The European Commission has found that restructuring aid granted by Ireland to Permanent TSB (PTSB) is in line with EU state aid rules. The restructuring plan sets out the path for PTSB to become viable in the long-term without further state support, while ensuring that the bank and its owners contribute to the cost of restructuring and limiting the distortions of competition created by the aid...
Commissioner Margrethe Vestager, in charge of competition policy, said: "Today, we close the book on open restructuring cases of banks in Ireland by approving the state aid to Permanent TSB. The restructuring plan sets out a clear path for the bank's long-term viability without further state support. It also confirms the effectiveness of EU state aid rules, which allowed the Commission and Irish authorities to work together successfully to strengthen confidence in the Irish banking sector in order to return it to normality."
PTSB has received state support several times in the form of state guarantees since 2008. In July 2011, the Commission temporarily approved a recapitalisation of the bank by Ireland. Final approval of the aid was made subject to Ireland submitting an appropriate restructuring plan for the bank that needed to be approved under EU state aid rules.
The initial plan submitted by Ireland was subsequently adjusted and updated several times to account for changing market conditions, the results of the October 2014 comprehensive assessment of major European banks by the Single Supervisory Mechanism, and agree terms to ensure the bank's long-term viability.
The Commission's assessment concluded that the final version of the proposed restructuring plan sets out a credible strategy to make PTSB profitable. PTSB will operate as a smaller domestically focussed bank with an improved funding profile. It will increase its level of profitability notably by disposing of its low-yielding assets and increasing its net interest margins. Finally, PTSB will raise capital from private investors to achieve and maintain a strong capital buffer during the restructuring period. PTSB also has contingent capital instruments which can be converted into equity, if needed. These measures will enable PTSB to return to long-term viability without further state support.
PTSB has already implemented a series of restructuring measures, including de-leveraging, liability management exercises and cost reduction measures, which contribute to its return to viability and ensure that the aid is limited to the minimum necessary.
The restructuring plan includes a set of commitments that PTSB will respect during the restructuring period, i.e. until the end of 2018. In particular, PTSB will continue to de-leverage and reduce costs and will not be able to carry out acquisitions in this period. Moreover, PTSB will take certain actions to facilitate the market entry of competitors. In particular, PTSB will provide competitors with access to certain services, such as cash supply and distribution services, and access to market intelligence. It will also distribute advertising material on behalf of a competitor to its clients to promote customer switching.
The commitments will ensure that the competition distortions brought about by the aid are limited.
On this basis, the Commission has concluded that the aid measures are in line with the Commission's Communications on state aid for banks during the crisis. This decision gives the final approval to aid measures granted to PTSB, including the recapitalisation measures which had previously been approved on a temporary basis pending the submission of a restructuring plan.
PTSB has received state support several times in the form of state guarantees since 2008. In July 2011, the Commission temporarily approved a recapitalisation of the bank by Ireland. Final approval of the aid was made subject to Ireland submitting an appropriate restructuring plan for the bank that needed to be approved under EU state aid rules.
The initial plan submitted by Ireland was subsequently adjusted and updated several times to account for changing market conditions, the results of the October 2014 comprehensive assessment of major European banks by the Single Supervisory Mechanism, and agree terms to ensure the bank's long-term viability.
The Commission's assessment concluded that the final version of the proposed restructuring plan sets out a credible strategy to make PTSB profitable. PTSB will operate as a smaller domestically focussed bank with an improved funding profile. It will increase its level of profitability notably by disposing of its low-yielding assets and increasing its net interest margins. Finally, PTSB will raise capital from private investors to achieve and maintain a strong capital buffer during the restructuring period. PTSB also has contingent capital instruments which can be converted into equity, if needed. These measures will enable PTSB to return to long-term viability without further state support.
PTSB has already implemented a series of restructuring measures, including de-leveraging, liability management exercises and cost reduction measures, which contribute to its return to viability and ensure that the aid is limited to the minimum necessary.
The restructuring plan includes a set of commitments that PTSB will respect during the restructuring period, i.e. until the end of 2018. In particular, PTSB will continue to de-leverage and reduce costs and will not be able to carry out acquisitions in this period. Moreover, PTSB will take certain actions to facilitate the market entry of competitors. In particular, PTSB will provide competitors with access to certain services, such as cash supply and distribution services, and access to market intelligence. It will also distribute advertising material on behalf of a competitor to its clients to promote customer switching.
The commitments will ensure that the competition distortions brought about by the aid are limited.
On this basis, the Commission has concluded that the aid measures are in line with the Commission's Communications on state aid for banks during the crisis. This decision gives the final approval to aid measures granted to PTSB, including the recapitalisation measures which had previously been approved on a temporary basis pending the submission of a restructuring plan.
