11.8.1 Why is this a relevant characteristic?

The Restructuring Communication provides that the beneficiary bank should withdraw from activities which would remain structurally loss-making. Many restructuring plans contain the intention that the bank will refocus on its core activities.1 This means that non-core activities are either run-off or sold (i.e. divested2). For instance, the restructuring plan of BayernLB envisaged several changes to the bank’s business model and provided for a “strategic realignment of the bank”.3

Apart from the fact that divestments contribute to the bank’s refocusing on its core activities, divestments can also have other positive effects. In the first place, divestments reduce the amount of RWA and therefore free up capital and increase the capital ratios. In the second place, divestments generate liquidity which can be used to finance the restructuring or to strengthen the liquidity basis.4 In the third place, divestments can free up management capacities. Subsequently, these management capacities can be reemployed in the core business of the bank.5

It is worth stressing that divestments are not only important from a viability- perspective, they are also important in relation to the other two pillars of the restructuring plan: i.e. own contribution (see section 12.3) and limiting competition distortions (see sections 13.5 and 13.6). The current section only discusses divestments in as far as they contribute to the restoration of long-term viability.