EU approves revised German bank bailout plan

Special Report:Global Financial Crisis　

BRUSSELS, Dec. 13 (Chinese media) -- The European Commission has approved a revised German bank bailout plan, paving way for a capital injection of eight billion euros (10.7 billion U.S. dollars) into German bank Commerzbank.

The European Union (EU)'s antitrust watchdog said the modifications, which concern mainly the remuneration of recapitalization measures, were in line with its new guidance on state aids to shore up financial institutions.

"The present decision demonstrates again, how quickly and effectively the commission can adapt to changing conditions in the financial markets with good cooperation from member states," said EU Competition Commissioner Neelie Kroes.

"On this basis we have now finally found an acceptable solution in order to allow confidence building and credit stimulating measures in Germany including the recapitalization of Commerzbank," she added.

Under the revised plan, the remuneration for state aid would depend on the risk profile of the beneficiary and on the capital instrument.

For fundamentally sound financial institutions the basic remuneration would vary according to the risk profile and instrument chosen from seven percent for subordinated debt to 9.3 percent for instruments with features like ordinary shares, whereas institutions in distress would have to pay a minimum of ten percent.

The German government had wanted to provide eight billion euros in capital injection to Commerzbank, the second largest private bank in the country, as part of its national bailout plan worth 500 billion euros (667 billion U.S. dollars).

But the commission had disputed the plan, which angered Berlin.

Bowing to pressure from France and Germany, the commission loosened its state aid control on financial bailout plans by member states Monday.