The Commission has authorised under EC State aid rules, a package of support measures to assist the restructuring of Lloyds Banking Group (“Lloyds”). The UK government facilitated the acquisition by Lloyds of HBOS (which was facing bankruptcy in January 2009), including the provision of a £17 billion capital injection, giving the government 43.5% ownership of the bank.
In March 2009, it was announced that Lloyds would be included in the UK’s Asset Protection Scheme. The State agreed to underwrite and participate in a share offer of £4 billion and to refund losses exceeding a certain level on a pool of assets worth £265 billion. Lloyds’ restructuring plan was subsequently submitted to the Commission in July 2009 and contained additional State aid measures.
On 3 November, a capital raising share offer of £20.5 billion was announced as an alternative to Lloyds’ participation in the UK Asset Protection Scheme. The Commission concluded that the State’s participation in this share offer for an amount of £5.9 billion constituted a State aid element and should, therefore, be assessed alongside the restructuring plan.
The Commission has concluded that the aid is compatible with EU State aid rules and with the Commission’s Communications on the application of State aid rules to banks in times of crisis. The measures will help to restore the bank’s long-term viability by implementing Lloyds cautious risk management strategy and removing high risk portfolios and non-core business operations. The plan also includes fair allocation of the burden for past losses to the bank, to dissuade the bank from taking excessive risks. The plan includes a divestment package in Lloyds’ core business of UK retail banking in order to limit the impact of the aid on competition.
IP/09/1728 – 18 November 2009