EU raises competition, doubts about Commerzbank bailout

The European Commission raised doubts on Wednesday that a massive capital infusion for German bank Commerzbank was in line with the terms of a bank bailout package it approved last week. Commerzbank became on Monday the first private German bank to tap into a government rescue fund's cash component by seeking a capital injection of 8.2 billion euros (10.5 billion dollars) in exchange for preferred shares.
However, the spokesman for competition issues Jonathan Todd said the preferred shares had been reported by the press to pay a lower yield to the state than the minimum 10 percent required by German bailout package.
"We now have some various basic information ... from the German authorites, but at first sight these figures don't appear to be in line with the German rescue scheme that was approved last week," Todd told journalists. "Therefore, this particular capital injection for Commerzbank will need to be examined by the commission," he added.
In Berlin, German Finance Minister Peer Steinbrueck said the aid fell "within the framework" of the government's package which has already been approved by the EU commission. The commission approved on Tuesday the German plans to support its financial sector, judging that the aid would not distort competition as it was drafted.
"It's the commission's duty to ensure a level playing field and to ensure that low remuneration of capital does not give rise to distortions of competition," Todd said. "We expect the German authorities to provide us with full information so that we can conduct a full assessment of the measures for Commerzbank," he added.
Steinbrueck told a press conference in the German capital that the commission's doubts "were a question of exchange of information" and said he had "no doubt" as to Germany's ability to provide a satisfactory response. A Commerzbank spokesman told AFP: "These are discussions between Berlin and Brussels, it is not up to us to express ourselves on the subject.
"It is normal for the commission to inspect public aid, it has already done so for other European banks in Benelux countries," he added in a reference to Belgium, Netherlands and Luxembourg. The German package contains up to 80 billion euros in capital injections and up to 400 billion euros in guarantees for interbank loans. Another private German bank, Hypo Real Estate, has obtained 15 billion euros in state loan guarantees under the plan, and several state-owned regional banks have applied for both types of aid.