Commission temporarily authorises aid measures for Austrian bank BAWAG P.S.K.

The European Commission has authorised under EU state aid rules a €550 million capital injection and a €400 million guarantee in favour of the Austrian bank BAWAG. P.S.K. The Commission found the measures to be in line with EU state aid rules. In particular, the measures are limited in time and scope. The Commission therefore concluded that they are an appropriate means to remedy a serious disturbance in the Austrian economy and as such compatible with Article 107(3)(b) of the Treaty on the Functioning of the European Union (TFEU). The Commission approved the measures as emergency aid for a period of six months. Austria committed to submit a modified restructuring plan for the bank within three months from the date of the decision.

Competition Commissioner Neelie Kroes said: “The aid will limit the adverse impact of the current financial crisis on BAWAG and improve the capital base of the bank. However, we need a revised restructuring plan and a detailed valuation of the guaranteed portfolio for a final assessment of the support measures.”

BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG is one of the largest banking groups in Austria, concentrating on retail and commercial customers. With about 150 BAWAG branches and more than 1,300 post offices, BAWAG P.S.K group has the biggest centrally managed distribution network in Austria. As of 30 June 2009 BAWAG P.S.K. had a balance sheet total of €40.8 billion.

Austria intends to provide a guarantee and a capital injection to BAWAG P.S.K. in order to improve the capital base of the bank and to shield it against the risk of potential losses from a structured credit book.

Capital injection: The issuance of Tier 1 participation capital is split into two tranches. The first tranche, which will be subscribed by Austria, has a volume of €385 million; the second tranche, which will be offered by BAWAG P.S.K. to private investors at the same conditions as for the Republic of Austria, amounts to €165 million. If the second tranche is not taken up by private investors, it will be subscribed by the State.

Asset guarantee: BAWAG P.S.K. has receivables against subsidiaries which result from the sale of a structured credit portfolio. Austria intends to grant a guarantee of up to €400 million on these receivables in favour of BAWAG P.S.K in order to enable the bank to spread potential losses which might result from the portfolio.

For reasons of financial stability both measures are compatible with the internal market pursuant to Article 107(3)(b) TFEU.