At 31 May 2013, Nea Proton Bank’s RWA were EUR 811 million and its regulatory capital was EUR – 203 million. At the same date, Nea Proton Bank needed a total recapitalisation of EUR 276 million to reach a 9 % Core Tier One capital ratio. The Bank paid cash consideration of EUR 1 in exchange for 100 % of the shares and voting rights of Nea Proton Bank. The Bank requested the HFSF to recapitalise Nea Proton Bank by EUR 395 million which, apart from the EUR 276 million needed to bring the capital adequacy ratio of Nea Proton Bank back to 9 %, would allow for an additional EUR 119 million of provisions to deal with additional loan loss provisions and expected pre-tax losses until 2016. Under the terms of the sale, the HFSF committed to cover the capital needs of Nea Proton Bank prior to the completion of the transaction by contributing EUR 395 million in cash.

As part of the MEFP commitments, the HFSF proceeded with the sale of its shares in New TT Bank. In that way, it also fulfilled its obligation to dispose of its shares in that interim credit institution within two years of the latter’s creation. Its financial advisor contacted a wide range of potential investors, including Greek banks, foreign banks and financial sponsors. Only the four largest Greek banks submitted final offers, of which the Bank’s offer was preferred.

In the restructuring plan for the Bank submitted by the Greek authorities to the Commission on 16 March 2014 the Greek authorities signalled their intention to continue granting guarantees and lending government bonds under the scheme during the restructuring period.

The recapitalisation took the form of preference shares subscribed by Greece which had a coupon of 10 % and a maturity of five years. In 2010 the duration of the preference shares was extended while their remuneration was increased. From this point forward, if the preference shares are not redeemed within five years from their issue and no decision has been taken by the general meeting of shareholders as to the redemption of those shares, the Greek Minister of Finance will increase the coupon by 2 % per year on a cumulative basis (that is to say, a coupon of 12 % for year six, 14 % for year seven, etc…).

Recitals 15 to 32 of the Eurobank Opening Decision give a detailed description of the first bridge recapitalisation of May 2012 (measure B1). The background and main features of that measure are set out in this section.

On 20 April 2012, the HFSF provided a letter to the Bank committing to participate in a planned share capital increase of the Bank for an amount of up to EUR 4,2 billion.

Under measure B1, the HFSF transferred EUR 3,97 billion of EFSF bonds to the Bank on 28 May 2012, in line with the provisions for bridge recapitalisations laid down in the law 3864/2010 establishing the HFSF (‘HFSF Law’). The EFSF bonds transferred to the Bank were EFSF floating notes with maturities of six and 10 years and an issue date of 19 April 2012. The Commission has already established in recital 48 of the Eurobank Opening Decision that ‘The bridge recapitalisation finalised on 28 May 2012 is the implementation of the obligation undertaken in the commitment letter and thus a continuation of the same aid’. Both the amounts provided in the commitment letter and in the first bridge recapitalisation were calculated by the Bank of Greece to ensure the Bank reached a total capital ratio of 8 % as of 31 December 2011, the date of retroactive booking of the bridge recapitalisation in the Bank’s records. As can be seen from Table 3, measure B1 only covered a limited part of the total capital needs identified by the stress test of 2012. The Bank was supposed to raise the capital through a future capital increase and the bridge recapitalisation was intended only to preserve the Bank’s eligibility for ECB financing until that capital increase had taken place.

The Bank booked further losses in the autumn of 2012. Its capital therefore again fell below the minimum capital requirements for it to remain eligible for ECB refinancing.

A second bridge recapitalisation became necessary as a result. On 21 December 2012, the HFSF implemented a second bridge recapitalisation of EUR 1 341 million (measure B2), which was again paid by transferring EFSF bonds to the Bank.

In addition to the second bridge recapitalisation, on 21 December 2012 the HFSF provided the Bank with a commitment letter for its participation in the share capital increase of the Bank and in the convertible instruments to be issued, for a total amount up to EUR 528 million (measure B3).

On 30 April 2013, the general meeting of shareholders approved an increase in the share capital of the Bank for an amount of EUR 5 839 million (‘the Spring 2013 recapitalisation’). The Bank therefore issued 3 789 317 357 new shares with a nominal value of EUR 0,30 at a price of EUR 1,54 per share.

On the same date the general meeting of shareholders also decided that the full amount of capital would be provided by the HFSF and would be paid in kind, in the form of EFSF bonds.

As a result, the HFSF injected a total of EUR 5 839 million into the Bank in the form of ordinary shares in May 2013 (measure B4). That amount is equal to the sum of measures B1, B2 and B3.

By means of the Spring 2013 recapitalisation the first and second bridge recapitalisations (measures B1 and B2) were converted into a permanent recapitalisation, and the commitment to grant additional capital aid (measure B3) was implemented.

On 6 March 2014, the Bank of Greece reported the results of a stress test exercise carried out in the second half of 2013. The Bank of Greece indicated that in the baseline scenario the capital needs of the Bank for the period 2014-2016 would reach EUR 2 945 million.

On 31 March 2014 the HFSF sent a letter to the Bank indicating that it had the intention and ability to backstop any share capital increase implemented under the HFSF law 3864/2010 as amended on 30 March 2014 required to comply with capital needs identified during the stress test. The HFSF law provides that if, at the end of the subscription period, there is insufficient demand of private investors at a price determined by the General Council of the HFSF based on two independent valuations, the HFSF would subscribe any remaining shares, subject to prior conversion of the existing subordinated capital instrument of the Bank into shares as stated in Article 6a.

As concluded in recital 38 of the Nea Proton Opening Decision, Nea Proton Bank harbours the economic activities of Proton Bank. Measures Pr1, Pr2 and Pr3 have benefited Nea Proton Bank, as they contributed to the stabilisation and the continuance of the economic activities which were transferred to it and would otherwise no longer exist. Therefore, the Commission considers that they have benefited the economic activities transferred to Nea Proton Bank.

In recitals 31 to 37 of the Nea Proton Opening Decision the Commission has already established that measure NP1, the intervention by the Resolution Scheme of the HDIGF and the HFSF to cover the funding gap, constitutes State aid within the meaning of Article 107(1) of the Treaty. In recital 38 of the same decision the Commission considered Nea Proton Bank to be the economic beneficiary of that measure as Nea Proton Bank harbours the economic activity of Proton Bank which continues to exist because of the aid received.

In recitals 41 to 43 of the Nea Proton Opening Decision the Commission has already established that the capital injection by the HFSF of EUR 250 million and the additional capital injections anticipated at the time of that Decision, amounting to a total of EUR 300 million, were State aid within the meaning of Article 107(1) of the Treaty. As mentioned in recital 93 of the present Decision, out of the possible additional EUR 300 million in capital, HFSF eventually contributed an additional EUR 265 million in 2012, which brings the total recapitalisation aid in 2011 and 2012 to EUR 515 million (measure NP2).

The Commission considers the capital injection by the HFSF into Nea Proton Bank prior to its sale to the Bank, amounting to EUR 395 million, to be State aid within the meaning of Article 107(1) of the Treaty.

The capital injection was provided by the HFSF, which is an entity set up and financed by Greece to support banks, and so was made by using State resources. Furthermore, the measure is selective in nature, since the capital injection only benefits Nea Proton Bank.

Moreover, the intervention provides Nea Proton Bank with a clear advantage since it enables its banking activities to remain alive. Without the capital injection, Nea Proton Bank, which had deeply negative capital, would have gone bankrupt. In such circumstances, it would not have been possible to sell Nea Proton Bank and integrate it into a larger entity. Furthermore, that recapitalisation does not comply with the market investor principle. On the contrary, the EUR 395 million recapitalisation allowed the sale of Nea Proton Bank to take place for a price of one euro. A private investor would have chosen not to proceed with the recapitalisation and to let Nea Proton Bank go bankrupt, therefore saving EUR 395 million.

Nea Proton Bank competes with other banks, including subsidiaries of foreign banks, which are active in Greece or potentially interested in entering the Greek market. Hence, the capital injection has an effect on trade between Member States and potentially distorts competition.

The Commission therefore concludes that the capital injection of EUR 395 million into Nea Proton Bank constitutes State aid within the meaning of Article 107(1) of the Treaty.

On the basis of recitals 182 to 190, the Commission considers that measures Pr1, Pr2 and Pr3, NP1, NP2 and NP3 all fulfil the conditions laid down in Article 107(1) of the Treaty and constitute State aid. Regarding measures Pr1, Pr2 and Pr3, the Commission concludes that, as they contributed to the continued existence of the activities of Proton Bank which were later transferred to Nea Proton Bank, they may be considered to also benefit Nea Proton Bank which harbours those activities. As already stated in recital 184, the beneficiary of measure NP1 is Nea Proton Bank, which harbours the transferred activities of Proton Bank. Moreover, Nea Proton Bank is also the beneficiary of measures NP2 and NP3.

Measures Pr1, Pr2 and Pr3 were granted under the Greek Banks Support Scheme. The measures included under that scheme have already been assessed as compatible with the internal market in the Commission’s decision of 19 November 2008.

The Commission approved measures NP1 and NP2 as rescue aid in the Nea Proton Opening Decision. However, as mentioned in recital 142, the Commission raised concerns regarding the necessity of the amount of measure NP2, as to whether Nea Proton Bank would be able to restore its long-term viability on a stand-alone basis, and therefore queried that the stand-alone option would the cheapest option available. Those concerns have been addressed by the sale of Nea Proton Bank to the Bank on 15 July 2013. Since Nea Proton Bank was sold in an open, transparent and non-discriminatory process to the Bank, the consideration paid by the Bank is considered as the market price. As a result, the amount of the equity injected by the State prior to the sale was necessary for the success of the sale. The integration of Nea Proton Bank into the Bank’s activities will solve the long-term viability issues of Nea Proton Bank, in the light of the restructuring plan submitted by the Bank to the Commission.

Point 21 of the Restructuring Communication provides that where the credit institution in difficulty cannot credibly return to long term-viability, its orderly liquidation or its auctioning off should be considered. Member States may therefore encourage the exit of non-viable players while allowing for the exit process to take place within an appropriate time frame that preserves financial stability.

In the Nea Proton Opening Decision, the Commission raised serious doubts as to whether Nea Proton Bank could restore its long-term viability on a stand-alone basis and pointed out the synergies that could be achieved by its integration into a large financial entity.

In that respect, point 17 of the Restructuring Communication clarifies that the sale of an ailing bank to another financial institution can contribute to the restoration of long-term viability, if the purchaser is viable and capable of absorbing the transfer of the ailing bank and may help to restore market confidence. Moreover, in line with the MEFP, further consolidation of the banking sector had to be achieved and the HFSF had to sell Nea Proton Bank by 15 July 2013.

As stated in section 7.5.2, on the basis of its restructuring plan, the Bank can be considered as a viable entity. Therefore, the fact that the activities of Nea Proton Bank have been transferred to the Bank allows their long-term viability to be restored. Moreover, the fact that Nea Proton Bank is fully integrated within the Bank and disappears as a stand-alone competitor constitutes in-depth restructuring as required by the insufficient remuneration of the State aid.

In the Nea Proton Opening Decision, the Commission expressed doubts as to whether the restructuring costs were limited to the minimum. Those doubts derived from the observation that Nea Proton Bank could not return to long-term viability on a stand-alone basis without incurring high costs. The integration of Nea Proton Bank into the Bank, a larger entity with IT infrastructure and risk management structure in place, addresses those concerns. The sale to the Bank contributes to limiting the restructuring costs to the minimum.

Concerning the contribution of shareholders and subordinated debt holders to the restructuring costs, the Commission has already established in recital 77 of the Nea Proton Opening Decision that the shareholders and subordinated debt holders were not transferred to Nea Proton Bank but remained in Proton Bank, that is to say, the entity in liquidation. Hence, the Commission considered that sufficient burden-sharing of shareholders and subordinated debt holders was achieved.

Regarding measures to limit distortions of competition, point 30 of the Restructuring Communication provides that ‘the Commission takes as a starting point for its assessment of the need for such measures, the size, scale and scope of the activities that the bank in question would have upon implementation of a credible restructuring plan. The nature and form of such measures will depend on two criteria: first, the amount of the aid and the conditions and circumstances under which it was granted and, second, the characteristics of the market or markets on which the beneficiary bank will operate.’

Regarding the market on which Nea Proton Bank operated, in recital 82 of the Nea Proton Opening Decision the Commission pointed out that Proton Bank was a very small bank (approximately 1 % market share of Greek banks’ total assets) and consequently the assets and liabilities of Proton Bank which were transferred into Nea Proton Bank were relatively small compared to the size of the Greek banking system. Therefore, it concluded that, despite the exceptionally large aid amount, the distortions of competition caused by the aid to Nea Proton Bank could be considered to be limited.

Moreover, the activities of Nea Proton Bank were offered to competitors through an open auction. Following its sale, Nea Proton Bank ceased to exist as a stand-alone competitor as it was fully integrated within the Bank.

The Commission concludes that given the small size of Nea Proton Bank the open sale process, and the fact that Nea Proton Bank will not continue to exist as a stand-alone competitor, there are no undue distortions of competition, despite the very large amount of aid and the absence of remuneration.

On the basis of the analysis in recitals 216 to 226 above, the Commission concludes that the sale of Nea Proton Bank and its integration into the Bank ensure Nea Proton Bank’s long-term viability, that the aid is limited to the minimum necessary and that there is no undue distortion of competition.

All the aid measures listed in Table 7 should therefore be declared compatible with the internal market.

In recitals 26 to 32 of the T Bank Decision, the Commission has already established that measure T, the intervention by the Resolution Scheme of the HDIGF and the HFSF to cover the funding gap of the assets and liabilities transferred to TT Bank, constitutes State aid within the meaning of Article 107(1) of the Treaty. In recital 33 of that Decision the Commission considered the economic activities of T Bank which were transferred to TT Bank to be the beneficiary of State aid as they continued to exist because of the aid received.

As the Commission observed in recital 98 of the New TT Opening Decision, New TT Bank harbours the economic activities previously carried out within TT Bank, including T Bank.

In recitals 53 to 57 of the New TT Opening Decision, the Commission has already established that measure NTT1, the intervention by the HFSF to cover the funding gap of New TT Bank, constitutes State aid within the meaning of Article 107(1) of the Treaty. In recital 54 of that Decision the Commission considered New TT Bank to be the economic beneficiary as New TT Bank harbours the economic activities of TT Bank which continue to exist because of the aid received.

In recitals 49 to 52 of the New TT Opening Decision, the Commission has already established that measure NTT2, the initial share capital injection by the HFSF amounting to EUR 500 million in favour of New TT Bank, constitutes State aid to New TT Bank within the meaning of Article 107(1) of the Treaty.

The Bank acquired the shares in New TT Bank in the framework of an open and non-discriminatory tender process. According to information received from the Greek authorities on 15 July 2013, a financial advisor contacted a large number of foreign and Greek banks and investors and only the four largest Greek banks submitted final offers. The fact that the financial advisor contacted a large number of banks allows the Commission to conclude that the tender process was open and non-discriminatory. The Bank’s offer was considered to be the best one considering the amount and type of consideration offered.

More precisely, the Bank agreed to pay the HFSF a total of EUR 681 million in the form of newly issued ordinary shares. The second-highest offer was a cash offer of EUR 500 million. It was therefore 26,58 % lower than the offer of the Bank. According to the letter from the Bank of Greece of 8 July 2013, any cash offer by a domestic bank could not be considered to the extent that it still relied on Eurosystem funding and particularly not if it was receiving emergency liquidity assistance. The second-highest offer therefore did not comply with the requirements of the Bank of Greece.

Therefore, the Commission concludes that the acquisition does not constitute aid to the buyer.

On the basis of the foregoing, the Commission considers that measures T, TT, NTT1 and NTT2 all constitute State aid. Regarding measure T, the Commission concludes that the aid benefited the activities of T Bank as they were transferred to TT Bank and later to New TT Bank. Regarding measure TT, the Commission concludes that it benefited the activities of TT Bank which were transferred to New TT Bank. The beneficiary of measures NTT1 and NTT2 is New TT Bank.

Regarding measure T, in its T Bank Decision the Commission found that the intervention fulfils the requirements of Article 107(3)(b) of the Treaty and decided it was compatible with the internal market for reasons of financial stability for a period of six months as from the date of adoption of that Decision. The Greek authorities did not submit an updated restructuring plan for TT Bank which took into account the integration of T Bank’s activities into TT Bank before the end of that six-month period. However, in recital 83 of the New TT Opening Decision the Commission considered that omission was understandable as a decision had been taken in the meanwhile that TT Bank would be resolved. As the Greek authorities submitted a restructuring plan for New TT Bank in January 2013 and an updated one in March 2013, both of which deal with the activities transferred from T Bank to TT Bank, the Commission, in its New TT Opening Decision, approved measure T provisionally as rescue aid until a final decision was taken on measures T, TT, NTT1 and NTT2.

The Commission has already temporarily approved measures NTT1 and NTT2 as rescue aid in the New TT Opening Decision.

In recital 45 of the T Bank Decision, the Commission noted that the HDIGF and the HFSF will probably not recover any money and that the financing of the funding gap from T Bank to TT Bank is therefore similar to a grant. Moreover, as concluded in recital 101 of the New TT Opening Decision, the HFSF could expect to recover only part of its initial share capital injection of EUR 500 million (measure NTT2). Moreover, the Commission observed that there will be no remuneration for the HFSF covering the funding gap from TT Bank to New TT Bank (measure NTT1) and there is a very small likelihood that the HFSF will recover much of the EUR 3,7 billion. Finally, the Commission notes that the State will most probably not recover any amount in respect of measure TT since its equity claims, related to the preference shares issued in May 2009, remained in TT Bank, which was put into liquidation.

As indicated in recitals 77 and 102 of the New TT Opening Decision, the absence of remuneration triggers the need for in-depth restructuring, both in terms of viability measures and in terms of measures to limit distortions of competition.

Point 21 of the Restructuring Communication provides that where the credit institution in difficulty cannot credibly return to long term-viability, its orderly liquidation or its auctioning off should be considered.

In section 3.2.4.1 of the New TT Opening Decision, the Commission raised serious doubts as to whether New TT Bank could restore its long-term viability on a stand-alone basis and whether New TT Bank could achieve the planned growth of income. Moreover, it pointed out that New TT Bank had taken only a limited number of measures to generate profits and that there was a lack of measures on the part of New TT Bank to reduce personnel costs and to rationalise the branch network. It also referred to the synergies that could be achieved by the integration of New TT Bank into a large financial entity.

In that respect, point 17 of the Restructuring Communication clarifies that the sale of an ailing bank to another financial institution can contribute to the restoration of long-term viability, if the purchaser is viable and capable of absorbing the transfer of the ailing bank and may help to restore market confidence. Moreover, in line with the MEFP, the sale of the New TT Bank was a priority action, taking into consideration the public interest and financial stability, as well as the protection of the HFSF’s assets.

As stated in section 7.5.2, on the basis of its restructuring plan, the Bank can be considered as a viable entity. Therefore, the fact that the activities of New TT Bank are now placed within the Bank allows their long-term viability to be restored. New TT Bank ceases to exist as an autonomous competitor. The operational merger between New TT Bank and the Bank was completed by 14 April 2014. The ‘Hellenic Postbank’-branded branch network will be reduced (the Bank intends to keep the brand ‘Hellenic Postbank’ for certain branches, while the ‘T-bank’ brand will not be kept and the ‘T-bank’ branch network will be nearly entirely closed) in combination with the full operational integration of back office and other headquarter functions within the Bank. The Commission concludes that the restructuring plan ensures that an in-depth restructuring as required by the insufficient remuneration will be achieved.

Concerning burden-sharing of shareholders and subordinated debt holders, the Commission has already established, in recital 100 of the New TT Opening Decision, that the shareholders and subordinated debt holders were not transferred to New TT Bank but have remained in TT Bank, that is to say, the entity in liquidation. Hence, the Commission considered that sufficient burden-sharing of shareholders and subordinated debt holders was achieved.

Therefore, the Commission considers that the restructuring costs are limited to the minimum and that sufficient burden-sharing has been achieved. However, as already concluded in recital 251, the absence of remuneration triggered the need for in-depth restructuring, both in terms of viability measures and in terms of measures to limit distortions of competition.

Regarding measures to limit distortions of competition, point 30 of the Restructuring Communication provides that ‘the Commission takes as a starting point for its assessment of the need for such measures, the size, scale and scope of the activities that the bank in question would have upon implementation of a credible restructuring plan. The nature and form of such measures will depend on two criteria: first, the amount of the aid and the conditions and circumstances under which it was granted and, second, the characteristics of the market or markets on which the beneficiary bank will operate.’

On the other hand, in recital 104 of the New TT Opening Decision, the Commission pointed out the circumstances under which the aid was granted. More precisely, a significant part of the losses which TT Bank has incurred in recent years do not seem to stem from risk-taking activities but from the holding of GGBs. The Commission also observed that the high loan losses on lending to households and corporations stem mainly from the exceptionally deep and long recession and not from risky lending. The aid therefore seems to create few distortions of competition. However, the Commission observed that, proportionally to its size, TT Bank had held far more GGBs than the other banks in Greece, a factor that reflects some inappropriate risk-taking.

As already noted, New TT Bank ceases to exist as an autonomous competitor that determines its policy on a stand-alone basis. The restructuring plan of the Bank is based on the assumption of the full integration of New TT Bank, even if the Bank will continue to use the brand ‘Hellenic Postbank’ for some branches and products.

Regarding the market on which New TT Bank operated, in recital 106 of the New TT Opening Decision, the Commission pointed out that TT Bank was a medium-sized bank in Greece (approximately 6 % in terms of deposits) and that the assets and liabilities of TT Bank that were transferred into New TT Bank were relatively small compared to the size of the Greek banking system. Therefore, it concluded that, despite the exceptionally large aid amount, the distortions of competition caused by the aid to New TT Bank could be considered to be rather limited.

Moreover, the activities of New TT Bank were offered to competitors through an open and non-discriminatory auction.

A significant part of aid measures NTT1 and NTT2 was needed because of a waiver of debt in favour of the State (in the form of the PSI programme) and because of the exceptionally long recession rather than as a consequence of inappropriate lending practices. Additionally, the size of the activities of New TT Bank was small, the sale process was open, transparent and non-discriminatory, and New TT Bank will not continue to exist as an autonomous competitor. Therefore the Commission concludes that, despite the large amount of aid and the absence of appropriate remuneration for the State aid granted, there is no undue distortion of competition.

The Commission concludes that the sale of New TT Bank to the Bank and the associated restructuring ensure New TT Bank’s long-term viability, the limitation of aid to the minimum necessary and the absence of undue distortions of competition.

All the aid measures listed in Table 8 should be declared compatible with the internal market.

In 2010 Greece introduced several changes to the technical parameters of those preference shares. Given that the changes increase the remuneration of the State, with an automatic increase of the coupon by 2 % each year if the preference shares are not redeemed within five years, the Commission concludes that the modifications of the technical parameters do not provide any advantage to the Bank and hence do not involve additional State aid.

In section 5.1 of the Eurobank Opening Decision, the Commission has already concluded that the first bridge recapitalisation constitutes State aid. The capital received amounted to EUR 3 970 million.

Measure B2 was implemented with HFSF resources, which, as explained in recital 47 of the Eurobank Opening Decision, involve State resources.

As regards the existence of an advantage, measure B2 increased the Bank’s capital ratio to a level that allowed it to continue to function on the market and to access Euro-system funding. Furthermore, the remuneration of measure B2 consists of the accrued interests on EFSF notes and an additional 1 % fee. Because that remuneration is manifestly lower than the remuneration of similar capital instruments in the market, the Bank would have certainly been unable to raise that capital on such terms in the market. Therefore, measure B2 granted an advantage to the Bank from State resources. As the measure was made available only to the Bank, it is selective in nature.

As a result of measure B2, the position of the Bank was strengthened since the Bank was provided with the financial resources necessary to continue to comply with the capital requirements, thus leading to competition distortions. Since the Bank is active in other European banking markets and since financial institutions from other Member States operate in Greece, notably in the insurance market, measure B2 is also likely to affect trade between Member States.

The Commission considers that measure B2 constitutes State aid. It was notified as aid by the national authorities. The capital received amounted to EUR 1 341 million.

By measure B3, the HFSF committed to provide the additional capital necessary to complete the recapitalisation of the Bank up to the amount requested by the Bank of Greece in the framework of the stress test of 2012. The HFSF receives its resources from the State. The Commission therefore concludes that the letter commits State resources. The circumstances in which the HFSF can grant support to financial institutions are precisely defined and limited by law. Accordingly the use of those State resources is imputable to the State. The HFSF gave a commitment to provide up to EUR 528 million of additional capital.

The commitment letter granted an advantage to the Bank because it reassured depositors that the Bank would be able to raise the entire amount of capital it had to raise, that is to say, the HFSF would provide the capital should the Bank fail to raise it on the market. That commitment also facilitates the raising of private capital from the market, since investors are reassured that, if the Bank cannot find part of the capital from the market, the HFSF will provide it. No private investor would have accepted to commit before the terms of the recapitalisation were known, and at that time the Bank had no access to capital market.

Since the Bank is active in other European banking markets and since financial institutions from other Member States operate in Greece, notably in the insurance market, measure B3 is also likely to affect trade between Member States and to distort competition.

Measure B3 therefore constitutes aid and was notified as State aid by the Greek authorities on 27 December 2012.

The Spring 2013 recapitalisation (measure B4) is the conversion of the first and second bridge recapitalisations (measures B1 and B2) and of the commitment letter (measure B3) into a permanent recapitalisation of EUR 5 839 million in ordinary shares. Since measure B4 is the conversion of aid already granted, it still involves State resources but it does not increase the nominal amount of aid. However, it increases the advantage to the Bank (and therefore the distortions of competition) since it is a permanent recapitalisation and not a temporary recapitalisation as in the case of measures B1 and B2. Compared to measure B3, which is only a commitment and not an actual recapitalisation, measure B4 increased the capital adequacy of the Bank and is therefore more advantageous.

The Commission notes that such support was not granted to all banks operating in Greece. As regards distortions of competition and effect on trade, the Commission notes for instance that the aid enabled the Bank to pursue its operations in other Member States, such as Romania or Bulgaria. A liquidation of the Bank would have led to the termination of its activities abroad, through the liquidation of those activities or the sale of the businesses. In addition, the insurance activities of the Bank in Greece compete with the activities of subsidiaries of insurance companies from other Member States. Therefore, the measure distorts competition and affects trade between Member States. Measure B4 therefore constitutes State aid.

Measures B1, B2, B3 and B4 constitute State aid within the meaning of Article 107(1) of the Treaty. The amount of State aid included in measures B1, B2, B3 and B4 is EUR 5 839 million, which was also the amount of State support actually paid out by HFSF to the Bank.

Point 31 of the Restructuring Communication indicates that, besides the absolute amount of aid, the Commission has to take into account the aid ‘in relation to the bank’s risk-weighted assets’. Measures B1, B2, B3 and B4 have been granted over the course of a one-year period, from April 2012 until May 2013. During that period, the RWA of the Bank changed. The question therefore arises as to which level of RWA should be used, that is to say, that which existed at the beginning of the period or that which existed at the end of the period. Measures B1, B2, B3 and B4 aim at covering a capital need identified by the Bank of Greece in March 2012 (the stress test of 2012). In other words, the capital needs those measures covered already existed in March 2012. The Commission therefore considers that the aid amount included in measures B1, B2, B3 and B4 should be compared to the RWA of the Bank at 31 March 2012. It is also recalled that the Bank of Greece, after March 2012 and until the Spring 2013 recapitalisation, did not take into account acquisitions made by Greek banks to adjust — upwards or downwards — their capital needs. That factor further demonstrates that measures B1, B2, B3 and B4 were aid measures related to the perimeter of the Bank as it existed at 31 March 2012.

The first and second bridge recapitalisations and the commitment letter altogether amounted to EUR 5 839 million. That amount represents 13,8 % of the RWA of the Bank at 31 March 2012.

On 31 March 2014 the Bank received a commitment letter from the HFSF, by which the HFSF gave a commitment to participate in the share capital increase of the Bank for an amount of up to EUR 2 864 million (measure C). For the reasons explained in recital 277, that measure involves the use of State resources. That measure constitutes an advantage to the Bank since it ensures that the Bank it will find the capital it needs, which will reassure depositors and facilitate it in raising capital from private investors.

If private investors do not subscribe to the entire amount of the capital increase, the HFSF has to actually inject capital into the Bank in application of the commitment letter. Such a capital injection would, compared to the commitment letter, constitute a larger advantage in favour of the Bank. Unlike a mere commitment letter, the actual injection of capital increases the capital adequacy of the Bank.

Neither the commitment letter nor its potential implementation in the form of an actual capital injection complies with the market economy investor principle. Even if the HFSF were to purchase the new shares at the same price as private investors, the circumstances of the participation of the HFSF are very different from those of the private investors who will subscribe to new shares. The HFSF has committed to subscribe the entire share capital increase if needed, before any private investor has formally committed to buy shares. Private investors who buy new shares will be certain that in any event the Bank will raise the entire amount of capital needed, since the HFSF will act as a backstop and purchase any shares not subscribed by private investors. Secondly, the HFSF will participate only if there is insufficient demand from private investors at the floor of the announced price range. As such, the HFSF will provide capital which the Bank cannot find on the market at the same price per share. In consequence, the HFSF provides capital for an amount or at a price which the market is not ready to provide.

Because it was only granted to the Bank, measure C is selective. The position of the Bank was strengthened since the Bank was provided with the financial resources necessary to continue to comply with the regulatory capital requirements set by the Bank of Greece. It therefore provides an advantage which distorts competition. Since the Bank is active in other European banking markets and since financial institutions from other Member States operate in Greece, notably in the insurance market, measure C is also likely to affect trade between Member States.

In terms of operating profitability, the acquisitions made by the Bank will enhance the Bank’s return to long-term viability as merging two banks in the same geographical market gives the opportunity to realise meaningful synergies, for instance in the form of personnel reduction, branch closures and reduced overhead costs. The Bank will acquire the customers and depositors, while significantly reducing the distribution costs. It will close most of the ‘T-Bank’-branded branches and some of the ‘Hellenic Postbank’-branded branches, in addition to rationalising headquarters functions.

In terms of liquidity positions, the transaction also has a favourable impact on the Bank’s loan-to-deposit ratio, bringing it down significantly from an excessive level, since New TT Bank had significantly more deposits than loans. In particular, the Bank of Greece noted in its letter to the HFSF dated 8 July 2013 that the Bank had been under much pressure for the two years preceding the transaction. The Bank of Greece observed that the Bank had lost market shares in Greece, and that it was relying significantly on Eurosystem funding and emergency liquidity assistance. In its letter the Bank of Greece referred to the large funding gap, to the consolidated loan-to-deposit ratio of 132 % and to the deteriorated perception of the Bank by customers. In that letter the Bank of Greece indicated that the acquisition of New TT Bank by the Bank would lead to ‘a substantial increase of deposits of [the Bank], thereby improving its overall funding profile, depositors' perception and its ability to attract new deposits at more attractive terms than currently’.

The acquisition therefore contributes to repairing the liquidity position of the Bank, which is essential to the restoration of long-term viability. The Commission acknowledged the positive impact of the acquisition in a letter from its services to the HFSF dated 8 July 2013. In that letter the Commission indicated that the draft restructuring plan of the Bank, which had been submitted by Greece prior to the acquisition of New TT Bank, did not meet the requirement of restoration of long-term viability, due to the vulnerability of the Bank’s balance sheet at the end of the restructuring period. In the same letter the Commission indicated that the ‘acquisition of the deposit-rich [New TT Bank] would be a key contributor to the repair of the balance sheet of [the Bank] and thereby the restoration of its long term viability’. That assessment was justified in view of the impact of such an acquisition on the liquidity position of the Bank: ‘Based on end 2012 figures, the acquisition would make [the] loan-to-deposit ratio drop immediately from 155 % to 123 %, such that it should be possible to meet [the Commission’s] requirement [at] end 2017’.

The Commission therefore considers that the acquisition is positive for the restoration of the long-term viability of the Bank.

In line with point 23 of the Restructuring Communication, restructuring aid should not be used for the acquisition of other companies but merely to cover restructuring costs which are necessary to restore the viability of the Bank.

The Bank paid the purchase price in new shares, so that the acquisition was not financed through State aid. As a result, the capital need created by the payment of the purchase price was immediately covered by the issuance of new shares so that the payment of the purchase price did not create a net increase of the capital needs of the Bank. Moreover, the HFSF was the 100 % owner of New TT Bank, which implies that all the new shares issued by the Bank were given to the HFSF, that is to say, to the State.

The acquisition as such will not trigger additional State aid as New TT Bank complied with its regulatory capital requirements. In addition, that interim credit institution had been created only a few months before it was acquired. Since the assets of a failing bank are assessed and valued at fair value before they are transferred to an interim credit institution, it can be assumed that the loan book of New TT Bank did not contain losses that were hidden or were not adequately provisioned.

In conclusion, in the specific circumstances of this case the acquisition of New TT Bank exceptionally does not contravene the principle that aid should be the minimum necessary.

In line with points 39 and 40 of the Restructuring Communication, State aid should not be used to the detriment of non-aided companies for the acquisition of competing businesses. Point 41 of the Restructuring Communication also states that acquisitions may be authorised if they are part of a consolidation process necessary to restore financial stability or to ensure effective competition, that the acquisition process should be fair and that the acquisition should ensure the conditions of effective competition in the relevant market.

New TT Bank was not a viable bank on a stand-alone basis. The consolidation of that bank was requested under the MEFP dated 15 May 2013. The transaction can therefore be considered to be part of a consolidation process which is necessary to restore financial stability of the kind described in point 41 of the Restructuring Communication.

Against that background, it can be concluded that the acquisition of New TT Bank is compatible with section 4 of the Restructuring Communication.

In terms of operating profitability, the acquisition of Nea Proton Bank should enhance the return to long-term viability of the Bank as merging two companies in the same geographical market gives the opportunity to realise meaningful synergies, for instance in the form of personnel reduction, branch closures and reduced overhead costs.

The acquisition of Nea Proton Bank allows the Bank to benefit from synergies. The Bank will acquire the customers and depositors while closing most of the branches and rationalising the information system as well as headquarter functions. The transaction also reduced the Bank’s loan-to-deposit ratio, since Nea Proton Bank had a lower loan-to-deposit ratio. As at the end of June 2013, the Bank’s ratio of net loans to deposits was around 135,79 % while Nea Proton Bank’s ratio of net loans to deposits was around 52,68 %.

In conclusion, the acquisition had a positive effect on the viability of the Bank.

In line with point 23 of the Restructuring Communication, restructuring aid should not be used for the acquisition of other companies but merely to cover restructuring costs which are necessary to restore viability.

In conclusion, the acquisition of Nea Proton Bank does not contravene the principle that aid should be limited to the minimum necessary

In line with points 39 and 40 of the Restructuring Communication, State aid should not be used to the detriment of non-aided companies for the acquisition of competing businesses.

Nea Proton Bank was not a viable bank on a stand-alone basis. The consolidation of that bank was requested under the MEFP dated 15 May 2013. The acquisition can therefore be considered to be part of a consolidation process which is necessary to restore financial stability of the kind described in point 41 of the Restructuring Communication.

Against that background, it can be concluded that the acquisition of New Proton Bank is compatible with section 4 of the Restructuring Communication.

The Commission concludes that, in the light of the specificities of the acquisition of Nea Proton Bank, that acquisition is reconcilable with the requirements laid down in the Restructuring Communication.

As regards liquidity and the Bank’s reliance on Eurosystem funding, the restructuring plan foresees a limited growth of the balance sheet in Greece while the deposit base should grow again. The reliance on ELA, which has already fallen, will continue to decrease which will also help the Bank to reduce the cost of its funding.

The loan-to-deposit ratio commitment described in recital 127 ensures that the Bank’s balance sheet structure will be sustainable by the end of the restructuring period. The sale of securities and of other non-core activities will also strengthen the liquidity position of the Bank and ensure it does not rely on wholesale markets. Due to the still stressed liquidity position of the Bank, the Commission can accept the request of the Greek authorities to be authorised to provide liquidity to the Bank under the guarantee and government bond loan measures of the Greek Banks Support Scheme.

To decrease its funding costs, the Bank has also given a commitment to continue reducing the interest rates it pays on deposits, as described in recital 127. The Commission observes that such a decrease of the cost of deposits will be a key contribution to improving the pre-provisioning profitability of the Bank.

Another point of attention is the governance of the Bank given that the HFSF owned 95,23 % of the Bank’s shares at 31 December 2013. In the light of the track record of State-owned banks in Greece, a specific relationship framework was agreed between the Bank and the HFSF in 2013. That agreement protects the day-to-day business of the Bank from excessive interference from its main shareholder, while ensuring the HFSF can monitor the implementation of the restructuring plan and prevent excessive risk-taking by the Bank’s management through appropriate consultation procedures. The Bank has also committed to monitor closely its exposure to connected borrowers.

The HFSF law, as amended in 2014, provides that the shares subscribed by the HFSF in the Spring 2013 recapitalisation will become non-voting if at least 50 % of the 2014 capital increase is subscribed by private investors. As regards the restoration of the long-term viability of the Bank, the Commission would not take a negative view of the control granted to private shareholders if they invest a significant amount of own money in the Bank. The Commission observes that the limitation of the HFSF voting rights will not apply to votes related to the articles of association of the Bank or to corporate actions or other strategic decisions. The Commission notes positively the fact that the HFSF will automatically regain its full voting rights if the Bank does not implement its restructuring plan. Those provisions ensure that, while the HFSF will not intervene in the daily operations of the Bank, it can preserve its interests as shareholder and as an authority in charge of ensuring the correct implementation of the restructuring plan.

Some of the Bank’s international activities have drained its capital, liquidity and profitability in the past, as explained in recitals 362 and 363.

The overall profitability of the foreign operations will be restored from […] onwards. At the same date, the funding granted to the foreign subsidiaries will have been reduced by […] compared to the level as of 31 December 2012.

Therefore the Commission believes that the Bank will have sufficiently restructured and reduced those foreign subsidiaries in size to avoid it being exposed to additional capital needs and liquidity shortages in the future. The commitment described in recital 128 to refrain from injecting large amounts of capital into the Bank’s international subsidiaries also ensures that foreign subsidiaries will not represent a threat for capital or liquidity.

The base case scenario as described in section 2.4 shows that at the end of the restructuring period the Bank will be able to realise a return which allows it to cover all its costs and provide an appropriate return on equity taking into account its risk profile. In fact, the return on equity of the Bank will amount to […] % in 2018 according to the base scenario. At the same time, the Bank’s capital position is projected to remain at a satisfactory level, since the capital adequacy ratio will not fall below […] % from 2014 onwards.

The 2013 stress tests performed by the Bank of Greece confirm that the amount of additional capital which will be raised in 2014, namely EUR 2 864 million, is sufficient to cope with the baseline scenario in the restructuring period. The Bank will also submit a contingent capital plan to the Bank of Greece with measures to be implemented if the economic environment should deteriorate further. The Commission recalls that in the assessment of the capital needs under the baseline scenario, the Bank of Greece already introduced several adjustments which resulted in an increase of the estimated capital needs compared to the capital needs estimated by the Bank in its own baseline scenario. The baseline capital needs estimated by the Bank of Greece can therefore be considered as a kind of stress test. To conclude that the Bank is viable, the Commission does not require that the Bank has enough capital upfront to cover the stressed scenario capital needs estimated by the Bank of Greece, as the latter estimated level represents a high level of stress.

In addition, it is positive that the Bank will not make additional investments in non-investment grade paper, which will help to preserve its capital and liquidity position.

The Commission can therefore conclude that the Bank has taken sufficient measures to address the viability issues for the Greek domestic banking activities and the foreign activities.

As stated in the Restructuring Communication, banks and their stakeholders need to contribute to the restructuring as much as possible in order to ensure that aid is limited to the minimum necessary. Thus banks should use their own resources to finance the restructuring, for instance by selling assets, while the stakeholders should absorb the losses of the bank where possible. The commitments made by the Bank should ensure that own resources are used and that original shareholders and private investors, holding hybrid capital of the Bank, contribute to the restructuring.

The 2013 Banking Communication complements the Restructuring Communication and calls for enhanced burden-sharing and for banks obtaining capital support to undertake additional measures to limit the aid to the minimum. Point 29 of the 2013 Banking Communication requires the Member State to demonstrate that all measures to limit such aid to the minimum have been exploited to the maximum extent. To that end, the Member State must present a capital raising plan, ensure adequate burden-sharing by the shareholders and subordinated creditors, and prevent the outflow of funds prior to the restructuring decision. According to the 2013 Banking Communication, the capital raising plan should include right issues, voluntary liability management exercises, capital accretive divestments, deleveraging measures, earning retention and other measures such as, for example, strict costs and remuneration policies.

Point 47 of the 2013 Banking Communication provides that once capital shortfalls are identified, a bank must prevent outflows of funds through a number of measures which aim at ensuring the same outcome as regular dividend and coupon bans, acquisition bans, price leadership bans or advertising bans. The Commission notes that such bans are already complied with by the Bank as they are included in the list of commitments submitted by Greece, as described in recital 133, and that the Bank has not paid any cash dividend since 2008.

The 2014 recapitalisation commitment (measure C) provides a cushion to absorb future losses as determined by the stress test exercise performed by the Bank of Greece in 2013 and disclosed on 6 March 2014. The results of the stress test show that the Bank needs EUR 2 945 million of additional capital to cover its future losses in a stress scenario. Measure C only covers the capital need which will remain insofar as (i) it cannot be covered through further divestments or capital enhancement measures (the Commission considers that the Bank has analysed all potential divestments and committed to all those which can reduce the capital needs in the framework of the capital plan submitted to the Bank of Greece) and (ii) it is not covered by private investors in the framework of the share capital increase which will take place in April 2014. Therefore it does not provide the Bank with any excess capital.

As explained in recitals 385 to 395, the Bank has already taken actions before the stress test to limit the amount of capital needed to the minimum. If, in the framework of the current capital raising exercise, the Bank manages to raise most of the capital needed from private investors and the additional aid paid out by the HFSF remains below EUR 1 billion, no further own contribution by the Bank will be necessary. However, if the aid paid out under measure C is above that level, it would be appropriate for the Bank to divest more activities.

As regards burden-sharing, the 2013 Banking Communication provides that adequate burden-sharing entails contributions by shareholders, hybrid capital holders and subordinated debt holders before aid in the form of capital support is granted. The Commission notes that Greece has amended its national legislative framework to ensure that subordinated creditors will contribute to the costs of restructuring of the Bank before any additional capital is injected into the Bank. The Commission also notes that Greece has given a commitment that it will implement the measures provided for in Article 6a of the HFSF law as amended in 2014, which provide for the allocation of the capital shortfall to the holders of its capital instruments and other subordinated liabilities as may be necessary. While such burden-sharing will only take place after the date of the 2014 recapitalisation commitment (measure C), on the basis of point 45 of the 2013 Banking Communication the Commission considers disproportionate results would follow if mandatory conversion of subordinated debt and hybrid capital had to occur already at the moment of the commitment. If the Bank were to raise sufficient private capital to cover all of its capital need as determined by the stress test performed by the Bank of Greece, the conversion of subordinated debt holders would be disproportionate. The commitment by Greece to bail-in subordinated creditors before any capital support is actually paid out to the Bank is therefore sufficient to ensure proper burden-sharing.

Moreover, in order to ensure that the owners of the Bank participate to the maximum extent in the reconstitution of an adequate capital basis over the restructuring period, Greece gave a commitment that, until the end of the restructuring period, the Bank will retain dividends and not pay any coupons which it is not under law obliged to pay. Thereby, in line with point 26 of the Restructuring Communication and point 47 of the 2013 Banking Communication the Bank will not use State aid to make payments on own funds if there are insufficient profits to make such payments.

The Commission has to assess whether that commitment covering two scenarios fulfils the requirements laid down in the 2013 Banking Communication.

In the first scenario where the HFSF does not actually inject new capital into the Bank, the aid enshrined in measure C will be limited to a mere underwriting commitment of a capital increase, and the HFSF will not disburse a single euro since all the new shares will have been subscribed by private investors. The 2013 Banking Communication provides that the remuneration limitation can end when the aid has been repaid. However, the aid included in such an underwriting commitment in relation to a prospective capital increase cannot be repaid where the commitment in question is never put into effect (since no money was ever disbursed by the State to the Bank). In such circumstances, the Commission can accept that the remuneration limitation applies for a fixed period of time. The Commission considers that the commitment made by Greece, which lasts until 31 December 2017 (i.e. for three years and eight months, ending one year before the end of the restructuring plan) is a correct application of the last paragraph of point 38 of the 2013 Banking Communication. Because the annual remuneration of the Governor of the Bank of Greece is lower than the cap set in the second paragraph of point 38 of the 2013 Banking Communication, and because that commitment will apply to the entire group, the Commission then considers that the commitment proposed by Greece for the case where no share is subscribed by the HFSF in the framework of the planned capital increase is in line with point 38 of the 2013 Banking Communication.

In the second scenario where the HFSF would have to subscribe any share of the bank, Greece committed to amend the commitment to put it in line with the 2013 Banking Communication. The Commission notes that, if the HFSF would subscribe any share, to remain in line with the 2013 Banking Communication, the duration of the remuneration cap would be amended, to last until the earlier of the end of the restructuring plan — 31 December 2018 — or a transaction equivalent to the repayment of the aid. Since ordinary shares cannot be repaid by the Bank, the Commission accepts that a sale of the shares on the secondary market at a profit could be considered equivalent to a repayment of the aid.

In conclusion, in both scenarios, the commitment on limitation of remuneration issued by Greece complies with the requirements of the 2013 Banking Communication.

As regards the remuneration of the State, the 2011 Prolongation Communication requires that new shares are issued at a discount to market price, after adjustment for dilution. The Commission observes that the purpose of that requirement is to ensure that the State receives a sufficient remuneration for its shareholding in the Bank and that the historical shareholders are correspondingly diluted. In the case of measure C, the State is already the main shareholder of the Bank, holding more than 90 % of the shares. Therefore an excessive discount to market price would decrease the remuneration of the State on measure B4, and may entail aid to the investors if the discount underestimates the value of the Bank. In order to avoid such a situation, the subscription price cannot be lower than a floor price determined on the basis of two appraisals from independent valuators. Therefore the detailed arrangements of the price determination protect the HFSF from an excessive dilution by the new investors, while ensuring the HFSF subscribes new shares at a price which reflects the value of the Bank. In those circumstances, the Commission can accept that the new shares may be issued at a lower discount to current market price than that envisaged by the 2011 Prolongation Communication and it considers the floor price to be acceptable.

If the shares were issued at a higher price, it would have risked discouraging private investors from participating in the share capital increase and consequently would have limited private capital raising.

Therefore, the Commission considers the level of own contribution and burden-sharing to be appropriate for measure C.

The Commission observes that, in comparison with the total State recapitalisation received, the own contribution and burden-sharing in the form of sale of assets is much lower than the levels the Commission would usually consider as sufficient. However, in view of the elements developed in section 7.6.1, under which the Commission can accept a lower own contribution and burden-sharing, the restructuring plan can be considered as providing for sufficient own contribution and burden-sharing measures.

The restructuring plan also complies with the requirements of the 2013 Banking Communication as regards measure C.