Brussels, 18th November 2009
State aid: Commission approves asset relief and restructuring package for KBC
The European Commission has approved under EC Treaty state aid rules an asset relief and restructuring package for the Belgian KBC Group. The restructuring package foresees structural and financial restructuring through the divestment, run-down and listing of various businesses. The Commission is satisfied that the package of measures ensures that KBC will pay a significant proportion of the restructuring costs, will restore the long-term commercial viability of KBC, and tackles the distortions of competition that result from the state aid. Furthermore, following an in-depth investigation, the Commission has concluded that the asset relief measure launched on 30 June 2009 (see IP/09/1063), is in line with state aid rules and no doubts remain concerning the valuation and remuneration of the measure. The Commission therefore concluded that both measures are compatible with the EU rules on state aid to remedy a serious disturbance in a Member State's economy (Article 87(3)(b) of the EC Treaty).
Competition Commissioner Neelie Kroes said "The in-depth restructuring of KBC will restore its long-term viability and limit distortions of competition, while at the same time taking into account financial stability concerns. I am therefore satisfied that, through close cooperation with the Belgian authorities, we have managed to strike the right balance."
KBC is an integrated banking and insurance group, serving mainly retail customers, SMEs and private banking clients. KBC is one of the main financial institutions in Belgium. Besides its activities in Belgium and Central and Eastern Europe, KBC is also present in Russia, Romania, Serbia, several Western European countries including Ireland and to a lesser extent in the US and Southeast Asia.
KBC has received three aid measures:
a recapitalisation of €3.5 billion
a second recapitalisation of another €3.5 billion and
an asset relief measure on a portfolio containing Collateralised Debt Obligations (CDOs).
The Commission temporarily approved the first recapitalisation on 18 December 2008 (see IP/08/2033) and the other two measures on 30 June 2009 (see IP/09/1063), while simultaneously opening an in-depth investigation into several aspects of the asset relief measure. The final approval of the measures was conditional upon the presentation of a restructuring plan capable of restoring the long term viability of the bank without continued state support.
The Belgian authorities submitted the restructuring plan for KBC on 30 September 2009. The restructuring plan provides for an in-depth restructuring of KBC. KBC will retain its integrated banking and insurance model. However, it will divest or run-down a significant number of businesses, including in Central and Eastern Europe, particularly those that are not fully in line with its core business model. Furthermore, it will divest a banking business (Centea) and an insurance business (Fidea) in Belgium which will stimulate competition in this core market. The restructuring plan also sets out how KBC will repay the two capital injections to the Belgian authorities.
The Commission's in-depth investigation into the asset relief measure removed its concerns as it enabled the Commission to verify that the valuation of the CDO portfolio is in line with the Commission's Impaired Asset Communication (see IP/09/322). In addition, the remuneration paid by KBC to the Belgian authorities is above that required according to that Communication.
The Commission furthermore has found that the restructuring plan ensures the long-term viability of KBC, as the main cause of its difficulties, the CDO exposure, has been addressed through the asset relief measure and the run-down of the business that gave rise to the CDOs. The Commission further found that KBC has adequately contributed from its own resources to the restructuring through asset sales and various financial restructuring measures. The Belgian divestments, the other reductions in KBC's business activities and the commitments provided by the Belgian authorities sufficiently limit the distortions of competition brought about by the aid.
The non-confidential version of the decision will be made available under the case number C18/2009 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.
See also MEMO/09/507.