(RTTNews) - European Union Competition regulator Wednesday announced the approval of the restructuring plan of Lloyds Banking Group Plc (LYG: News ), and the approval of the restructuring plan and an illiquid asset back-up facility of Dutch-based financial institution ING (ING: News ) under EC Treaty state aid rules. The European Commission also approved an asset relief and restructuring package for the Belgian KBC Group.

The Lloyds Banking Group was formed following the acquisition of HBOS by Lloyds TSB in January 2009. In 2008, HBOS was close to bankruptcy as a result of risky lending practices and high dependence on wholesale funding. The UK Government facilitated the takeover of HBOS by Lloyds TSB. Under a package of financial support measures approved by the Commission on October 13, 2008, the Lloyds Banking Group received a state recapitalization of GBP 17 billion or about EUR 19 billion, that provide the UK State 43.5% ownership of Lloyds Banking Group.

The approval of the recapitalization was conditional upon the submission of a restructuring plan. The bank submitted the plan to the Commission on July 16, 2009 and contained additional state aid measures.

According to the Commission, having assessed the past and new aid on the basis of the notified plan, and in view of amendments agreed by the UK authorities, the Commission is satisfied that it is in line with its restructuring communication and compatible with EU rules on state aid.

As per Lloyds' plan, it will pay a significant proportion of the restructuring costs, ensure a sustainable future for the bank without continued state support, and there will not be undue distortions of competition.
Commenting on Lloyds' plan, Competition Commissioner Neelie Kroes said, "This plan effectively addresses the Commission's competition concerns and at the same time ensures the return of Lloyds Banking Group to long term viability."

The Commission also said that it found the plan ensures a fair burden sharing of past losses. The bank and its capital providers make a significant contribution to the financing of the restructuring costs. Further, the plan contains a divestment package for Lloyds' UK retail banking. The divested entity, with a network of at least 600 branches, will have a 4.6% market share in the personal current account market.

In addition, the Commission said that the exit fee which will be paid by Lloyds Banking Group for not participating in the Asset Protection Scheme is sufficiently high to compensate for the advantage the bank gained from its announced participation of March 7, 2009.

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