Hungarian bank FHB’s €500mn state aid within EU rules

The European Commission on Wednesday gave the green light to the state rescue operation of Hungarian bank FHB. A recapitalisation of HUF 30 billion (app. €100 million) and a loan under the Hungarian liquidity scheme of approximately HUF 120 billion (approximately €400 million) for the Hungarian bank FHB were put in place in accordance to EU state aid framework, the Commission ruled.

After an in-depth investigation, the Commission concluded that the measures were in line with its guidance on state support for banks during the crisis because the revised restructuring plan will restore the bank’s viability, while ensuring that the distortion of competition is minimal.

Commission Vice President in charge of competition policy, Joaquín Almunia, said:

“The updated restructuring plan ensure that FHB will become viable without continued state support.”

In October 2011, Hungary submitted an updated restructuring plan that will result in reducing FHB’s involvement in the mortgage bond market and its exposure to adverse currency movements. The bank has also managed to increase its share of retail loans.

In 1997, FHB was set up by the Hungarian State which was also the majority stake holder. In August 2007, the State reduced its share in the bank to just over 4%. FHB was originally set up as a mortgage bank in order to promote the use of mortgage bonds, which were also the main funding source of its lending activity. Further, the bank refinanced mortgage loans extended by other banks.

On 19 February 2010, FHB paid back the full amount of the recapitalisation to the State. In September 2010 FHB acquired Allianz Commercial Bank Ltd and concluded a long-term strategic agreement with Allianz Hungaria Insurance Co. Ltd.