EC clears state aid for MKB restructuring
The European Commission said today that it had cleared Hungarian state aid for the restructuring of MKB Bank, Hungarian news agency MTI reported.
"The European Commission has concluded that Hungarian plans to grant state aid for the restructuring of Hungarian bank Magyar Kereskedelmi Bank Zrt. (MKB) are in line with EU state aid rules," the EC said.
"The Commission found in particular that MKBʼs restructuring plan will enable the bank to become viable in the long-term and ensured that the bankʼs owners contribute to the cost of restructuring while limiting the distortions of competition created by the aid," it added.
The state acquired MKB from BayernLB last year and plans to re-sell it by early 2016. Before the sale, the state plans to transfer impaired assets in MKBʼs portfolio that cannot be sold to an asset management vehicle, while undergoing a restructuring that reduces costs and changes strategy to restore MKBʼs long-term viability.
"In particular, MKB will refocus its core activities to lending to the real economy in Hungary instead of engaging in non-core and risky activities like granting commercial real estate loans or foreign currency loans. MKB will also enhance its corporate governance by improving its risk management to prevent the bank from making the same mistakes again," the EC said.
The EC noted that the stateʼs divestment of MKB would take place in "an open, transparent and non-discriminatory sales process".
The National Bank of Hungary, which exercises ownership rights over MKB, acknowledged the ECʼs decision in its own statement released today and said it cleared the way for the removal of the toxic assets from MKBʼs balance sheet by the end of 2015 and the sale of the bank in the first half 2016.
The MNB noted that impaired assets in MKBʼs portfolio that were salable had been sold in a transparent manner with the involvement of an outside, professional consultant. The asset management vehicle established to buy the rest of the bad assets will make the purchases at real economic value, which is lower than the present market value, it added. The purchases will be financed by a consortium of domestic commercial banks, it said.
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