Today, the European Commission announced its approval, under EC Treaty state aid rules, of a €9 billion restructuring package for German bank IKB Deutsche Industriebank AG. Last year, Germany’s state-owned development bank, Kreditansstalt für Wiederaufbau (KfW), and three German banking associations granted a total of €9 billion in state aid to IKB (consisting of risk shields, capital injections and liquidity facilities) following its financial difficulties arising from investments in the U.S. subprime housing market. Following an investigation launched in February 2008, the European Commission has concluded that such measures are compatible with EU rules on state aid to companies in difficulty. According to these rules, “restructuring measures must be capable of restoring the long-term viability of the company, the state support must be limited to the minimum necessary, the beneficiary has to make a substantial contribution to the restructuring and accept compensatory measures to limit distortions of competition induced by the aid.” KfW, which was also IKB’s main shareholder, had previously announced the proposed sale of its 90.8% stake in IKB to U.S.-based investment fund Lone Star Funds. EU Competition Commissioner Neelie Kroes stated that “the sale of IKB, important structural changes and significant reduction of activities” by IKB met these requirements, “while minimising distortions of competition” created by state support. According to a statement released by IKB, EU conditions require that IKB cut the size of its balance sheet to €33.5 billion by September 2011. IKB CEO Guenther Braeunig stated that “the authorization of the rescue measures for IKB allows for the continued existence of the bank.”