February 19, 2019
By Francesco Guarascio and Klaus Lauer
BRUSSELS (Reuters) – The recapitalization of Germany’s NordLB bank should be investigated by the European Commission as it likely involved state aid that might have violated European Union rules, two EU lawmakers said on Tuesday.
The lender, which has been struggling for years due to its exposure to the crisis-hit shipping industry, said in February that the German regional state of Lower Saxony and Saxony Anhalt had decided to go ahead with a recapitalization, also backed by German savings banks .
The intervention of the two states, which together own 65 percent of NordLB, effectively sidelined a rival offer by private equity groups Cerberus and Centerbridge.
“There are good reasons to believe the rescue of NordLB involved state aid,” German green EU lawmaker Sven Giegold told Reuters on Tuesday before a parliament’s closed-door hearing on the matter with competition commissioner Margrethe Vestager.
A spokeswoman for the finance ministry of Lower Saxony, the largest shareholder in the bank, said the lender was seeking to have the deal recognized as “free of state aid” and was discussing the issue with the EU Commission.
A spokesman for NordLB said the bank was in contact with banking supervisory authorities and the Commission.
The Commission declined to comment after the meeting.
Giegold said it was likely the deal was not on market terms as “no buyer was ready to pay a positive net value for the bank.”
He urged NordLB to notify Brussels about the deal and called on the Commission to open an investigation to assess whether it was legal.
Under EU rules, banks’ shareholders, bondholders and, in extreme cases, even depositors should pay for a rescue before public money is used. State aid provided on terms that are better than what the market would offer is considered illegal.
NordLB’s owners could argue the rescue is not state aid, as the capital is coming from existing shareholders.
“There is an obvious state aid dimension,” the head of the parliament’s economic committee, Roberto Gualtieri, told Reuters after the hearing with Vestager, which was also attended by the EU commissioner on financial services Valdis Dombrovskis.
Gualtieri said EU rules should be applied in an intelligent way but urged the Commission “not to give the impression of using a double standard” when dealing with bank crises.
Brussels has closely monitored banking rescues in Italy and has required creditors to take losses before Banca Monte dei Paschi di Siena and two smaller lenders were saved with public money.
(Additional reporting by Silvia Aloisi in Milan; Writing by Francesco Guarascio in Brussels; Editing by Edmund Blair)