The European Commission has approved, under EC Treaty state aid rules, a loan of EUR320m granted by Luxembourg for the restructuring of Kaupthing Bank Luxembourg. The Commission had decided that the measure will have the desired effect of contributing to the stability of the financial system while avoiding undue distortions of competition pursuant to Article 87(3)(b) of the EC Treaty.
EU Competition Commissioner Neelie Kroes said: “The aid for Kaupthing Bank is designed to enable all depositors to recover their funds. This solution should help to reinforce public confidence in the banking sector without giving rise to competition problems."
On June 10, 2009, the Luxembourg authorities informed the Commission that a EUR320m loan had been set up which would be granted by the Luxembourg State to Kaupthing Bank Luxembourg SA for the purpose of its restructuring.
Since the primary purpose of the loan was to compensate depositors with the Belgian branch of Kaupthing Bank Luxembourg SA, the Belgian State decided to help finance it to the tune of EUR160m. Under the restructuring plan, deposits with the Belgian branch of Kaupthing Luxembourg were sold to Crédit Agricole Belgique/Keytrade Bank. The Luxembourg based private bank part is to be taken over by UK investment fund Blackfish Capital. All these activities were sold to the highest bidder in a transparent tender procedure. The bank’s other assets will be wound up in a hive off vehicle and the revenue will be used to compensate creditors and repay the state aid.
The Commission has concluded that the proposed measure is appropriate for the purpose of restructuring the bank's activities, which will enable depositors to access their money again. The aid is proportionate because it will not result in compensation being paid unduly to the bank’s former shareholders. In addition, the scaling down of the bank’s activities and the break up of its assets following an open, transparent sale procedure will ensure that the aid does not give rise to distortions of competition, it further noted.
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