(135) Under Article 107(3)(b) of the Treaty, State aid may be considered to be compatible with the internal market if it serves ‘to remedy a serious disturbance in the economy of a Member State’. In its approval of the German rescue package the Commission acknowledged that there was a threat of serious disturbance in the German economy and that State support of banks was likely to remedy that disturbance. Although the economy has been recovering slowly since the beginning of 2010, stress has recently reappeared in the financial markets, and the Commission still considers that the requirements for State aid to be approved pursuant to Article 107(3)(b) of the Treaty are fulfilled. In December 2011 the Commission confirmed this view when it adopted a communication on the application, from 1 January 2012, of State aid rules to support measures in favour of banks in the context of the financial crisis(53), in which it prolonged the application of those provisions.

(136) The collapse of a bank which is considered by a Member State to be of systemic importance, such as BayernLB, could directly affect the financial markets and thus the entire economy of a Member State. In the light of the current fragile situation of the financial markets, the Commission therefore continues to base its assessment of State aid measures in the banking sector on Article 107(3)(b) of the Treaty.

(137) In the opening decision the Commission raised doubts as regards the compatibility of the risk shield. Those doubts need to be assessed in the light of Article 107(3)(b) of the Treaty on the basis of the Impaired Assets Communication, to establish whether the assets qualify for relief under paragraph 32 of the Communication.

Management of assets

(138) Paragraph 46 of the Impaired Assets Communication stipulates that while it is a matter for the Member States to choose the most appropriate model for relieving banks from impaired assets, nevertheless, in order to prevent conflicts of interest and facilitate the beneficiary bank's focus on the restoration of viability, it is necessary to ensure clear functional and organisational separation between the bank and its impaired assets, notably as to their management, staff and clientele.

(139) Although the

Land

of Bavaria provides a guarantee shielding BayernLB against losses stemming from its ABS portfolio, all of the shielded assets remain on BayernLB's balance sheet.

(140) The Commission accepts that a complete segregation of the assets covered and of the staff managing them could, in the case of a guarantee of such a size as the risk shield, be difficult and potentially damaging to the objective of minimising the expected losses. Hence, there is no requirement for portfolio managers to be dedicated exclusively to the management of covered assets or otherwise to keep covered assets separated from the bank's other assets.

(141) Furthermore, the Commission considers that Germany has put in place adequate safeguards to prevent conflicts of interest and to ensure that losses on the covered assets are reduced to the minimum(54). In particular, BayernLB has set up an internal Restructuring Unit to which several portfolios have been transferred. The Restructuring Unit has taken charge of reducing these portfolios and also oversees reductions of business activities in BayernLB's other units. The Restructuring Unit is functionally and organisationally separated from BayernLB's other units(55).

Valuation of the shielded portfolio

(142) The Commission engaged external experts to conduct a valuation of BayernLB's ABS portfolio. The Commission's team of experts established the real economic value (REV) of BayernLB's ABS portfolio, in line with the Commission's decision-making practice, at 83,87 % of the nominal value. The real economic value amounts to EUR 16,429 billion.