European Union antitrust regulators opened an in-depth investigation into a German state aid package for regional lender HSH Nordbank on Friday, saying they suspected the measures might violate EU rules. German regional authorities had provided a 10 billion euro ($15 billion) risk shield and a 3 billion euro recapitalisation for HSH, the fifth-largest Landesbank in the country, after receiving preliminary regulatory approval in May.
Last week, German rescue fund SoFFin said it was examining HSH's business model. The European Commission, the EU competition watchdog, said it would examine whether the two aid measures complied with its guidance on impaired assets, the valuation of the assets and compensation paid to the regional authorities.
"The Commission will explore further with the German authorities whether the rescue measures are capable of restoring the long-term viability of HSH Nordbank," Competition Commissioner Neelie Kroes said in a statement. HSH cannot set up a "bad bank" for its toxic assets if it does not have a viable business model.