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EU approves restructuring of Austrian bank BAWAG

The European Commission has authorised under EU State aid rules a €550 million capital injection provided by Austria in favour of the BAWAG bank and approved a new restructuring plan of the bank.

The Commission found the restructuring package to be in line with its communication on the restructuring of banks during the crisis, because it will allow the bank to become viable without continued state support, while limiting distortions of competition.

“BAWAG has ceased the activities which caused its latest difficulties and is now operating on the basis of a business model focusing on retail and corporate customers. To ensure the viability of the bank and to limit distortions of competition caused by the capital injection it is crucial that all commitments provided by Austria in the context of the restructuring plan of the bank are complied with," said Joaquín Almunia, Commission Vice President in charge of Competition Policy.

On 22 December 2009, the Commission authorised for a period of six months a €400 million asset guarantee and a €550 million capital injection in favour of BAWAG P.S.K., subject to the submission of a modified restructuring plan. The asset guarantee was withdrawn on 22 June 2010.

BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft (BAWAG P.S.K.) is one of the largest banking groups in Austria. With about 150 bank branches and more than 1200 post office branches BAWAG P.S.K. group has the biggest centrally managed distribution network in Austria. As of 31 December 2009 BAWAG P.S.K. had a balance sheet total of €41.2 billion.

A new restructuring plan was submitted in March 2010 modifying that on which a conditional clearance state aid decision of 2007 was based. The Commission concluded that the new plan, completed in June 2010, should ensure the restoration of the viability of the bank and is in line with EU state aid rules.

The bank must honour several commitments, such as divestments, a temporary dividend and acquisition ban, limitations regarding investments in certain business fields and a premature redemption of certain P.S.K. liabilities covered by a State guarantee. This is to ensure a sufficient contribution by the bank and its shareholders to the cost of restructuring and to limit the distortions of competition brought about by the aid.

In 2007 already, the Commission had approved a €900 million State guarantee for BAWAG and a restructuring plan, but the bank again got State support in 2009 because of the global financial crisis. Therefore, additional restructuring measures were needed.

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