The European Commission approved on 15 May, under the EC Merger Regulation (ECMR), the acquisition of Hypo Real Estate AG (Hypo), the German financial institution, by one of Germany’s state-owned financial institutions, the Financial Market Stabilisation Fund (SOFFIN). SOFFIN was established to avert the impact of the financial crisis and with this in mind it has the power to purchase shareholdings in financial institutions.

In April of this year, SOFFIN acquired Hypo, which is active in real estate financing and was an early victim of the financial crisis. In spite of the fact that the transaction constitutes a “nationalisation” of Hypo, the Commission concluded that the ECMR was applicable. The Commission’s reasoning was that Germany’s Financial Market Stabilisation Act and the terms of the transaction do not ensure that Hypo is operated as an independent commercial entity separate from other State owned financial institutions, in particular from Kreditanstalt fur Wiederaufbau (KfW). The Commission therefore reviewed the transaction under the ECMR and, on the substance, the transaction was cleared as there was no overlap.

This is the first time that a bank nationalisation has been notified to the Commission under the ECMR in the context of the financial crisis.