EU clears Swedish restructuring aid for Carnegie Investment Bank
The European Commission has granted final clearance under the EU state aid rules to the Swedish aid for the restructuring of Carnegie Investment Bank.
The Commission considers that Carnegie's restructuring plan adequately addressed the problems that led to the bail-out of the bank in 2008 whilst avoiding undue distortions of competition.
"Sweden's quick intervention and subsequent resolution of the problems of Carnegie is an example of effective restructuring, in terms of addressing the bank's viability, the legitimate competition concerns of others and of ensuring that Carnegie's former shareholders contributed to the cost of restructuring,” said Commission Vice President and Competition Commissioner Joaquín Almunia.
In October 2008, the Swedish government provided a rescue loan of SEK2.4 billion (€ 225 million) to Carnegie Investment Bank (an investment bank with its main focus on institutional investors and corporates) thereby taking ownership of the bank and its sister company, the insurance broker Max Matthiessen. The intervention was rendered necessary by the severe difficulties in the group because of the global financial crisis. An apparent primary cause of the difficulties were flaws in the bank's credit risk management and compliance structure.
The state intervention in the form of a loan was approved as rescue aid on 15 December 2008, under the temporary State aid rules to overcome the financial crisis on the condition that a liquidation or restructuring plan be submitted by the end of April 2009. Sweden submitted a plan for the restructuring of Carnegie on 25 April 2009. Previously, the Swedish State launched a tender to find new owners for the bank, which was completed on 19 May 2009 with the sale of both companies to investment funds Altor and Bure.
The Commission's investigation found that the rescue of Carnegie contained state subsidies, which improved the capital position of the bank and allowed it to remain on the market as a going concern, which had the potential to distort competition. However, the Commission concluded that Sweden had swiftly initiated restructuring measures to address the causes of the bank's difficulties and to ensure its viability. In particular, the risk management was reshuffled and losses were absorbed whilst providing adequate capital buffer. Moreover, the risk of moral hazard has been addressed through an adequate contribution of the former owners of the bank to the cost of restructuring. Finally, the Commission found, with particular regard to the swift sale of the Bank in a competitive tender, that the potential distortion of competition had been kept to a minimum.
The Commission consequently concluded that the restructuring aid in favour of Carnegie constituted state aid that can be considered compatible with Article 107(3)(b) TFEU, in light of the Commission's Communication on the restructuring of banks during the crisis.
The non-confidential version of the decision will be made available under the case number NN 18/2010 in the State Aid Register once any confidentiality issues have been resolved.