13.6.3.4 Divestments needed for viability-reasons

To what extent can the divestments needed from a viability-perspective be considered as a compensatory measure? This question especially arises when the balance sheet reduction results from the disposal of loss-making subsidiaries or of low quality assets (or even impaired assets).1

One of the cases in which the Commission did not accept divestments as a compensatory measure is the case of OVAG. In the Opening Decision on OVAG, the Commission welcomed the significant reduction in size by OVAG. The reduction amounted to [60-75%] in terms of balance sheet size and to [60-75%] in terms of RWA. Although these percentages indicate a very significant reduction in size, the Commission noted that these percentage included the divestment of KA.2 The Commission noted that the divestment of KA by OVAG was rather a measure to improve OVAG’s viability.3 This was due to the fact that KA had many problems, so the divestment of KA actually contributed to the stabilisation of OVAG. Hence, the divestment of KA could not be considered as a measure to limit the distortions of competition.4

Thus, the disposal of loss-making subsidiaries is not accepted as a compensatory measure. In the same vein, the disposal of impaired assets contributes to the restoration of long-term viability of the bank. It can therefore be considered as a viability-measure. It can less easily be considered as a compensatory measure.