German bank Helaba ensures state help ahead of Basel III

The owners of German regional bank Helaba agreed this week to adapt their participation in profit, loss and any liquidation proceeds so the entity can comply with the future requirements of banking supervisory law Basel III.

Landesbank Hessen-Thueringen (Helaba) is owned by the State of Hesse, the Free State of Thuringia and the Savings Banks and Giro Association Hesse-Thuringia (Sparkassen und Giroverband Hessen-Thueringen SGVHT). Following the accord, instead of a fixed interest, the State of Hesse will receive a share in the Bank’s net income for the year in the amount of its percentage interest held as remuneration for its participation. If this is not disbursed, which is to be decided on annual basis by the Board of Owners and also with regard to the holders of participations in the ordinary capital, the State’s share is allocated to a reserve.

Although this pushes the State’s public finances to the first line if capital ratio difficulties appeared, the owners are positive that

“the arrangement that has been agreed upon strengthens the Bank and thus creates the prerequisite for ensuring that Helaba will be able to play a central and material role also in the further consolidation in the Landesbank sector.”

Hesse’s Minister of Finance Schafer has declared he is satisfied with the deal:

“The fact that the adaptation of our silent participation will result in a Core Tier 1 Ratio of Helaba of about 10 %, is a strong and powerful signal after the resolutions passed by the EU summit on a stronger recapitalisation of the banks. Helaba is and will remain a credit institution that is healthy to the core.”

* The source of all data in this post is HELABA Landesbank Hessen-Thueringen.