11.8.3.2 How are the non-core activities discontinued?

With respect to this question, it can be observed that non-core activities are either run-off or sold. To that end, several banks have set up an internal resolution division (“non-core unit”). The assets allocated to this non-core unit will be run down. Several names are used for this non-core unit: Legacy Unit, internal resolution division, internal winding-up segment, wind-down entity or “Abbaugesellschaft”. A winding-up segment is not legally separated, but it is to be managed as a segment in its own right with separate accounting in the sense of its own reporting procedure.1 The rationale of setting up a non-core unit is explained in the following recital from the decision on Nova Ljubljanska banka: “That separation will also allow it to implement a more specialised approach to running off the bank’s non-core business and to manage its non- performing assets so as to maximise recovery value”.2

With respect to the question how activities are discontinued, it can be concluded that it does not really matter if activities are divested or run down. For the viability-assessment, the central element is that the bank withdraws from certain activities.

The Amendment Decision in the case of KBC is illustrative of the fact that from a viability-perspective, it does not really matter if activities are divested or wound-down.3 In 2011, the Belgian State and KBC requested the Commission to change certain measures of the restructuring plan approved by the Commission in the Restructuring Decision. In particular, KBC proposed to wind-down Romstal instead of divesting it. In the Amendment Decision4, the Commission recalled that the divestment of Romstal was proposed by KBC in the context of the rationalisation of it business and a focus on its core markets. The Commission concluded that the wind-down of Romstal instead of its divestment would lead to the same result as envisaged in the Restructuring Decision.

The importance of withdrawing from activities is also reflected by the fact that restructuring plans that are based on an expansion of activities are not accepted by the Commission. This can be illustrated by the Opening Decisions in the cases of Parex banka and Anglo Irish Bank. The Commission noted that the initial restructuring plan for Parex banka seemed to be built on an expanding business strategy for all lending segments.5 Moreover, the plan did not provide for abandoning or significant reduction of more risky activities.6 This was one of the reasons for opening the formal investigation procedure. The original restructuring plan for Anglo Irish Bank envisaged a split-up into a New Bank and Old Bank. The New Bank would engage in new activities. The Commission, however, had doubts regarding these diversification activities. The Commission noted that Anglo was at that moment not active on these markets and that Anglo therefore lacked the required expertise.7 These two examples underline the importance that the Commission attaches to the focus on core activities.