third party by 15 July 2013.

(179) Regarding the remuneration of measures NTT1 and NTT2, the Ministry of Finance noted that the HFSF, which fills the funding gap until 31 December 2013 instead of the HDIGF, obtains a preferential claim ahead of other unsecured creditors in case of the liquidation of the assets that remained in the ownership of TT Bank and that only the claims of employees to receive 50 % of their compensation rank before the HFSF’s claim. Therefore, it observed that the product of the liquidation of those assets will benefit the HFSF mainly and so reduce the cost borne by the State.

(180) Regarding the restoration of long-term viability of New TT Bank, the Ministry of Finance observed that, as an interim credit institution, New TT Bank had to be sold within two years of its establishment, in accordance with Article 63E of Law 3601/2007. The sale of New TT Bank would, in line with the MEFP of May 2013, be completed by 15 July 2013, thus ensuring the long-term viability of its activities.

6. ASSESSMENT OF AID RELATED TO THE ACQUIRED BUSINESSES

6.1. ASSESSMENT OF AID RELATED TO NEA PROTON BANK

6.1.1. Existence and the amount of aid

(181) The Commission has to establish the existence of State aid within the meaning of Article 107(1) of the Treaty. According to that provision, State aid is 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, in so far as it affects trade between Member States.

6.1.1.1. Existence of aid in the measures granted under the Greek Banks Support Scheme (measures Pr1, Pr2 and Pr3)

(182) The EUR 80 million capital injection by the Greek State into Proton Bank in May 2009 (measure Pr1), the Greek government securities amounting to EUR 78 million obtained by Proton Bank in April 2009 (Measure Pr2) and the State guarantee given to Proton Bank for issued bonds with a nominal value of EUR 149,4 million in July 2010 (Measure Pr3) were granted under the Greek Banks Support Scheme (113). In the Decision approving that scheme, the Commission concluded that measures granted under that scheme would constitute State aid.

(183) As concluded in recital 38 of the Nea Proton Opening Decision, Nea Proton Bank harbours the economic activities of Proton Bank. Measures Pr1, Pr2 and Pr3 have benefited Nea Proton Bank, as they contributed to the stabilisation and the continuance of the economic activities which were transferred to it and would otherwise no longer exist. Therefore, the Commission considers that they have benefited the economic activities transferred to Nea Proton Bank.

6.1.1.2. Existence of aid in the coverage of the funding gap of Nea Proton Bank (measure NP1)

(184) In recitals 31 to 37 of the Nea Proton Opening Decision the Commission has already established that measure NP1, the intervention by the Resolution Scheme of the HDIGF and the HFSF to cover the funding gap, constitutes State aid within the meaning of Article 107(1) of the Treaty. In recital 38 of the same decision the Commission considered Nea Proton Bank to be the economic beneficiary of that measure as Nea Proton Bank harbours the economic activity of Proton Bank which continues to exist because of the aid received.

6.1.1.3. Existence of aid in the initial share capital injection by the HFSF and additional share capital injection by the HFSF in 2012 (measure NP2)

(185) In recitals 41 to 43 of the Nea Proton Opening Decision the Commission has already established that the capital injection by the HFSF of EUR 250 million and the additional capital injections anticipated at the time of that Decision, amounting to a total of EUR 300 million, were State aid within the meaning of Article 107(1) of the Treaty. As mentioned in recital 93 of the present Decision, out of the possible additional EUR 300 million in capital, HFSF eventually contributed an additional EUR 265 million in 2012, which brings the total recapitalisation aid in 2011 and 2012 to EUR 515 million (measure NP2).

6.1.1.4. Existence of aid in capital injection from the HFSF into Nea Proton Bank prior to its sale to the Bank (NP3)

(186) The Commission considers the capital injection by the HFSF into Nea Proton Bank prior to its sale to the Bank, amounting to EUR 395 million, to be State aid within the meaning of Article 107(1) of the Treaty.

(187) The capital injection was provided by the HFSF, which is an entity set up and financed by Greece to support banks, and so was made by using State resources. Furthermore, the measure is selective in nature, since the capital injection only benefits Nea Proton Bank.

(188) Moreover, the intervention provides Nea Proton Bank with a clear advantage since it enables its banking activities to remain alive. Without the capital injection, Nea Proton Bank, which had deeply negative capital, would have gone bankrupt. In such circumstances, it would not have been possible to sell Nea Proton Bank and integrate it into a larger entity. Furthermore, that recapitalisation does not comply with the market investor principle. On the contrary, the EUR 395 million recapitalisation allowed the sale of Nea Proton Bank to take place for a price of one euro. A private investor would have chosen not to proceed with the recapitalisation and to let Nea Proton Bank go bankrupt, therefore saving EUR 395 million.

(189) Nea Proton Bank competes with other banks, including subsidiaries of foreign banks, which are active in Greece or potentially interested in entering the Greek market. Hence, the capital injection has an effect on trade between Member States and potentially distorts competition.

(190) The Commission therefore concludes that the capital injection of EUR 395 million into Nea Proton Bank constitutes State aid within the meaning of Article 107(1) of the Treaty.

Beneficiary of measure NP3

(191) As already explained in recital 188, the Commission regards Nea Proton Bank as being the beneficiary of the capital injection of EUR 395 million into Nea Proton Bank, as the aid allowed the continuation of its economic activities within the Bank.

(192) As to whether the sale of Nea Proton Bank entails State aid to the Bank, in line with point 49 of the 2008 Banking Communication the Commission needs to assess whether certain requirements are met. It needs to examine in particular whether: (i) the sale process was open and non-discriminatory; (ii) the sale took place on market terms; and (iii) the financial institution or the government maximised the sale price for the assets and liabilities involved.

(193) The Bank acquired the shares in Nea Proton Bank because it submitted the only valid bid in the framework of a non-discriminatory tender procedure open to other banks and financial institutions. A financial advisor of the HFSF contacted a wide number of banks, financial institutions and sponsors and only four expressed their interest in acquiring Nea Proton Bank, of which only two, the Bank and a hedge fund (114), submitted final offers. The Bank’s offer was the only one which complied with the process letter of the HFSF.

(194) Because the financial advisor contacted a wide number of banks and had set in advance the requirements and the time frame that offers should meet in order to be valid, the Commission considers that the tender was open and non-discriminatory. The Commission therefore concludes that the tender procedure allows it to exclude the presence of aid to the buyer.

(195) The Bank paid consideration of one euro and the HFSF gave a commitment to recapitalise Nea Proton Bank prior to its sale. That negative price (that is to say, taking into account the recapitalisation of Nea Proton Bank just before the sale) does not preclude that the sale price reflects the market value of the business (115) since the net equity of Nea Proton Bank was clearly negative and it was expected to continue registering losses. The Commission has no reason to believe that the offer made and the price paid did not reflect the market price of the business. As a result, in line with point 49 of the 2008 Banking Communication, point 20 of the Restructuring Communication and its own decisional practice (116), the Commission concludes that the sale price was the market price and that aid to the Bank can be excluded.

6.1.1.5. Conclusion on the existence and total amount of aid received

(196) On the basis of recitals 182 to 190, the Commission considers that measures Pr1, Pr2 and Pr3, NP1, NP2 and NP3 all fulfil the conditions laid down in Article 107(1) of the Treaty and constitute State aid. Regarding measures Pr1, Pr2 and Pr3, the Commission concludes that, as they contributed to the continued existence of the activities of Proton Bank which were later transferred to Nea Proton Bank, they may be considered to also benefit Nea Proton Bank which harbours those activities. As already stated in recital 184, the beneficiary of measure NP1 is Nea Proton Bank, which harbours the transferred activities of Proton Bank. Moreover, Nea Proton Bank is also the beneficiary of measures NP2 and NP3.

(197) Therefore, the Commission concludes that the activities of Nea Proton Bank have received State aid in form of capital support of EUR 2 111,6 million (measures Pr1, NP1, NP2 and NP3), in addition to State guarantees of EUR 149,4 million (measure Pr3) and Greek government securities of EUR 78 million (measure Pr2), as summarised in Table 9. Table 9 Overview of the total aid received by Proton Bank and Nea Proton Bank Aid beneficiary Measure Nature of aid Amount of aid (in EUR million) Proton Bank’s activities Pr1 Recapitalisation 80 Nea Proton Bank’s activities NP1 Financing of funding gap from PB to NPB 1 121,6 NP2 Recapitalisation 515 NP3 Recapitalisation 395 Total capital aid granted 2 111,6 Aid beneficiary Measure Nature of aid Proton Bank’s activities Pr2 Bond Loan 78 Pr3 Guarantee 149,4 Total liquidity aid granted 227,4

6.1.2. Legal basis of the compatibility assessment

(198) Article 107(3)(b) of the Treaty empowers the Commission to find that aid is compatible with the internal market if it is intended ‘to remedy a serious disturbance in the economy of a Member State’.

(199) The Commission has acknowledged that the global financial crisis can create a serious disturbance in the economy of a Member State and that measures supporting banks may remedy that disturbance. This has been confirmed in the 2008 Banking Communication, the Recapitalisation Communication and the Restructuring Communication. The Commission still considers that requirements for State aid to be approved pursuant to Article 107(3)(b) of the Treaty are fulfilled in view of the reappearance of stress in financial markets. The Commission confirmed that view by adopting the 2011 Prolongation Communication (117) and the 2013 Banking Communication (118).

(200) In respect to the Greek economy, in its decisions approving and prolonging the Greek Banks Support Scheme as well as in its approvals of State aid measures granted by Greece to individual banks (119), the Commission has acknowledged that there is a threat of serious disturbance in the Greek economy and that State support of banks is suitable to remedy that disturbance. Therefore, the legal basis for the assessment of the aid measures should be Article 107(3)(b) of the Treaty

(201) In order for an aid to be compatible under Article 107(3)(b) of the Treaty it must comply with the general criteria for compatibility: (a) appropriateness: the aid has to be well-targeted in order to be able to effectively achieve the objective of remedying a serious disturbance in the economy; it would not be the case if the measure were not appropriate to remedy the disturbance; (b) necessity: the aid measure must, in both its amount and form, be necessary to achieve the objective; therefore it must be of the minimum amount necessary to achieve the objective, and take the form most appropriate to remedy the disturbance. (c) proportionality: the positive effects of the measure must be properly balanced against the distortions of competition, in order for the distortions to be limited to the minimum necessary to achieve the measure’s objectives.

(202) During the financial crisis, the Commission has developed compatibility criteria for different types of aid measures. Principles for assessing aid measures were first laid down in the 2008 Banking Communication.

(203) The Recapitalisation Communication (120) sets out further guidance on the level of remuneration required for State capital injections.

(204) Finally, the Commission has explained in the Restructuring Communication (121) how it will assess restructuring plans. In its assessment of the restructuring plan of the Bank under the Restructuring Communication, the Commission will take into account all the measures listed in Table 7.

6.1.3. Compatibility assessment of the aid measures under the 2008 Banking Communication and Recapitalisation Communication

6.1.3.1. Compatibility of measures Pr1, Pr2 and Pr3 with the 2008 Banking Communication

(205) Measures Pr1, Pr2 and Pr3 were granted under the Greek Banks Support Scheme. The measures included under that scheme have already been assessed as compatible with the internal market in the Commission’s decision of 19 November 2008.

6.1.3.2. Compatibility of measures NP1 and NP2 with the 2008 Banking Communication and Recapitalisation Communication

(206) The Commission approved measures NP1 and NP2 as rescue aid in the Nea Proton Opening Decision. However, as mentioned in recital 142, the Commission raised concerns regarding the necessity of the amount of measure NP2, as to whether Nea Proton Bank would be able to restore its long-term viability on a stand-alone basis, and therefore queried that the stand-alone option would the cheapest option available. Those concerns have been addressed by the sale of Nea Proton Bank to the Bank on 15 July 2013. Since Nea Proton Bank was sold in an open, transparent and non-discriminatory process to the Bank, the consideration paid by the Bank is considered as the market price. As a result, the amount of the equity injected by the State prior to the sale was necessary for the success of the sale. The integration of Nea Proton Bank into the Bank’s activities will solve the long-term viability issues of Nea Proton Bank, in the light of the restructuring plan submitted by the Bank to the Commission.

6.1.3.3. Compatibility of measure NP3 with the 2008 Banking Communication and Recapitalisation Communication

6.1.3.3.1. Appropriateness

(207) As regards the appropriateness of measure NP3, the capital injection by the HFSF of EUR 395 million into Nea Proton Bank before its sale to the Bank, the Commission considers that the measure is appropriate because it helped to keep Nea Proton Bank’s activities alive. Those activities would not have been able to continue without the aid by the HFSF, as Nea Proton Bank had a negative equity at the time of its sale to the Bank and continued to register losses. No bank would have bought Nea Proton Bank without a prior recapitalisation. The measure therefore ensures that financial stability in Gr