Dodecanese Bank was established in 1994.

On 22 July 2013, the Bank of Greece requested Dodecanese Bank to restore its Core Tier 1 ratio. Dodecanese Bank proceeded with a capital increase through a public offering of cooperative shares. According to the offering circular, the Core Tier 1 ratio of Dodecanese Bank, calculated on the basis of the financial data of that bank on 30 June 2013, was estimated at 3,5 % and was therefore below the minimum capital adequacy requirements set by the Bank of Greece. However, the capital raising failed to attract sufficient demand from investors.

At 30 September 2013, Dodecanese Bank employed 132 people and had 11 branches. In the framework of the resolution, the Bank took over no branches of Dodecanese Bank but it indicated that it would maintain a physical presence in areas where no network overlaps exist (namely, in four islands with no banking alternatives) by renting the four small branches managed by the liquidator. The employees of Dodecanese Bank were laid off and selectively re-hired by the Bank.

Evia Bank was established in 1995.

On 22 July 2013, the Bank of Greece requested Evia Bank to restore its Core Tier 1 ratio. Evia Bank proceeded with a capital increase through a public offering of cooperative shares. According to the offering circular, the Core Tier 1 ratio of Evia Bank was estimated at 1,8 %, calculated on the basis of the financial data of the bank at 30 June 2013, and was therefore below the minimum capital adequacy requirements set by the Bank of Greece. However, the capital raising failed to attract sufficient demand from investors.

At 30 September 2013, Evia Bank employed 59 people and had 4 branches. The Bank took over no branches of Evia Bank. The employees of Evia Bank were laid off and selectively re-hired by the Bank.

In 1995, the Development Credit Cooperative Society of Prefecture of Kozani was established. In 2008, the Cooperative operated under the new name ‘Cooperative Bank of Western Macedonia’.

On 22 July 2013, the Bank of Greece requested Western Macedonia Bank to restore its Core Tier 1 ratio. Western Macedonia Bank proceeded with a capital increase through a public offering of cooperative shares. According to the offering circular, the Core Tier 1 ratio of Western Macedonia Bank was estimated at – 11 %, calculated on the basis of the financial data of the bank on 30 September 2013, and was therefore below the minimum capital adequacy requirements set by the Bank of Greece. However, the capital raising failed to attract sufficient demand from investors.

At 30 September 2013, Western Macedonia Bank employed 36 people and had 3 branches. The Bank took over no branches of Western Macedonia Bank. The employees of Western Macedonia Bank were laid off and selectively re-hired by the Bank.

In the restructuring plan for the Bank submitted by the Greek authorities to the Commission on 12 June 2014, the Greek authorities signalled their intention to continue granting guarantees and lending government bonds under the Greek Banks Support 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.

The Bank redeemed the preference shares on 17 April 2014, as described in recital 41.

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 1,9 billion.

Under measure B1, the HFSF transferred EUR 1,9 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 established in recital 48 of the Alpha 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 % at 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 further 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 fell again 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 1 042 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 1 629 million (measure B3).

On the same date, the Bank also announced that the HFSF would subscribe 9 138 636 364 shares at a price of EUR 0,44 per share. As a result, by the Spring 2013 recapitalisation, the HFSF injected into the Bank capital totalling EUR 4 021 million in the form of ordinary shares (measure B4). That amount is equal to the sum of measures B1, B2 and B3, after deduction of the amount of private participation. The shares held by the HFSF give it limited voting power as the total private participation had reached 12 % of the capital increase. The HFSF law provided that private investors would retain control of the Bank if they injected more than 10 % of the capital needed by the Bank. However the HFSF retain full voting rights for key corporate decisions.

By means of the Bank’s share capital increase (measure B4), 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 partially implemented.

The HFSF law as amended in 2014 provides that only the warrants’ strike prices may be adjusted in the event of a rights issue. In addition, any such adjustment will take place ex post and only up to the amount of the realised proceeds from the sale of pre-emption rights of the HFSF. No adjustment is provided for in the event of a non-pre-emptive share capital increase.

The Commission has already established in the decision of 19 November 2008 on the Greek Banks Support Scheme that recapitalisations to be granted under its recapitalisation measure would constitute aid. The Bank received EUR 940 million by means of preference shares, which represented 2 % of the Bank’s RWA at that date.

In section 5.1 of the Alpha Opening Decision, the Commission has already concluded that the first bridge recapitalisation constitutes State aid. The capital received amounted to EUR 1,9 billion.

Measure B2 was implemented with HFSF resources, which, as explained in recital 47 of the Alpha 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 Eurosystem funding. Furthermore, the remuneration of measure B2 consisted of the accrued interest 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 was 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 to continue complying with the capital requirements, thus leading to competition distortions. Since the Bank is active in other European Union banking markets and since financial institutions from other Member States operate in Greece, 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 1 042 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 committed to provide up to EUR 1 629 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 facilitated the raising of private capital from the market, since investors were reassured that, if the bank could not find part of the capital from the market, the HFSF would provide it. No private investor would have accepted to commit to inject capital before the terms of the recapitalisation were known, and at that time the Bank had no access to the capital market. That advantage is selective since it was not granted to all banks operating in Greece.

Since the Bank is active in other European Union banking markets and since financial institutions from other Member States operate in Greece, 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.

HFSF’s participation in the Spring 2013 recapitalisation (measure B4) is the conversion of the first and second bridge recapitalisations (measures B1 and B2) and the partial implementation of the commitment letter (measure B3) into a permanent recapitalisation of EUR 4 021 million in ordinary shares. The fact that not the entire amount of capital committed through measure B3 had to actually be injected is due to the raising of EUR 550 million of capital from private investors. 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. Therefore the advantage granted to the Bank is selective. As regards distortion 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. A liquidation of the Bank would have led to the termination of its activities abroad, through the liquidation of those activities or their sale. Therefore, the measure distorts competition and affects trade between Member States. The measure 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 4 571 million. As indicated in section 7.1.3.4, only part of the amount committed in December 2012 (measure B3) was converted into an actual capital injection (measure B4). The amount of State support actually paid out was therefore only EUR 4 021 million.

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 were granted over the course of a one-year period, from April 2012 until May 2013. During that period, the RWA of the Bank changed, rising after the acquisition of Emporiki Bank. The question therefore arises as to which level of RWA should be used, and more particularly whether the State aid should be assessed by reference to the RWA that existed at the beginning of the period or 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 that those State support measures aim to address 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. The fact that the Bank acquired Emporiki Bank, well after March 2012, should not lead to a reduction of the ratio ‘aid to RWA’. Indeed, the aid is not less distortive because the Bank made an acquisition which increases its RWA. It is also recalled that after March 2012 and until the Spring 2013 recapitalisation, the Bank of Greece did not take into account acquisition made by the Greek banks to adjust their capital needs – upwards or downwards. That element further demonstrates that measures B1, B2, B3 and B4 were aid measures related to the perimeter of the Bank such as it existed at 31 March 2012.

Since the Bank managed to attract private capital, the actual amount injected by the HFSF into the Bank only amounted to EUR 4 021 million, which represents 9,1 % of the RWA of the Bank at 31 March 2012.

In terms of operating profitability, the acquisition of Emporiki Bank enhances the Bank’s return to long-term viability as merging two banks in the same geographical market allows the Bank to realise meaningful synergies, for instance in the form of personnel reduction, branch closures and reduced overhead costs. The Bank acquires customers and deposits, while significantly reducing distribution costs. It is closing a significant number of branches of the combined entity, in addition to rationalising headquarters functions.

From a static point of view, the transaction also has a positive impact on the Bank’s capital ratio, since the Bank acquires a highly capitalised bank for one euro consideration. At 31 March 2012, the pro forma capital adequacy ratio of the combined entity was 11,8 % whereas the Bank’s capital adequacy ratio was only 8,8 %. Similarly, the pro forma Core Tier 1 ratio of the combined entity stood at 11,1 % while the Bank’s Core Tier 1 ratio was 7,9 %. The high capital of Emporiki Bank provides protection against future losses which could materialise in the stress test, as shown in Table 3. The static observation of the increase in the capital ratio of the Bank overestimated the positive effect on its long term capital position. The acquisition is therefore positive for the restoration of the long-term viability of the Bank.

According to 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. In this case, although the acquisition has positive implications for the Bank’s viability, it is not essential for its viability within the meaning of point 23 of the Restructuring Communication.

The Bank only paid one euro consideration to purchase Emporiki Bank. The purchase price was therefore not financed through State aid. That fact also implies that the payment of the purchase price did not create any capital need for the Bank. In addition, Emporiki Bank was adequately capitalised (that is to say up to the level required under the 2012 stress test illustrated in Table 3). As such, the acquisition is unlikely to create any future capital need for the Bank.

In conclusion, due to the atypical terms (purchase at EUR 1 of a fully capitalised bank to meet stress test requirements), the acquisition of Emporiki Bank exceptionally does not go against the requirement to minimise the aid.

In line with points 39 and 40 of the Restructuring Communication, State aid should not be used to the detriment of non-aided companies and in particular for acquiring 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. In such circumstances the acquisition process should be fair and the acquisition should ensure the conditions of effective competition in the relevant market.

Emporiki Bank was not deemed viable on a stand-alone basis by the Bank of Greece, according to a viability review carried by an external consultant at the beginning of 2012. It was creating large losses for Crédit Agricole which therefore wanted to sell it. If no sale was possible, Crédit Agricole could have considered how to let it fail. 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.

No non-aided bidder submitted any valid bid to acquire Emporiki Bank, and the sale process was open, transparent and non-discriminatory. There was therefore no crowding out of a non-aided bidder by the Bank. Since that acquisition was authorised by the Hellenic Competition Authority, the outcome of the sale process does not endanger the conditions of effective competition in Greece.

Furthermore, the Bank’s need for aid does not stem from mismanagement or inappropriate risk taking. Finally, as concluded in recital 227, no State aid was used to fund this acquisition (purchase at EUR 1 of a bank capitalised up to the level required to pass the stress test of the Bank of Greece).

In view of those elements, it can be concluded that the acquisition of Emporiki Bank is in line with section 4 of the Restructuring Communication.

In the light of the unique situation of Greek banks and the specificities of the acquisition of Emporiki Bank, it is concluded that that acquisition is in line with the requirements laid down in the Restructuring Communication.

The acquisition of the selected assets and liabilities of the three Cooperative Banks will enhance the long-term viability of the Bank.

More precisely, the integration of the deposits of the three Cooperative Banks into the Bank’s balance sheet improved its liquidity profile. The net loan-to-deposit ratio of Alpha Bank S.A. decreased by around 1,5 % and the reliance of Alpha Bank S.A. on the Eurosystem decreased.

Furthermore, the acquisitions gave the Bank the opportunity to enhance its revenues by broadening its client base in several geographic areas. The Bank did not take over any costly infrastructure or costly branch network. Nor did the Bank take over any loans. It therefore did not increase its risk or capital requirements.

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. In this case, although the acquisition has positive implications for the Bank’s viability, it is not essential for its viability within the meaning of point 23 of the Restructuring Communication.

The consideration paid by the Bank for the acquisition of the transferred assets and liabilities of all three Cooperative Banks was determined at 2,1 % of the value of the transferred deposits and amounted to approximately EUR 9 million, equivalent to 0,01 % of the total balance sheet of the Bank at the time of the acquisition. That consideration can therefore be considered as very small. In addition, the Bank had already raised EUR 550 million of private capital during the Spring 2013 recapitalisation.

It is concluded that the acquisition price of the transferred assets and liabilities (mainly deposits) of the three Cooperative Banks was so low that it did not prevent the aid from being limited to the minimum necessary.

As stated in recital 229, according to points 39 and 40 of the Restructuring Communication, State aid should not be used to the detriment of non-aided companies and in particular for acquiring competing businesses, except under specific circumstances.

The Bank of Greece considered the three Cooperative Banks not to be viable and the adoption of the resolution measures to be necessary in order to maintain financial stability. The acquisitions 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.

In conclusion, the Commission considers these exceptional circumstances justify the authorisation of the acquisitions, in accordance with point 41 of the Restructuring Communication

It is concluded that, in the light of the specificities of the acquisitions of the selected assets and liabilities of the three Cooperative Banks, those acquisitions are in line with the requirements laid down in the Restructuring Communication.

The acquisition of Citibank Greece, including Diners, will enhance the long-term viability of the Bank. The Bank acquired a highly provisioned loan bank. In addition the net loan book is much smaller than the acquired deposits.

The integration of the deposits of Citibank Greece into the Bank’s balance sheet will improve the Bank’s medium- and long-term funding profile, while, at the same time, increasing the Bank’s profitability.

Furthermore, through the acquisition, the Bank will enhance its deposit gathering franchise and capabilities, thereby achieving a balanced and sustainable business model.

Finally, the expected significant synergies – in terms of central functions, IT services and operating expenses – will contribute to the Bank’s long-term viability.

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

According to 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. In this case, although the acquisition has positive implications for the Bank’s viability, it is not essential for its viability within the meaning of point 23 of the Restructuring Communication.

The acquired portfolio includes a large number of loans which are totally written-off. Indeed, the valuation of that new portfolio of loans could offset the limited capital need stemming from their integration in the balance sheet of the Bank.

In addition, the Bank has raised EUR 1,2 billion of private capital at a price per share higher than the price per share at which the HFSF subscribed in the Spring 2013 recapitalisation.

In those specific circumstances, it cannot be claimed that the acquisition was financed through State aid. The acquisition will not increase the need for aid or reduce the remuneration of the existing aid.

As indicated in recital 241, State aid should not be used to the detriment of non-aided companies in particular for acquiring competing businesses.

The purchase price paid for Citibank Greece was extremely low and the Bank raised a large amount of private capital at a high price per share. It can therefore not be considered that aid was used to fund that acquisition.

In addition, since no non-aided bidder submitted any bid to acquire the perimeter of activities acquired by the Bank, there is no crowding out of non-aided investors.

In conclusion, in view of the elements in recitals 257 and 258, the acquisition does not fall under the prohibition in points 39 and 40 of the Restructuring Communication. In addition, the Commission recalls that the Bank’s need for aid does not stem from mismanagement or inappropriate risk taking.

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 State-guaranteed ELA, which has already fallen, will continue to decrease which will also help the Bank to reduce its cost of funding.

The loan-to-deposit ratio commitment mentioned in recital 118 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. 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 and under the State-guaranteed ELA.

To decrease its funding costs, Greece has also given a commitment that the Bank will continue reducing the interest rates it pays on deposits in Greece, as described in recital 118. The achievement of such a decrease in the cost of deposits will be a key contribution to improving the pre-provisioning profitability of the Bank.

Some of the Bank’s international activities have drained the Bank’s capital, liquidity and profitability in the past, as explained in recital 266.

The restructuring plan anticipates that the Bank will continue to re-focus on its domestic market. The Bank has already sold its unprofitable subsidiary in Ukraine. It has also started to rationalise the other subsidiaries, to strengthen the loan underwriting process and to reduce the subsidiaries’ funding gap. It is planning further rationalisation of its network in retained subsidiaries, as described in recital 109.

The total amount of foreign assets will shrink by at least a further […]% by 31 December 2017 (compared to 31 December 2012).

The overall profitability of international activities will be restored from […] onwards.

Therefore the Commission believes that the Bank will have sufficiently restructured and reduced those foreign businesses in size to avoid it being exposed to additional capital needs and liquidity shortages in the future. The commitment described in recital 119 to refrain from injecting large amounts of capital in 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. At the same time, the Bank’s capital position is projected to remain at a satisfactory level.

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.

It is therefore concluded that the Bank has taken sufficient measures to restore its long-term viability.

The restructuring plan foresees the sale of further assets in South-Eastern Europe, as described in recital 107. Considering the deleveraging and the divestments already implemented and following the implementation of those commitments, the Bank will have significantly reduced its geographical footprint in South-Eastern Europe. The downsizing of the Bank’s international assets will also significantly reduce the contingent risk that aid will be needed in the future. It therefore helps to reduce the amount of aid to the minimum.

The Bank sold its insurance activities in 2007. It therefore has no significant activity in that market which could be sold to generate resources.

In order to limit its capital needs, the Bank will not use capital to support or grow its foreign subsidiaries, as described in recital 119. Additionally, the commitments made by Greece provide that the Bank will not make further acquisitions.

The Bank has also engaged in a far-reaching cost reduction programme, as indicated in section 2.4.2. Its costs will further decrease until 2017. Its workforce is being reduced and salaries adjusted downwards. Greece has also committed to limit the remuneration of the Bank’s managers, […].

The Bank’s subordinated debt holders have contributed to the restructuring costs of the Bank. The Bank performed several liability management exercises in order to generate capital. The total amount of liabilities exchanged reached EUR 828 million, with a capital gain of EUR 436 million, as described in recital 114.

The still outstanding instruments are subject to the coupon ban mentioned in recital 124. Therefore, the Commission considers that an adequate burden-sharing from the bank’s private hybrid investors is ensured and the requirements of the Restructuring Communication in that respect are met.