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Report: NordLB state-backed recapitalization not likely to happen by August-end

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Report: NordLB state-backed recapitalization not likely to happen by August-end

German public lender Norddeutsche Landesbank Girozentrale must wait at least until the end of September to receive a planned capital injection by its owners, according to a Reuters report carried by Handelsblatt on Aug. 21.

The bank originally expected to receive the funds by the end of August, but this looks unlikely as the EU is yet to approve the transaction, according to the report. Upon EU approval, the regional governments of the states of Lower Saxony and Saxony-Anhalt would also need to OK the deal, sources familiar with the matter told Reuters.

NordLB, majority-owned by the state of Lower Saxony, is in urgent need of fresh capital following a spree of deleveraging toxic shipping loans over the past 18 months. The bank has to raise its common equity Tier 1 ratio to 14% by the end of 2019 from 6.75% as of March 31, which was well below the regulatory minimum requirement of 10.6%.

This would be impossible to achieve without the €3.6 billion rescue package to be provided by its state owners and the public savings banks sector.

Nevertheless, the package still needs to get the approval of the European Commission, which has to make sure the transaction would not breach EU state aid rules.