Governmental Assistance to the Financial Sector: an Overview of the Global Responses (V9)

Economic Stabilization Advisory Group | October 2, 2009

Governmental Assistance to the Financial Sector: an Overview of the Global Responses (v9)

The measures that Governments have taken to protect the financial sector have settled down to a large extent. We have, however, decided to publish a further update on the measures following a renewed interest in developments and the recent G20 Summit.

This memorandum summarizes the measures Governments across the world have taken to protect the financial sector and prevent a recession.

The measures fall into the following categories:

guarantees of bank liabilities;

retail deposit guarantees;

central bank assistance measures;

bank recapitalization through equity investments by private investors and Governments; and

open-market or negotiated acquisitions of illiquid or otherwise undesirable assets from weakened financial institutions.

The purpose of this publication is to provide an overview of the principal measures that have been taken in the major financial jurisdictions to support the financial system. The first version of this note was published on November 12, 2008. Since then, Governments in some jurisdictions have adopted further measures or amended measures previously adopted. The current version of the note takes into account those measures and is based on information available to us on September 30, 2009.

Table of Contents

Page

AUSTRALIA...... 5 AUSTRIA ...... 9 BELGIUM...... 17 BRAZIL ...... 25 BULGARIA...... 31 CANADA...... 32 DENMARK1 ...... 35 ESTONIA...... 40 FINLAND ...... 41 FRANCE...... 44 GERMANY...... 48 GREECE...... 60 HONG KONG ...... 65 HUNGARY...... 69 ICELAND ...... 75 INDIA ...... 80 IRELAND ...... 94 ITALY...... 98 JAPAN ...... 104 LUXEMBOURG ...... 107 THE NETHERLANDS...... 109 NEW ZEALAND...... 115 NORWAY...... 118 PEOPLE'S REPUBLIC OF CHINA...... 121 PORTUGAL...... 127 REPUBLIC OF KOREA...... 132 RUSSIA ...... 136 SLOVAKIA...... 146 SLOVENIA...... 148 SPAIN...... 153 SWEDEN...... 157 SWITZERLAND...... 161 UKRAINE...... 165 UNITED ARAB EMIRATES ("UAE")...... 166 UNITED KINGDOM...... 168 UNITED STATES OF AMERICA...... 181

All additions and updates are noted in blue text.

ARGENTINA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES The Central Bank of Argentina Effective November 1, 2008, the The Argentine Government has set forth new conditions to grant Central Bank reduced by 10% reformed the private pension direct financial assistance to the minimum cash reserve system and nationalized the financial entities. requirement for checking pension assets managed by the account deposits in foreign country's private pension fund In the event of non-compliance currency and by 5% the managers (AFJPs). As of with these conditions, requests minimum cash reserve January 1, 2009, the for financial assistance are requirement for demand and Administradora Nacional de la subject to the analysis and time deposits made upon a court Seguridad Social ("ANSES") will approval of the board of order with funds arising from manage the funds deposited in directors of the Central Bank. cases pending before the court AFJPs. (amparos). To obtain direct financial assistance from the Central In addition, the following are the Bank, financial entities must minimum cash reserve have a liquidity ratio under 25%. requirements for time deposits in The value of the assistance foreign currency and holding of granted shall be the requested securities in foreign currency, as amount, the amount necessary per the remaining terms: (i) up to to raise the liquidity ratio to a 29 days: 20%; (ii) from 30 to 59 maximum of 35%, the amount of days: 15%; (iii) from 60 to 89 the decrease of funding sources days: 10%; (iv) from 90 to 179 in the previous month, 20% of days: 5%; (v) from 180 to 365 the total projected assistance to days: 2%; (vi) more than 365 the financial system described in days: 0%. the monetary program, or the amount arising from the Effective November 1, 2008, the difference between the net worth Central Bank reduced by 20% of the entity and the debt the minimum cash reserve resulting from operations requirement for deposits, completed through the Central whatever their nature, as assets Bank program to assist financial of a mutual fund, in foreign entities (whichever of these is currency. the lowest).

The Central Bank assistance will be granted for 180 days, renewable for the same period, with an interest rate of 1.35 BADLAR rate (and 1.70

ARGENTINA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES BADLAR rate in renewal cases).

Financial entities must make prepayments depending on their liquidity ratio at the time.

AUSTRALIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES On November 20, 2008, the The Government has passed Australia's central bank (the No publicly announced RMBS Purchase Scheme Australian Government executed a legislation to give effect to its Reserve Bank of Australia) measures at this stage. 4 Deed of Guarantee which took effect proposal with respect to all periodically intervenes to The Government has from November 28, 2008 (the deposits of Australian banks, support the Australian dollar. established an A$8 billion "Guarantee") and which put in place building societies and credit Residential Mortgage Backed the Australian Government unions and Australian Securities ("RMBS") purchase Guarantee Scheme for Large subsidiaries of foreign-owned scheme that will apply to new Deposits and Wholesale Funding banks. (rather than existing) issuances. ("Guarantee Scheme")1 for eligible Authorised Deposit-Taking The proposal takes effect A$4 billion is available for the Institutions ("ADIs"). through a "Financial Claims Government to act as a Scheme" ("FCS"). Under the cornerstone investor for both Eligible ADIs will include: FCS, the Australian Prudential bank and non-bank RMBS Regulation Authority ("APRA") issuances. ▪ Australian owned banks; (as administrator of the FCS) must apply for the winding-up An additional A$4 billion is ▪ Australian ADI subsidiaries of of an ADI, and a declaration available for non-bank foreign banks; must be made by the issuances only. Issuances responsible Government under this scheme have taken ▪ Australian branches of foreign minister in order for the FCS to place. ADIs; and apply to that ADI (an "eligible ADI"). The initial A$8 billion has been ▪ credit unions and building almost fully allocated. The societies. Under the scheme, holders of Governement has not protected accounts3 with net announced whether the RMBS An eligible ADI must make an credit balances are entitled to Purchase Scheme will be application to the Reserve Bank of payment from APRA of the extended. Australia as administrator of the balance plus accrued interest Guarantee Scheme for an eligibility (subject to certain adjustments Commercial Property Support certificate ("Eligibility Certificate") in and compliance with the Scheme respect of the relevant deposits or provisions of the FCS) up to a wholesale funding liabilities. maximum of A$1 million per Earlier in 2009, it was proposed Eligibility Certificates are issued at depositor per institution. Also, that the Australian Government the discretion of the Commonwealth APRA is assigned the relevant and the four largest domestic of Australia as guarantor. Once an account holder's right to claim ADIs would establish a Eligibility Certificate has been issued this amount from the ADI. corporation for the purposes of in respect of a liability, it is published supporting the commercial on the Guarantee Scheme website at The amount of any deposit property assets of viable http://www.guaranteescheme.gov.au. over A$1 million will not be Australian businesses. covered by the FCS, but may A copy of the Guarantee, the related be covered by the Guarantee Legislation was required to

AUSTRALIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES rules of the Guarantee Scheme, a list Scheme described in the implement the measure. The of eligible institutions, information previous column if the relevant legislation passed the Lower relating to the application procedure fee has been paid by the House of the Australian and information relating to the claims eligible ADI. Parliament but, following an procedure, and a copy of an opinion inquiry by the Upper House of given by the Australian Government The Government has indicated the Australian Parliament, the solicitor on the validity and that the FCS will be legislation was defeated in the enforceability of the guarantee can administered so that it applies Upper House. be found at to all deposits held in eligible http://www.guaranteescheme.gov.au. ADIs by all types of legal As at the time of publication, entities, regardless of where there is no public indication that In addition to those deposits which the depositor resides. It will implementation of the measure are the subject of an Eligibility also apply to deposits held in will be reconsidered. Certificate, in order to qualify for an any currency. The FCS will not Eligibility Certificate, the wholesale apply to financial products that Guarantee of State funding liabilities must fall into one of are not deposit products, such Government Debt the following categories: (i) a bank as market-linked investment bill; (ii) a certificate of deposit or a products. On March 25, 2009, the transferable deposit; (iii) a Australian Treasurer announced debenture; (iv) commercial paper; The deposit liabilities of the a temporary measure for the (v) a bond; or (vi) a note issued, Australian branches of foreign Commonwealth government to drawn or made by the eligible ADI. ADI's held by Australian Tax guarantee the obligations of Residents (as defined in the Australian State governments in Certain other restrictions also apply previous column) are not relation to both existing and new to the types of wholesale funding covered by the FCS. However, issues of eligible borrowings. liability that will be guaranteed, deposits held in foreign ADIs including the liability must: (i) have a can be guaranteed under the While no formal documentation maximum term of 60 months; (ii) be Guarantee Scheme described implementing the guarantee has unsecured; and (iii) not be 'complex'. in the previous column on been released, the Treasurer's Liabilities with one or more of the payment of the relevant fee. press releases indicate that the following features are likely to be guarantee will apply to regarded as complex: borrowings with a term of up to 15 years that are issued in ▪ liabilities where the principal Australian dollars.5 amount of the liability is not a fixed sum but varies by reference to, or It is expected that the guarantee is derived from, the value of an will not apply to the obligations asset, index or commodity or is of a State government owned linked to the credit standing of any issuer where those obligations person; are guaranteed by the relevant State government. However, the

AUSTRALIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES ▪ subordinated debt; Commonwealth government guarantee will apply in respect ▪ liabilities that may be converted of the State government's into equity; obligations under such a guarantee. ▪ liabilities that include any cross- default or acceleration clause; and It is understood that a fee will be charged for the guarantee, ▪ liabilities that include any rights to which will be determined by demand prepayment of principal reference to the credit rating of or permit redemption prior to their the relevant State government maturity date except in certain borrower and will differ between permitted circumstances. existing and new issuances.

The Australian Government has Details of the Commonwealth released guidelines on the government guarantee of State interpretation of what is 'not government obligations will be complex', which can be found at published on a new website, http://www.guaranteescheme.gov.au. once the enabling legislation has been passed: Additional conditions also apply to www.stateguarantee.gov.au the liabilities of the Australian branches of foreign ADIs including:

that deposit liabilities must not have a maturity after December 31, 2009 and must be held by a person treated as an Australian tax resident for the purposes of Australian tax law ("Australian Tax Resident"); and

that wholesale funding liabilities must not have a maturity greater than 15 months.

The additional conditions applicable to the Australian branches of foreign ADIs can also be found at http://www.guaranteescheme.gov.au.

AUSTRALIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Fees are payable in respect of the Guarantee, the quantum of which will be set by reference to the relevant issuer's credit rating and will be the same regardless of the tenure of the debt securities.2

The Australian Government has announced that the Guarantee Scheme will be reviewed on an ongoing basis and revised if necessary.

1 The Guarantee Scheme is not restricted to "inter-bank" debt but extends to all eligible term funding subject to the restrictions set out in the relevant Guarantee Scheme rules. 2 The current fee is 70bps for AA rated firms, 100bps for A-rated firms and 150bps for BBB and unrated firms. The fee will be levied by the Reserve Bank of Australia on the eligible ADI on a periodic basis depending on the quantum of the liability. 3 A "protected account" is either:

an account where the eligible ADI is required to pay the account-holder, on demand or at an agreed time, the net credit balance of the account; or

another account or financial product prescribed by declaration. The Australian Treasurer has released a declaration of certain covered financial products which can be found at http://www.treasury.gov.au.

4 The Australian Government has indicated that its "Four Pillars" banking policy that restricts mergers between the four largest domestic ADIs will continue in force. 5 The Treasurer's press release announcing the temporary guarantee is available at http://www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2009/027.htm&pageID=003&min=wms&Year=&DocType=0 . On May 12, 2009, the Treasurer released further details by press release available at http://www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2009/070.htm&pageID=003&min=wms&Year=&DocType=0.

AUSTRIA

SPECIAL CENTRAL PURCHASES OF GUARANTEES OF BANK BANK ASSISTANCE TROUBLED FINANCIAL DEBT DEPOSIT GUARANTEES MEASURES RECAPITALIZATION MEASURES ASSETS OTHER MEASURES Under the Inter-Bank Market Deposit Guarantee Scheme The Financial Market Stabilization Act Minimum Capital Requirements Enhancement Act (Finanzmarktstabilitätsgesetz – (Interbankmarktstärkungsgesetz The Austrian deposit FinStaG) provides for up to €15 billion Under the amended BWG, the FMA has – IBSG), up to €65 billion will be guarantee scheme does not (or an additional amount not utilized to require a higher minimum capital if an made available for state provide for funding under the IBSG) for recapitalization adequate limitation of the risks arising guarantees, sureties or similar arrangements such as capital measures. Potential beneficiaries of from banking transactions and banking assumptions of liability.2 held directly in deposit the measures will be credit institutions operations of a credit institution or group guarantee scheme accounts holding a license pursuant to the of credit institutions does not exist and Clearing Bank (ex ante funds). By contrast, Austrian Banking Act proper recording and limitation of those the Austrian scheme provides (Bankwesengesetz - BWG), including risks cannot be expected in the short To this end, a separate entity for financing based on ex post branches of foreign banks, and term. Such higher minimum capital has been established as a contributions from member Austrian insurance companies. requirements will be imposed by the FMA clearing house to facilitate the banks forming part of the immediately in cases where it is refinancing of banks on the protection scheme of their Once the aims of the recapitalization expected that other measures will not be inter-bank market respective trade organization measures1 have been achieved, the sufficient to ensure the proper recording (Oesterreichische Clearingbank (Fachverband). State will dispose of its equity stakes and limitation of risks as well as AG – "OeCAG"). OeCAG is a to private investors. compliance with legal regulations within specialised bank owned by If any protection scheme is due time. major Austrian credit institutions unable to pay out the There are, in principle, three types of (as at May 6, 2009 the main guaranteed deposits or claims stabilization measures under the State Ownership shareholders are Raiffeisen in full, the protection schemes FinStaG: guarantees, recapitalisations Zentralbank Österreich of the other trade associations and assumptions of liability. The The first and so far only Austrian bank Aktiengesellschaft (24.85%), will be obliged to make following measures may be taken by taken over by the Austrian state is the Erste Group Bank AG (19.03%), proportionate contributions to the Federal Minister of Finance: public sector lender Kommunalkredit Unicredit Bank Austria AG cover the shortfall. In cases Austria AG previously owned by (18.51%), Hypo-Banken-Holding where the protection schemes (i) issue of guarantees for liabilities of Volksbank AG (50.78%) and the Franco- Gesellschaft.m.b.H. (12.66%), as a whole are unable to pay banks or insurance companies; Belgian group Dexia (49%). The shares Österreichische Volksbanken- out guaranteed deposits held by Dexia and Volksbank AG were Aktiengesellschaft (11.77%) and (claims) in full, the protection (ii) assumption of liability vis-à-vis transferred to the Austrian state for a BAWAG P.S.K. (5.32%), 3- scheme originally concerned banks or insurance companies; total consideration of € 2. The Austrian Banken Beteiligung Gesellschaft must issue notes or, according state now holds 99.78% of m.b.H. (4.54%)). to the proposed stability (iii) granting of loans to banks or Kommunalkredit Austria AG. The measures, take out a loan to insurance companies or the provision Austrian Association of Municipalities OeCAG shall collect deposits meet the remaining payment of own funds (Eigenmittel) to the (Gemeindebund) remains a shareholder from banks or insurance obligations. The Federal entity; with 0.22% of the shares. companies or raise funds on the Minister of Finance may inter-bank market and on-lend assume liability for such issue (iv) acquisition of shares (whether in a Strengthening Liquidity of Enterprises such funds to banks and capital increase or from existing Act insurance companies in line with shareholders) or convertible bonds; market conditions. Recipient Under the Strengthening Liquidity of

AUSTRIA

SPECIAL CENTRAL PURCHASES OF GUARANTEES OF BANK BANK ASSISTANCE TROUBLED FINANCIAL DEBT DEPOSIT GUARANTEES MEASURES RECAPITALIZATION MEASURES ASSETS OTHER MEASURES banks will have to pay interest, or loan. and Enterprises Act taking into account an adequate (Unternehmensliquiditätsstärkungsgesetz fee for state guarantees. (v) transfer of assets of the company – ULSG), the State shall provide credit by way of a merger pursuant to § 235 guarantees to medium-sized and large The Federal Minister of Finance Amendments to Existing of the Stock Corporation Act companies in order to maintain and will be entitled to (i) guarantee Scheme (Aktiengesetz – "AktG"). All such secure the liquidity of such companies. liabilities of OeCAG and measures should earn a return in line (ii) assume liability for losses The Austrian depositors' with market conditions. The ULSG came into effect on August incurred by OeCAG in protection scheme has been 25, 2009 after approval by the European connection with such amended with effect from If there is a risk that the bank or Commission. arrangements for a limited October 1, 2008. Bank insurance company cannot fulfill their period of time. The IBSG does deposits of natural persons will obligations vis-à-vis their creditors and The guarantees issued by the State will not specify any maximum period be protected in their entirety the above mentioned measures are have a maximum term of five years and of time for such state until December 31, 2009 (the not sufficient or are not available in will be up to €300 million per company guarantees given under (i). The protection scheme's cover due time, the Federal Minister of group. The total volume shall not exceed Austrian state has issued obligation was previously Finance shall, in consultation with the €10 billion (excluding interest and guarantees of up to € 4 billion limited to an amount of Federal Chancellor, be authorized to expenses). for OeCAG, which covers all €20,000 per depositary and expropriate the owners of the bank losses occurring on or before bank). Following the against payment of an adequate The liability of the State will be limited December 31, 2010 and Commission's proposal, the compensation where required to from 30% to 70% depending on the resulting from transactions coverage level for bank protect the national economy from amount of the loan and the risk. entered into on or before deposits of natural persons severe disruption. A seperate entity December 31, 2009. may be guaranteed up to a (Finanzmarktbeteiligung The beneficiaries are companies which maximum amount of €100,000 Aktiengesellschaft des Bundes – fulfill the following requirements: OeCAG accepts money market from January 1, 2010. FiMBAG) was set up to carry out such deposits (Geldmarkteinlagen) recapitalization measures. The seat or branch in Austria; for terms of up to 12 months For claims by small companies FiMBAG is indirectly owned by the less one day. In the same (mainly partnerships and small Republic of Austria. main business operation in Austria; maturity band, OeCAG will also corporations which meet the offer interbank money market criteria of Section 221 (1) Such recapitalization measures may not operative in the financial sector securities (commercial paper) Austrian Companies Act be provided by the state in the form of (i.e. credit institutions, insurance with a federal government (Unternehmensgesetzbuch – participation capital institutions, investment institutions, guarantee up to an aggregate UGB), the protection scheme's (Partizipationskapital). From a etc.); amount of €5 billion. cover obligation has been regulatory perspective, participation increased to the maximum capital constitutes own funds no micro, small and medium-sized The Austrian government's amount of €50,000 per (Eigenmittel) of the bank and is treated enterprise (SME) as defined under guarantees for OeCAG's loan depositary and bank. The as core Tier 1 capital if issued without Commission Recommendation of 6 assets and for the commercial claims of all other creditors will an obligation to pay cumulative May 2003 concerning the definition paper programme are subject to continue to be limited to the dividends (ohne of micro, small and medium-sized a guarantee fee of 50 basis maximum amount of €20,000 Dividendennachzahlungsverpflchtung). enterprises, C(2003) 1422;3

AUSTRIA

SPECIAL CENTRAL PURCHASES OF GUARANTEES OF BANK BANK ASSISTANCE TROUBLED FINANCIAL DEBT DEPOSIT GUARANTEES MEASURES RECAPITALIZATION MEASURES ASSETS OTHER MEASURES points on the guaranteed per depositary and bank Participation capital has to be fully a solid financial basis before July 1, amount. (subject to further exemptions, paid in and must be at the disposal of 2008 and it is expected that the e.g., for "big" companies, the bank for the duration of its company will be able to fulfil its The allowable lending exposure claims are not guaranteed at existence (due to a waiver of obligations during the term; of OeCAG under the investment all). For legal entities the extraordinary and ordinary termination rules of the Austrian Banking scheme's cover obligation rights by its holders). Participation the liability risk of the State is Act (Bankwesengesetz – BWG), remains limited to 90% of the capital fully participates in losses of reasonable. amounts to a maximum total of guaranteed deposit, so that an the bank. Interest payments on €10 billion, based on the amount of up to €45,000 is participation capital depend on the The ULSG is scheduled to expire by present regulatory capital of paid out to small companies banks's distributable profits of the December 31, 2010. However, €180 million and the loan and small partnerships, and an repective preceding financial year. guarantees issued under the ULSG maturity cap of 12 months less amount of up to €18,000 to before this date will not be affected. one day. Should loan defaults other legal entities (subject to Upon liquidation of the bank, by borrowers cause OeCAG's further exemptions). participation capital may only be regulatory capital to fall below repaid after satisfaction of or providing the legally required level, the The deposit guarantee only security to all creditors and it ranks Federal Government pledged up applies to deposits in EEA pari passu with share capital. The to € 4 billion of equity to currencies (e.g., not to holders of participation capital do not OeCAG. This pledge covers deposits in US$). have any voting rights. Its structure is, loan defaults arising on or therefore, similar to preference shares before December 31, 2010 and without voting rights attached. resulting from transactions entered into on or before The most prominent deal is Erste December 31, 2009. Group Bank's €2.7 billion capital injection in the form of participation Clearing Platform and hybrid capital (see below for details). Also, Hypo Group Alpe Adria To ensure the efficient received €900 million and Volksbank organisation and market- received €1 billion in the form of oriented execution of fund participation capital from the Republic raising and lending, OeCAG of Austria. Further Raiffeisen together with Oesterreichische Zentralbank Österreich AG placed Kontrollbank (OeKB) has participation capital amounting to €2.5 established a web-based billion (€1.75 billion thereof subscribed clearing and auction platform. by the Republic of Austria) (see below Planned auctions have already for details). The European been conducted over the Commission approved the state aid clearing platform. Results and measure of the Austrian Authorities to further information are available recapitalize Hypo Tirol with €100 million via a guarantee on capital

AUSTRIA

SPECIAL CENTRAL PURCHASES OF GUARANTEES OF BANK BANK ASSISTANCE TROUBLED FINANCIAL DEBT DEPOSIT GUARANTEES MEASURES RECAPITALIZATION MEASURES ASSETS OTHER MEASURES on the OeCAG website. subscribed by private investors (see below for details). BAWAG P.S.K. also Bond Issues intends to issue participation capital in the amount of a nominal of €550 The Federal Minister of Finance million, all of which will be underwritten is empowered to guarantee by the Republic of Austria. In addition, notes (according to § 1 para 1 BAWAG P.S.K. shall receive a no 10 BWG) issued by banks guarantee of €400 million by the with a maturity of up to three Republic of Austria for the next five years; under certain years. UniCredit (Bank Austria's circumstances the duration can shareholder) announced that the be extended up to five years. group will not make use of this According to § 1 para 1 no 10 scheme, but will raise money through BWG, banks authorized to the capital markets. perform banking activities may issue securities in order to Earlier thisn year Erste Group placed invest the proceeds in banking participation capital in a nominal activities. This provision does amount of €540 million with private not apply to Austrian insurance and institutional investors. The companies. dividend on the participation capital, amounts to 8.0% per annum over the Under this scheme the Republic first couple of years (if covered by of Austria provides specific Erste's annual profits). If the guarantees for (i) single bond participation capital is not redeemed issues, (ii) bond issues under a by 2015, the dividend increases debt issuance programme, (iii) progressively from fiscal year 2015 to bond issues under a medium a maximum of 10% per annum plus term note programme and (iv) the 12-month EURIBOR. No issuance of notes under restrictions on dividend payments on commercial paper programmes. its ordinary shares therefore apply. The Republic of Austria subscribed for The guarantees issued by the participation capital in a nominal Republic of Austria are amount of €1.0 billion in March 2009 unconditional and irrevocable. and may subscribe for additional Sample forms of these participation capital. The volume of the guarantees can be downloaded participation capital shall in aggregate from the website of the Federal amount to approximately €1.75 billion. Ministry of Finance. As at September 11, 2009, notes Hypo Tirol has issued participation issued by Erste Bank, capital for an amount of €100 million

AUSTRIA

SPECIAL CENTRAL PURCHASES OF GUARANTEES OF BANK BANK ASSISTANCE TROUBLED FINANCIAL DEBT DEPOSIT GUARANTEES MEASURES RECAPITALIZATION MEASURES ASSETS OTHER MEASURES Kommunalkredit Austria AG, which has been subscribed by private Raiffeisen Zentralbank investors. The Land Tirol has issued a Österreich AG , Hypo-Alpe- guarantee for the principal capital Adria-Bank International AG and amount subscribed by the investors for ÖsterreichischeVolksbank have a period of 10 years. The dividend on been guaranteed under this the participation capital amounts to 5% scheme. For instance, in May per annum (provided that the bank 2009 Erste Bank issued a fixed- shows a profit). For the state rate bond with a volume of €1.5 guarantee, Hypo Tirol will pay Land billion with a tenor of three years Tirol a progressively increasing guaranteed by the Republic of guarantee fee, starting with 3,9% in Austria. the first three years, and rising to 6,6% in the tenth year. Obligations guaranteed by the Republic of Austria qualify for Raiffeisen Zentralbank Österreich AG zero risk weighting for capital placed participation capital in a adequacy purposes pursuant to nominal amount of €2.5 billion with §§146ff Solvability Regulation private and institutional investors. The (Solvabilitätsverordnung). This subscription period ran from 8th June applies for obligations to 19th June 2009. The dividend on denominated in euros only. the participation capital, amounts to 8.0% per annum over the first couple The amount of single facilities of years. issued under this scheme is not restricted, but the total issuing The Republic of Austria as holder of volume covered under this participation capital has been granted scheme may not exceed €75 the right to a conversion billion, excluding payments on (Wandlungsrecht) of the participation coupons and expenses. capital into share capital by Hypo Group Alpe Adria and Volksbank if Beneficiaries these banks do not have distributable profits over a certain period of time to The beneficiaries of the stability pay interest on the participation measures are credit institutions capital. holding a license pursuant to the Austrian Banking Act One reason for placing participation (Bankwesengesetz – BWG) capital with private investors is to (including branches of foreign avoid the application of European banks) and Austrian insurance state aid rules and to be able to offer companies. Credit institutions participation capital on more

AUSTRIA

SPECIAL CENTRAL PURCHASES OF GUARANTEES OF BANK BANK ASSISTANCE TROUBLED FINANCIAL DEBT DEPOSIT GUARANTEES MEASURES RECAPITALIZATION MEASURES ASSETS OTHER MEASURES and insurance companies favourable terms than it would be rendering services in Austria by possible under European state aid using the EEA single passport rules. regime will not benefit from the IBSG. The Commission communication on the recapitalisation of financial General Provisions institutions in the current financial crisis issued on December 5, 2008 § 2 para 5 FinStaG will also (C(2008) 8259 final) sets out a certain apply to such measures entry level price for recapitalisation (providing for possible measures. Following this, it has to be conditions attached to stability distinguished between fundamentally measures). sound banks and distressed banks. In case of fundamentally sound banks an No claims of banks or insurance average required rate of return of 9.3% companies against the State on ordinary shares (e.g., participation may be assigned or pledged to capital) relating to Euro area banks is third parties and shall be subject required. A minimum average rate of of an attachment (Pfändung). 8% may apply if (i) the participation Moreover, the IBSG does not capital is repaid at 110% of its face confer a right on banks or value and (ii) where the State capital insurance companies to claim injections are on equal terms with any such stabilization measures significant participation (30% or more) from the state. of private investors (only one third of the private investors may be existing The scheme is scheduled to shareholders). expire by December 31, 2009. However, state guarantees In such case, the distribution of issued under the IBSG before dividends to existing shareholders this date will not be affected. (Altaktionäre) is limited to 17.5% of distributable profits as long as the State capital injection lasts. This limitation will not apply if the conditions at (i) and (ii) above are met (redemption above face value and significant participation of private investors).

Recapitalization measures for distressed banks require an average

AUSTRIA

SPECIAL CENTRAL PURCHASES OF GUARANTEES OF BANK BANK ASSISTANCE TROUBLED FINANCIAL DEBT DEPOSIT GUARANTEES MEASURES RECAPITALIZATION MEASURES ASSETS OTHER MEASURES rate of return of 10% with no payment of dividends.

The stability measures confer additional rights on the Austrian Financial Market Authority (Finanzmarktaufsicht – FMA), which will be authorized to lay down rules pursuant to which banks will be required to take on additional funds that are suitable for the current risk situation and that go beyond the statutory minimum requirements.

According to a regulation issued by the Federal Minister of Finance on October 30, 2008, the assumption of liability for notes issued by banks pursuant to the IBSG and stability measures pursuant to the FinStaG can be linked to corresponding, appropriate conditions. These conditions may relate to:

▪ the sustainability (Nachhaltigkeit) of the business model of the benefiting company;

▪ the allocation of funds provided to the benefiting company, with a particular view on the lending needs of small- and medium-sized companies and the provision of mortgage loans to private households;

▪ the remuneration of directors, employees and third parties retained for carrying out their tasks;

▪ minimum capital requirements of the

AUSTRIA

SPECIAL CENTRAL PURCHASES OF GUARANTEES OF BANK BANK ASSISTANCE TROUBLED FINANCIAL DEBT DEPOSIT GUARANTEES MEASURES RECAPITALIZATION MEASURES ASSETS OTHER MEASURES benefiting company;

▪ the distribution of dividends;

▪ the preservation of jobs at the company benefiting from the stability measures;

▪ the avoidance of distortion of competition;

▪ the calculation and amount of interest/(guarantee) fees payable by the company receiving such funds;

▪ the scope of information to be provided by the benefiting company; and

▪ the content of the declaration to be published by the directors and the supervisory board of the benefiting company (such declaration must also contain an undertaking to comply with such conditions).

1 On December 10, 2008 the European Commission approved the Austrian stability measures aimed at stabilizing the financial markets. According to the Commission guidelines on the recapitalization of financial institutions in the current financial crisis, the general principles applicable to the overall design of recapitalization measures are the objective of recapitalization, soundness of the beneficiary bank, remuneration, exit incentives (e.g., restrictive dividend policy), in particular with a view to the replacement of State capital by private investors. The Commission found the Austrian scheme to be in line with the recently up-dated guidance on state aid, in particular on pricing. The Commission therefore concluded that the package was an adequate means to restore a serious disturbance of the Austrian economy and as such compatible with Article 87(3)(b) of the EC Treaty. 2 From the originally €75 billion under the IBSG €10 billion are going to be shifted for the financing of the measures with regard to the ULSG (see below column Other Measures). 3 These are enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million.

BELGIUM

A. The Belgian Government has On November 14, 2008, the A. The Royal Decree of On October 20, 2008, the An increase of capital in Fortis A. On October 27, 2008, the implemented by means of a law Belgian Government September 29, 2008 provides Belgian federal government and Bank was operated by the Belgian Government agreed of October 15, 2008 and a Royal implemented the legal basis for explicitly that the National Bank the Flemish and Walloon Belgian State in the amount of upon a cash injection in order to Decree of October 16, 2008, the guaranteeing bank deposits of of Belgium can be the regional governments decided to €4.7 billion on September 29, strengthen the financial position legal basis pursuant to which it up to €100,000 – an increase of beneficiary under a Belgian law jointly finance a € 1.5 billion 2008, which brought the of KBC Bank, under which the can guarantee the agreements €80,000. floating charge (business capital increase of Ethias Group, shareholding of the Belgian Belgian State will purchase non of Belgian financial institutions, pledge) in order to secure loan a Belgian banking and insurance State to 49% of the capital. transferable core capital financial holding companies and (i) The first tranche of €50,000 is facilities made available to the company. As a result of such securities worth €3.5 billion their issuing vehicles (the guaranteed via the Deposits and financial market or otherwise. capital increase, each of the The Belgian State bought the issued by KBC Bank to increase "guaranteed entities") provided Financial Instruments Protection Before the said Royal Decree, a three governments holds a remaining 50% + one share of the tier 1 ratio of KBC Bank that: Fund, which initially only floating charge could only be blocking minority of 25% plus 1 Fortis Bank from Fortis Holding above 10% and the solvency covered amounts up to €20,000 made available to pledgees that share in return. for a total consideration of ratio of KBC Insurance to 280%. (i) the agreements are made in case of insolvency of financial qualified as a credit institution in €4.7 billion in cash. A portfolio of The transaction closed on with financial institutions or other institutions or investment the European Union or as a In return for the capital injection, structured products with fair December 19, 2008. professional counterparties; companies. financial institution otherwise the three governments will value of €10.4 billion was authorised to take floating receive a stake in the Ethias transferred by Fortis Bank to a The securities qualify as core (ii) the agreements expire on or (ii) The second tranche of charges in accordance with the group that will give them a separately-managed entity tier 1 capital and provide an before October 31, 2011; €50,000 is covered via a newly Belgian Royal Decree of preferential claim on future jointly owned by the Fortis annual dividend payment equal established vehicle, the Special October 9, 1995 (limited list of profits. The three governments Group (66%), the Belgian State to the higher of: (iii) the agreements have been Deposits and Life Insurance beneficiaries). have priority in receiving (24%) and BNP Paribas (10%). entered into or renewed Protection Fund. This fund dividends of up to 10% of their - €2.51 per security, non between October 9, 2008 and covers amounts up to €100,000 B. The Royal Decree of January investment. The Belgian Government cumulative, payable annually; October 31, 2009; in case of insolvency of financial 12, 2009 (with effect as of reached an agreement with BNP institutions (or insurance January 22, 2009) amends the This State aid was approved by Paribas on the subsequent - 120 % of the dividend paid on (iv) the guaranteed entity has companies). In the case of articles of association of the the European Commission on transfer of 75% of Fortis Bank the ordinary shares in 2009; taken sufficient measures in insolvency of a financial National Bank of Belgium in February 12, 2009 for a SA/NV in exchange for new respect of its financial situation, institution, the €100,000 such way that the Belgian State maximum period of six months. shares to be issued by BNP - 125 % of the dividend paid on its solvency and liquidity guarantee by the Special guarantees the repayment in full The temporary character of the Paribas2 for a value of the ordinary shares from 2010 position; and Deposits and Life Insurance of all loan facilities granted by authorization is due to the €8.25 billion; the Belgian State onwards. Protection Fund is reduced by the National Bank of Belgium condition that the Belgian will continue to own the (v) the State guarantee is the €50,000 guarantee of the made available in order to authorities have to submit to the remaining 25% of the company. The dividend will only be paid if justified in the interest of the Deposits and Financial ensure the stability of the Commission a restructuring plan a dividend is due on ordinary Belgian economy and the Instruments Protection Fund financial system, including all aimed at restoring the long-term BNP Paribas will acquire 100% shares. If KBC decides to buy protection of private savers. (mentioned under (i) above), losses related to the granting of viability of the Ethias group by of Fortis Insurance Belgium for a back the securities, it would and will consequently only be such loan facilities. April 20, 2009. total consideration of have to pay 150% of the issue The Belgian Minister of Finance used second. €5.73 billion in cash, subject to price. In case KBC requests the will determine the terms and On April 2, 2009, the board of final closing adjustment. The conversion of the securities into conditions of the State directors of Ethias adopted a Government of the Netherlands ordinary shares, the Belgian

BELGIUM

PURCHASES OF TROUBLED SPECIAL CENTRAL BANK RECAPITALIZATION FINANCIAL ASSETS OR GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES INSTITUTIONS OTHER MEASURES guarantee, such as the reorganisation plan called acquired Fortis Bank Nederland State can request repayment of guaranteed amount and the fee "Horizon 2011 Plan". Based on (Holding) N.V., including Fortis's the securities against a value of payable by the guaranteed Insurance policies the more than 170 new interest in ABN AMRO and other between 115% and 150% of the entity, on a case-by-case basis. measures set in this plan, Ethias operations, for a total issue price, depending on the The newly established Special aims to increase the profitability consideration of €16.8 billion. timing of such conversion. B. In view of completing the Deposits and Life Insurance by more than €150,000,000 by guarantee measures Protection Fund guarantees 2011. The aforementioned take-over The securities do not represent implemented pursuant to the amounts up to €100,000 in the scheme of Fortis by BNP share capital of KBC Bank, and Royal Decree of October 16, case of insolvency of insurance Dexia S.A. Paribas was rejected by the consequently do not dilute the 2008 described under point A companies. Consequently, life meeting of shareholders of rights of existing shareholders, above, a Royal Decree was insurance policies are also At the extraordinary general Fortis Holding. The Belgian but include the right of the implemented on December 10, covered by means of a State meeting of shareholders held on Government and BNP Paribas Belgian State to have seats on 2008 pursuant to which the guarantee of up to €100,000 May 13, 2009, the shareholders reached a new agreement on the board of directors of KBC Belgian State can further provided that the insurance agreed to cancel the existing March 7, 2009. Bank. guarantee agreements of company concerned has authorized capital and approve Belgian financial institutions and acceded to the Special Deposits an increased authorized capital The main features of the new B. Similar to the measures taken financial holding companies (the and Life Insurance Protection of €8.08 billion which can be agreement are (i) the acquisition by the Belgian Federal 'guaranteed entities') provided Fund guarantee. issued by decision of the board by BNP Paribas of 75% of Fortis Government mentioned above, that: of directors and converted into Bank and (ii) the acquisition by the Flemish Government share capital during a five year Fortis Bank of 25% of Fortis decided on January 22, 2009 to (i) the agreements are entered period. This may indicate a new Insurance Belgium for €1.375 inject €2billion in KBC by means into with a view to covering the capital increase. billion financed by BNP Paribas, of the purchase of non loss or risk of loss relating to and (iii) the creation of a special transferable core capital assets owned by the At the same general meeting of purpose vehicle ("SPV") in securities issued by KBC. This subsidiaries of the guaranteed May 13, 2009, the shareholders which part of Fortis Bank's will bring the tier 1 ratio of KBC entity; decided to amend the articles of structured credit portfolio is Bank from 8.5% to 10.5% Dexia SA in order to lower the contributed, financed partially (ii) the agreements and the minimum threshold for via an equity participation of In addition, an agreement was State guarantee contribute to transparency declarations to a.o., BNP Paribas and Fortis reached for a stand-by (non- avoid the exposure of the 1%. In other words any Bank, with the remainder of the dilutive) core capital facility in guaranteed entity or its shareholder acquiring or holding funding of the SPV financed via the amount of €1.5 billion. In subsidiaries to serious liquidity more than 1% is obliged, and senior subordinated debt of May 2009 KBC again needs, in particular as a result of any crossing of such threshold Fortis Bank and BNP Paribas, experienced financial difficulties a decrease in rating; shall trigger the obligation, to file which has been partially and decided to draw on this a transparency declaration. guaranteed by the Belgian facility to maintain capital at (iii) the guaranteed entity has Pursuant to such modification Government. As previously adequate levels in the future. taken sufficient measures in the company has already agreed upon, the price BNP respect of its financial situation, published two transparency Paribas pays for Fortis Bank has The terms and conditions of the its solvency and liquidity declarations received from (i) been valued at €9.4 billion. issue of the core capital the Walloon Region which Fortis Insurance has been securities will be similar to those

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PURCHASES OF TROUBLED SPECIAL CENTRAL BANK RECAPITALIZATION FINANCIAL ASSETS OR GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES INSTITUTIONS OTHER MEASURES position; and declared holding 2.01% of valued at €5.5. of the core capital securities Dexia's shares and (ii) the issued to the Belgian State in (iv) ) the State guarantee is Flemish Region (through the The next shareholders meeting December 2008. Consequently, justified in the interest of the Vlaams Toekomstfonds) which to vote on this new agreement the core capital securities do not Belgian economy and the declared holding 2.87% of was scheduled for April 8/9, represent share capital and no protection of private savers. Dexia's shares. 2009. However, due to the dilution of existing shareholdings uncertainty of the outcome of takes place, but include the right The Belgian Minister of Finance At the extraordinary general judicial proceedings relating to of the Flemish government to will determine the terms and meeting of shareholders held on the number of shareholders that have two seats on the board of conditions of the State June 24, 2009, the shareholders may vote on this new directors of KBC Bank. guarantee, such as the gave their approval to increase agreement, the shareholders guaranteed amount and the fee the capital under the condition meeting had been postponed KBC confirmed that the closing payable by the guaranteed that (i) Dexia issues warrants or until April 28/29, 2009. of the deal with the Flemish entity, on a case-by-case basis. participating bonds, and (ii) the government of January 22, 2009 contribution in kind by the Finally, on April 28 and 29, took place on July 20, 2009. Dexia Bank State Guarantee French and Belgian government 2009, the shareholders meeting of their right to recover the held in Ghent and Utrecht In July 2009 the Flemish Belgium (60.5% or €90,75 guarantees granted to Dexia. (which included all existing Government decided to inject billion), France (36.5% or €54,75 shareholders) voted in favour of another €2 billion into KBC. billion) and Luxembourg (3% or KBC the deal with BNP Consequently, KBC issued a €4,5 billion) guarantee all new Paribas.Currently, a group of state bond for a term of 3.5 or 7 issues of bonds subscribed for The extraordinary general minority shareholders is still years, to which only institutional by institutional investors, meeting of shareholders, held exploring the different legal investors may subscribe. interbanking deposits and on April 30, 2009, approved the possibilities to challenge the certain financial products (with a proposal of the Board of Fortis deal.1 C. A cross-border merger duration of less then three Directors to renew the between KBC Bank NV and years) for Dexia NV, Dexia Bank authorized capital for an amount On May 12, 2009, the European KBC Bank Netherland NV has Belgium, Dexia Banque of €900 million for a five year Commission approved additional been realized with effect on May Internationale Luxembourg and period. aid measures from the Belgian 1, 2009. Consequently KBC Dexia Crédit Local de France and Luxembourg States Bank Nederland NV has ceased until October 9, 2009. The State stemming from amendments of to exist as a legal entity as from guarantee can be extended for the agreement between Fortis May 1, 2009. one year. Holding, BNP Paribas, Fortis Bank and the Belgian and D. On September 14, 2009, The Governments of Belgium, Luxemburg authorities. KBC Bank launched tender France and Luxembourg have offers in certain contries in reached an agreement with On September 29, 2009, BNP Europe and in the USA to Dexia on the extension of the Paribas announced a capital repurchase four series of State guarantee for one year increase in the amount of outstanding hybrid Tier-1 (i.e. until October 31, 2010). EUR4.3 billion. The Belgian securities at 70% of their face

BELGIUM

PURCHASES OF TROUBLED SPECIAL CENTRAL BANK RECAPITALIZATION FINANCIAL ASSETS OR GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES INSTITUTIONS OTHER MEASURES Such agreement provides, Government, decided on value. If all outstanding however, for the reduction of the September 30, 2009, to securities would be bought back, guarantee from EUR150 billion participate (partially) to such the impact on the core Tier-1 to EUR100 billion and the capital increase. The Belgian ratio would be of +0.25%. The extension of the duration of the State holds 11.5% of the capital repurchase of three of the four products guaranteed to a of BNP Paribas. It would sell a series of outstanding hybrid maximum of four years (instead part of its subscription rights and Tier-1 securities was concluded of three). use the profits from such sale to on September 25, 2009 and subscribe to new shares. The approximately 70% of the France (38%) and Belgium operation will hence have no outstanding amount of these (62%) have also decided to impact on the State budget and hybrid loans was repurchased. grant a State guarantee to FSA, will allow the Belgian State to the US subsidiary of Dexia avoid having its participation Kaupthing Bank - Interstate Bank. Such guarantee will cover severly diluted. The Belgian Loan from Belgium to the financial product portfolio of State's participation after the Luxembourg FSA (US$16,5 billion, managed operation would be of 10.8%. by FSA Asset Management) The Belgian Government has against an initial loss of US$3,1 Dexia S.A. decided to lend €160 million to billion that exceeds the existing the Luxembourg Government. financial reserves of US$4,4 The Belgian, French and This loan facility forms part of billion. The existing liquidities of Luxembourg Governments and the reorganisation of Kaupthing FSA remain guaranteed by an other investors invested a total Bank Luxembourg SA and existing guarantee facility of of €6.4 billion in Dexia,3 a intends to safeguard the Dexia Bank. specialist in lending to local repayment of deposits to the governments in Europe. Dexia clients of Kaupthing Bank Fortis Bank State Guarantee announced on October 20, 2008 Luxembourg SA, including the that it would seek regulatory clients of its Belgian branch. The Belgian government has approval to create a balance The European Commission granted a State guarantee to the sheet for its holding company gave its approval of the Belgian benefit of Fortis Bank for an and merge its three national state loan on July 9, 2009. amount of €150 billion. balance sheets into one, indicating that it is intent on As of October 2008 the KBC Bank State Guarantee avoiding a break-up along Kauphting savings accounts national lines. were blocked. On July 16, 2009, The Government decided on the accounts were released and May 13, 2009 to grant to KBC a Following the authorization of the Kauphting savers can guarantee on a portfolio of the European Commission, the consult and operate their structured products of an initial Belgian, French and accounts via Keytrade, the value of €22.5 billion. The Luxembourg Governments internet bank of the guarantee mechanism is signed, on November 19, 2008,

BELGIUM

PURCHASES OF TROUBLED SPECIAL CENTRAL BANK RECAPITALIZATION FINANCIAL ASSETS OR GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES INSTITUTIONS OTHER MEASURES structured as follows: an agreement settling the Landbouwkrediet group. modalities of the temporary guarantee plan granted by the The Bill on the Recovery of • A first tranche of potential three States on October 9, 2008. the Economy losses of up to €5.7 billion shall be borne by KBC; The transfer of FSA Holdings, As a result of the financial crisis • A second tranche for which the US entity of Dexia, was and within the framework of the KBC may either bear the concluded on November 14, European recovery plan, the losses or, to this end, 2008 between Dexia and Belgian Government introduced increase its net assets, the Assured Guaranty Ltd. On July a Bill on February 3, 2009 Belgian State undertaking to 1, 2009, Dexia confirmed the providing for financial measures, subscribe to a capital closing of the sale of FSA social measures, measures increase of up to €2 billion; Holding Ltd to Assured Guaranty relating to work and measures • The third tranche of risk Ltd. The total sale price is of concerning energy. shall be borne at 90% by US$816.5 million of which the Belgian State and at US$546 milion have been paid The Bill on the recovery of the 10% by KBC for losses in cash and the rest in ordinary economy provides, amongst realized beneath a portfolio shares of Assured Guaranty Ltd. other things, that: value of €14.9 billion. representing 13.9% of the latter's share capital. - the holders of stock options Such a hybrid guarantee can, in agreement with the mechanism allows limitation of Assured Guaranty decided to company and subject to certain the volatility of the structured take part in the U.S. government conditions, expand the time products portfolio while program in which public and frame pursuant to which they maintaining the net assets of private bodies cooperate in may exercise their options, group KBC on a sufficient level buying toxic credit products. without additional taxes being in the context of the current Indirectly, this causes Dexia to charged. The extension market. possess again the bad credits is,however, limited to options up that they had intended to to €100,000; dispose of in the first place by Both second and third warrantee selling FSA Holdings to Assured - insurance policies against tranches shall be remunerated Guaranty. commercial and country risks at arm's length. Such are exempt from Belgian remuneration shall be spread Dexia has put its French life insurance tax. over time. insurance subsidiary, Dexia Epargne et Pension, up for sale. New 'Chapter 11 like' Flemish State Guarantee for Potential buyers are Swiss Life, Restructuring Law SMEs loan facilities the French insurance company Suravenir and La Mondiale, a Given the financial and The Flemish Government has economic crisis, and in order to protect debtors from their

BELGIUM

PURCHASES OF TROUBLED SPECIAL CENTRAL BANK RECAPITALIZATION FINANCIAL ASSETS OR GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES INSTITUTIONS OTHER MEASURES implemented a new guarantee subsidiary of Crédit Mutuel. creditors in a more efficient and system for the benefit of SMEs flexible way, the 1997 judicial located in the Flanders region composition law has been that are in need of funds but replaced by the law of January unable to obtain such funds 31, 2009 relating to the because of the lack of valuable continuity of companies. This security. law has been in force since April 1, 2009. The Flemish guarantees can be issued for the benefit of a The law establishes a new Belgian company located in the framework for debtors that face Flemish region that qualifies as continuity risks and seek court an SME and in which no more permission for a judicial than 25% of share capital is held restructuring. The aim of the by a non-SME. Since the judicial restructuring is to enable Flemish Government the debtor to: guarantees the loan facility, the loan must serve an investment - conclude a settlement in the Flemish region and at agreement with two or more of least two-thirds of the loan must its creditors. Such settlement will be in the form of a term loan (for be protected against certain more than one year). A one-way avoidance rules in case of the fee is due by the SME in return debtor's later bankruptcy. There for the guarantee. is also a significant tax incentive, as a waiver of debt agreed in the As a rule, an SME can obtain context of such settlement is not such guarantee up to a taxable for the debtor, although maximum amount of €500,000, remaining fully deductible for but exceptions are possible. The Belgian corporate creditors guarantee can relate to (subject to further rules to be maximum of 75% of the provided for by a Royal Decree); repayment obligations of the SME under the loan facility. The - obtain the consent of its bank is responsible for seeking creditors to a collective coverage for the remaining 25%. restructuring plan for a maximum of five years. If Nineteen Belgian financial approved by the majority of the institutions have already signed creditors representing the up for the Flemish guarantee majority of the claims, this plan will be binding upon all creditors;

BELGIUM

- Bank J. Van Breda & Co; - transfer the whole or part of its business or activities. - Dexia Bank; Key features of the new judicial - Ethias Bank; restructuring procedure are:

- Fortis Bank; - the flexible condition for opening of the procedure: a - ING Belgium; threat to the immediate or future continuity of the debtor's - KBC Bank; and business or activities (or part thereof) is sufficient; - Rabobank Shipping. - debtor-in-possession: the Gemeentelijke Holding NV debtor maintains, as a rule, the management over the company The Belgian Government has during the restructuring agreed to guarantee the procedure; outstanding loans of Gemeentelijke Holding NV, a - protecting the debtor and its shareholder of Dexia. These assets: as of the request for a loans were entered into with a judicial restructuring, the debtor view to strengthening the cannot be declared bankrupt or financial position of Dexia. The wound up by court order. In State guarantee is granted for a addition, any enforcement principal amount of €800 million, against the debtor's assets for with the termination date in prior claims is prohibited; and August 2009. - restricted court involvement.

- the position of secured creditors is diluted in such a way that they cannot enforce their rights during a judicial restructuring. However, existing financial collateral and netting arrangements remain unaffected to the extent that these arrangements fall under

BELGIUM

Cover for losses

On June 18, 2009, a new Bill was introduced in Parliamant. This Bill aims at increasing the powers of the Belgian Government to provide cover for losses of financial institutions due to the financial crisis. The new provision states that the government may provide State cover for losses incurred on certain assets and financial instruments.

1 A group of minority shareholders is taking legal action against the approval of the Fortis deal with BNP Paribas. A number of institutional shareholders gave proxies to Fortis Holding in order to represent and vote on their behalf during the latest general meeting of shareholders which approved the deal with BNP Paribas. According to the minority shareholders, Fortis was compelled to publish a transparency declaration since Fortis was authorized to represent at least 7% of the share capital. Fortis Holding refutes the argument by pointing out that the represented shareholders did not act by mutual agreement.

2 On October 13, 2008, the Belgian State declared that a special fund will be established to which the Belgian State will allocate a part of the possible increase in value and of the profits from its participation in BNP Paribas between the issuance of these new shares and the general assembly date of the BNP Paribas group which will decide on the 2013 dividend distribution. Natural persons that were Fortis shareholders on July 1, 2008 will have the possibility to receive shares in such fund subject to specific conditions and procedures. 3 Of the €6.4 billion, the Belgian Federal Government, the three Regions and the three institutional shareholders (namely Gemeentelijke Holding NV, Arcofin CV and Ethias) have agreed together to jointly invest €3 billion each for the following amounts: (i) the Belgian Federal Government invests €1 billion, (ii) the 3 Regions invest €1 billion, and (iii) the current institutional shareholders invest €1 billion, each in the following amounts: Gemeentelijke Holding NV for €500 million, Arcofin CV for €350 million and Ethias for €150 million. The Flemish Government declared on November 19, 2008 that it is ready to support Gemeentelijke Holding NV by granting a guarantee of up to €200 million.

BRAZIL

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES No changes have been made to On September 24, 2008, the On October 2, 2008, the Foreign Exchange Market the deposit guarantees rules. In Brazilian Central Bank ("BCB") Brazilian Central Bank (the the event of a financial announced that the compulsory "BCB") started to stimulate the The BCB has intervened in the institution's bankruptcy or reserve deposit rates relating to acquisition of credit portfolios of foreign exchange market insolvency, the Brazilian leasing transactions would be small financial institutions by (Mercado de Câmbio), with financial system currently relies kept at a 15% rate, even though authorizing the deduction of US$7.2 billion (spot on the Credit Guarantee Fund a BCB rule provided for the 40% of the compulsory reserve transactions), US$5.8 billion (Fundo Garantidor de Crédito), increase to a 20% rate in deposits to be made by the (financing export transactions), maintained by financial September 2008.6 BCB acquiring institutions. US$29.4 billion (swap institutions, to guarantee each estimates that such measure will transactions) and US$5.5 billion and all deposits in their bank keep R$8 billion in the economy. On October 6, 2008, the (sale of US$ with repo accounts, with a maximum cap Furthermore, on the same date, Brazilian Government enacted obligation). of R$ 60,000.00 per bank the BCB increased the reserve Provisional Measure No. 442 account.1 exemption limit (baseline) from (Medida Provisória 442)2, which Brazilian Sovereign Wealth R$100 million to R$300 million,7 authorizes the BCB to buy credit Fund On March 26, 2009, the National which if surpassed, causes the portfolios of financial institutions Monetary Council (the "CMN") banks to deposit in the BCB an that are facing difficulties and On December 24, 2008, under raised, by means of Resolution "extra compulsory reserve" reduced the collateral for such Law No. 11,88718, the Brazilian No. 3.692,18 the maximum cap portion over the savings, spot an acquisition. Sovereign Wealth Fund ("FSB") of the guarantee provided by the and term time deposits. BCB was formally created. This fund FGC to investors that acquire estimates that such a measure On October 16, 2008, the BCB will inject resources from the Bank Depositary Receipts would inject R$5.2 billion into extended the rules for the Brazilian Federal Government (CDB) from small and medium- the economy. compulsory reserve deposits. budget into investments mainly sized financial institutions. This Besides selling their credit involving Brazilian companies cap was raised from R$60,000 On October 8, 2008, the BCB portfolios and their interests in doing business abroad. to R$20 million per investor. reduced the compulsory reserve investment funds, smaller banks The CMN expects that this will deposit rates. The additional will be able to sell other assets Export Financing provide the economy with rates on spot and time deposits such as (i) fixed income additional credit and reduce the were reduced from 10% to 5% securities, advances and other On April 3, 2009, the BCB, by banking spread, by raising the (which should inject R$13.2 credits from individuals and non- means of resolution No. competition among banks. billion into the economy). financial and legal entities; and 3.691/2009,19 started a new type Additionally, the reserve (ii) inter-finance deposit with of "auction" for the sale of U.S. exemption limit was raised from warranties for the assets dollars, making up to US$2 R$300 million to R$700 million8 described in the previous item or billion available to the market. (with an estimated impact of credit operations.3 This new type of auction does R$6.3 billion into the economy). not require from the buyers the On October 22, 2008, the specific use of the resources on On October 13, 2008, the BCB Brazilian Government enacted foreign trade transactions (as announced the plans for the Provisional Measure No. 443 previously required in ordinary integral release of the reserve (Medida Provisória 443)4, which US dollars "auctions"). As a payments over time deposits, permits Banco do Brasil S.A. result, instead of using the

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SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES inter-finance deposits and over and the Brazilian Federal resources made available by the the additional liabilities of call Savings Bank (Caixa Econômica BCB to finance the foreign trade and time deposits, totaling Federal) to acquire interests in transactions, the banks are now R$100 billion.9 private banks and construction able to use these funds to companies. Furthermore, the finance any kind of debt of On October 14, 2008, the BCB government reduced to zero the Brazilian companies in a foreign established the reduction from Financial Transactions Tax currency. 45% to 42% of the compulsory (IOF) rate on foreign reserve deposit to be made by investments in the stock market On August 19, 2009, the the financial institutions to the and on foreign financing.16 Brazilian Government BCB over the spot deposits announced an agreement with without compensation (injecting On October 31, 2008, the BCB the Argentinean Government R$3.6 billion into the modified the on-lending method establishing a Reais (R$) for economy).10 for the compulsory reserve Pesos ($) swap line, equivalent deposits regarding term deposits to US $ 1.8 billion. By such On October 27, 2008, the BCB from 100% in bonds to 30% in measure the Brazilian allowed the deduction of the bonds and 70% in cash. This Government intends to reserve payment over call measure aims at stimulating strengthen the Argentinean deposits for banks that acquisitions of credit portfolios economy and therefore avoid a voluntarily advance installments and other assets from small- reduction of the international of the ordinary contribution to and medium-sized financial trade between both countries the FGC (Fundo Garantidor de institutions by large institutions.5 during the current financial Crédito).11 crisis.

On November 13, 2008, the Investments and Production BCB announced a modification Financing in the payment method of the additional enforceability of the Aiming at the financing of reserves over call, time and investments and production, the savings deposits.12 This following measures were taken: payment, that was performed in the maintenance of the BNDES cash and compensated by the goal of R$90 billion in credit; SELIC tax, shall be performed in keeping the long-term interest public bonds from December 1. rate ("TJLP") at 6.25%; and The rates for the additional granting the Merchant Marine enforceability continue to be 5% Fund an additional R$10 billion. for call and time deposits and 10% for savings deposits, which On January 22, 2009, the totalizes a total amount of Federal Government was R$40 billion. Such measure, authorized, by means of according to the BCB, aims the Provisional Measure No. 453, to

BRAZIL

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES recomposition of the volumes of grant additional funds in an the reserves paid in bonds that amount of up to R$100 billion to prevailed before the reserve the BNDES,24 for its lending modifications were announced activities. It is an attempt to on October 30.13 ensure cheaper credit to companies, enabling them to On November 25, 2008, the keep their investment plans (i.e., BCB announced new changes having Petrobras keep its to rules regarding the investment plans of R$20 billion compulsory deposits (private for the next few years). On May and public banks that invest 14, 2009, the Brazilian funds in BNDES' inter-bank Government enacted Provisional certificate of deposits ("CDI") will Measure No. 46220 establishing be able to deduct such amount a reduction of 150 basis points from the compulsory deposits), on the annual interest rate paid with an estimate of an additional by the BNDES in relation to the R$6.2 billion to the BNDES.14 loans granted by the National Treasury to BNDES. As a result, On December 18, 2008, the BNDES decided to lower the CMN amended the by-laws of costs of the short-term loans the FGC,15 allowing the FGC to granted to companies, in an invest a maximum of 50% of its attempt to compel private banks net worth in the acquisition of on doing the same. More credit portfolios of small and recently, on June 29, 2009, the medium-sized banks. Before this Brazilian Government enacted measure, such acquisitions by Provisional Measure No. 46521 FGC were limited to 20% of its providing an additional reduction net worth. of 100 basis points on the annual interest rate paid by the In order to stimulate the BNDES to the National acquisition of small-sized banks' Treasury. Additionally, on June credit portfolios by larger 29, 2009, the CMN approved, by financial institutions on means of resolution No. 3.74322, December 26, 2008, the CMN a reduction from 6.25% to 6% of enacted Resolution No. the Long Term Interest Rate 3,67317, establishing that the "TJLP". new accounting rules for the registration of financial assets by Changes to Tax on Financial banks will only be valid as of Transactions January 1, 2010 (previously such rules were to be valid as of On December 12, 2008, Decree

BRAZIL

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES January 1, 2009). The CMN No. 6.691/08 provided for the understands that the current reduction from 3% to 1.5% per accounting rules are simpler and annum of rate of the Tax on therefore stimulate the Financial Transactions ("IOF") acquisition of risky credit levied on loans and financings portfolios of small banks by granted to individuals. larger institutions.

On December 30, 2008 (in an extraordinary meeting), the CMN decided to make changes in the calculation of the financial institutions' Reference Networth (Patrimônio de Referência) relating to leasing transactions. With this measure, CMN expects an estimated impact of R$40 billion into the economy.

On January 21, 2009, the BCB Monetary Policy Committee ("COPOM") reduced the SELIC basic interest rate from 13.75% to 12.75% per year. COPOM expects to stimulate the economy by such reduction of the interest rate. On March 11, 2009, the COPOM reduced the SELIC basic interest rate from 12.75% to 11.25% per year. On April 29, 2009, the SELIC basic interest rate was reduced from 11.25% to 10.25% per year. On June 10, 2009, the SELIC basic interest rate was reduced from 10.25% to 9.25%. More recently, on July 22, 2009, the SELIC basic interest rate was reduced from 9.25% to 8.75% per year.

On March 4, 2009, the CMN

BRAZIL

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES enacted Resolution No. 3.689,17 allowing BCB to use its international reserves for granting loans in foreign currency to Brazilian banks. The CMN expects that this will enable Brazilian banks to grant loans in foreign currency to Brazilian companies with debts abroad.

On June 29, 2009, CETIP S.A. clearing house enacted Communication No. 057/0923 announcing a new system for the registration of derivative transactions. The new system shall require more detailed information regarding the derivative transactions which are registered with CETIP from financial institutions and shall bring more transparency and disclosure for such transactions.

On June 10, 2009, the Brazilian Government announced its intention to grant a US$10 billion loan in favor of the International Monetary Fund ("IMF") using the resources of the Brazilian international reserves. This loan shall be structured with the issue of IMF bonds and IMF shall use the funds to stimulate the world economy.

1 For Resolução CMN No. 3251/2004, see https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=104212266&method=detalharNormativo. For Resolução CMN No. 3400/2006, see https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=106276675&method=detalharNormativo.

2 For Provisional Measure No. 442, see: http://www.planalto.gov.br/ccivil_03/_Ato2007-2010/2008/Mpv/442.htm - to be voted in the Senate. Also see Resolução Bacen No. 3622 https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=108098613&method=detalharNormativo. 3 Circular Bacen No. 3414. See https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=108100557&method=detalharNormativo. 4 For Provisional Measure No. 443, see: http://www.planalto.gov.br/ccivil/_Ato2007-2010/2008/Mpv/443.htm. 5 Circular Bacen No. 3417/2008. See https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=108105748&method=detalharNormativo. 6 The BCB had increased the percentage of the compulsory reserve deposits relating to leasing operations, starting at 5% in May, 2008 up to 25% in January 2009 (estimated). After the crisis, the BCB kept the compulsory reserve deposits relating to leasing transactions on a 15% rate, with expectation for future increases only in January, 2009. 7 Circular Bacen No. 3405/2008. See https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=108093173&method=detalharNormativo. 8 Circular Bacen No. 3408/2008. See https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=108098141&method=detalharNormativo. 9 Circular Bacen No. 3412/2008. See https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=108099445&method=detalharNormativo. 10 Circular Bacen No. 3413/2008. See https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=108099939&method=detalharNormativo. 11 Circular Bacen No. 3416/2008. See https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=108104119&method=detalharNormativo. 12 Circular Bacen No. 3419/2008. See https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=108110963&method=detalharNormativo. 13 Circular Bacen No. 3417/2008. See https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=108105748&method=detalharNormativo. 14 Circular Bacen No. 3421/2008. See https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=108114236&method=detalharNormativo. 15 For Resolução CMN No. 3639/2008, see https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=108114725&method=detalharNormativo. 16 On March 3, 2009, the Provisional Measure No. 443 was converted into Federal Law No. 11.908. 17 For Resolution 3.689 see: https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=109016504&method=detalharNormativo. 18 For Resolution 3692 see: https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=109023546&method=detalharNormativo. 19 For Resolution 3.691/2009 see: https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=109022058&method=detalharNormativo. 20 For Provisional Measure No. 462 see: https://www.planalto.gov.br/ccivil_03/_Ato2007-2010/2009/Mpv/462.htm. 21 For Provisional Measure No. 465 see: https://www.planalto.gov.br/ccivil_03/_Ato2007-2010/2009/Mpv/465.htm. 22 For Resolution 3743 see: https://www3.bcb.gov.br/normativo/detalharNormativo.do?N=109052966&method=detalharNormativo. 23 For Communication No. 057/09: https://www.cetip.com.br/comunicados/ccetip/2009/ccetip2009-057.pdf. 24 On June 16, 2009, Provisional Measure No. 453 was converted into Law No. 11.948.

BULGARIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES By means of an amendment to As of December 1, 2008, the On November 4, 2008, the the guarantee of the Bank Central Bank decreased the Bulgarian Government1 decided Deposits Act, effective as of minimum amount of required to increase the capital of the November 17, 2008, the bank reserves to 10%. Bulgarian Development Bank (a protection given to savings by State-controlled bank aimed at the Fund for guaranteeing Bank Starting January 1, 2009, the supporting the SME and local Deposits was increased from Central Bank will decrease the banks) by BGN100,000,000. BGN40,000 to BGN100,000 minimum amount of required The capital is to be used mainly (approximately €50,000). bank reserves for funds for lending credits to the banks. attracted from abroad to 5%. A new Act on the State Fund for Starting January 1, 2009, the Guaranteeing the Stability of the Central bank will waive the State Pension System was obligation for required minimum enacted and entered into force bank reserves for funds as of November 17, 2008. The attracted from the Government Fund is aimed at achieving and or from municipalities. guaranteeing stability of the State pension system through accumulating, investing and transferring of additional financial means to the budget of the State pension system. The Minister of Finance as well as other members of the Government have been granted leading roles in the management of the new Fund. Representatives of the national employers' and employees' organizations will also participate in the management of the Fund.

1 The Bulgarian Prime Minister gave a brief oral presentation of the Anti-crisis Government Measures Programme. However, there is no official announcement, published structured document, or any consistent legislative changes initiated, other that those specified above. There have been some discussions on certain aspects of this programme, none of which have been promulgated as enforced statutes.

CANADA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES The Canadian Lenders The Canada Deposit Insurance In coordination with other major The 2009 Federal Budget On October 10, 2008, the On November 11, 2008, Assurance Facility announced Corporation ("CDIC"), a federal central banks, Canada's central proposed a framework for the Ministry of Finance announced a changes were announced to the on October 23, 2008, that it will Crown corporation, insures bank, the Bank of Canada, Canadian Government to inject program to provide additional regulatory capital requirements insure certain categories of deposits at member institutions, lowered its key lending rate by capital directly into federally liquidity to Canadian financial for banks and other federally- senior unsecured wholesale which include most Canadian 0.5% on October 8, 2008, 0.25% regulated financial institutions. institutions through the purchase regulated, deposit-taking debt with a term to maturity of at chartered banks, as well as on October 21, 2008, 0.75% on Proposed amendments to the of up to $25 billion of mortgage- institutions. Debt covered by the least three months. Institutions various other deposit-taking December 9, 2008, 0.5% on federal Financial Administration backed securities. On Canadian Lenders Assurance eligible to participate in the institutions. The CDIC protects January 20, 2009 and 0.5% on Act authorize such capital November 12, 2008, the Ministry Facility and similar foreign facility include (i) deposit-taking funds in savings and checking March 3, 2009. This was injections. of Finance announced that the programs can now be assigned financial institutions accounts, and term deposits followed by a further 0.25% rate purchase program would be the same risk weighting for incorporated, amalgamated or with a term of less than five cut on April 21, 2009, leaving increased from C$25 billion to regulatory capital purposes as continued under the federal years, for as much as the rate at 0.25%. The Bank of C$75 billion. The size of the the debt of the sovereign Bank Act or Trust and Loan C$100,000 (US$91,470). Canada has indicated that, program was further increased guarantor during the term of the Companies Act, (ii) associations conditional on the outlook for to C$125 billion as part of the guarantee even if that term is and central cooperative The 2009 Federal Budget tabled inflation, the key lending rate 2009 Federal Budget. less than the term to maturity of societies regulated under the on January 27, 2009 proposed can be expected to remain at its the debt. Also, an additional federal Cooperative Credit to provide the CDIC with greater current level until the end of the Since the underlying mortgages 10% of Tier 1 capital may be Associations Act, and (iii) on the flexibility to enhance its ability to second quarter of 2010. already carry guarantees composed of qualifying approval of the Minister of safeguard financial stability in backed by the Canadian preferred shares (the former Finance, provincially regulated Canada including the following: The Bank of Canada has Government, there is no maximum of 30% has been central cooperative credit increased the amount of liquidity incremental risk to the federal increased to 40%). societies. This insurance will ▪ allowing the CDIC to establish it makes available to financial Government in the purchase of cover principal and interest a bridge institution to preserve institutions, has expanded the these securities. The Canadian Government payments on eligible debt critical functions and help scope of institutions eligible to partnered with the governments instruments for up to three years support financial stability in the participate in its liquidity facilities The purchases are being of Ontario, Alberta and Quebec from the date of issue. event a CDIC member is no and has expanded the types of undertaken through a series of to provide a senior funding longer viable; collateral it accepts. competitive auctions. facility to support the January The facility will charge premiums Approximately C$50 billion of 21, 2009 closing of the C$32 that are intended to approximate ▪ increasing the CDIC's In April 2009, the Bank of mortgage-backed securities billion restructuring of non-bank commercial terms. The facility borrowing limit from C$6 billion Canada outlined a framework for have been purchased to date. sponsored asset-backed will charge a base annualized to C$15 billion to reflect the quantitative easing or credit commercial paper. Media premium of 110 basis points (the growth of insured deposits; and easing, should additional reports indicate that the size of previously announced premium stimulus be necessary. the senior funding facility was in of 135 basis points was reduced ▪ granting the Minister of the range of C$3.5 - C$4.5 in an effort to make the program Finance the power to direct the billion. more competitive with similar CDIC to take specific action to foreign programs), with prevent adverse effects on The 2009 Federal Budget surcharges depending on the financial stability. contained a number of other credit rating of the issuing measures designed to improve institution and an additional access to financing, strengthen surcharge for debt that is not Canada's financial system and

CANADA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES denominated in Canadian stimulate the economy including dollars (on November 13, 2008, the following: the Canadian Government announced a temporary waiver ▪ committing C$13 billion in of the surcharge). The additional financing by Canadian Government has increasing the capacities of extended the period for issuing certain financial Crown guaranteed instruments from corporations including Export April 30, 2009 as originally Development Canada ("EDC") announced to December 31, and the Business Development 2009. There is a limit on the Bank of Canada; amount of insurance available to each institution, based on the ▪ creating the C$12 billion amount of wholesale debt of the Canadian Secured Credit institution maturing in the next Facility to support financing of six months, and on the amount equipment and vehicles by of deposits held by the businesses and consumers (on institution. June 8, 2009, the Minister of Finance announced that The Ministry of Finance has allocations under the CS$1- indicated that the facility was billion Small Enterprise Tranche introduced in order to ensure of the Canadian Secured Credit that Canadian institutions are Facility have been made, not disadvantaged in global ensuring the facility reaches capital markets relative to banks smaller participants in the loan in other jurisdictions that have and leasing market); access to a government guarantee. ▪ establishing the Canadian Life Insurers Assurance Facility to Dominion Bond Rating Services guarantee wholesale term has indicated that it will assign a borrowings by life insurers by AAA long-term rating with a way of a model similar to the stable trend to eligible debt Canadian Lenders Assurance instruments to be issued by Facility; eligible deposit-taking financial institutions covered by the ▪ providing approximately C$8 CLAF. billion to stimulate housing construction and C$12 billion in On May 22, 2009, the Minister of new infrastructure funding over Finance announced the launch a period of two years; and of the Canadian Life Insurers

CANADA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Assurance Facility (CLIAF), ▪ tax cuts totalling C$20 billion which is intended to assist life over the next six years. insurance companies in accessing debt markets on With the passing of Bill C-10 on competitive terms by insuring March 12, 2009, the their wholesale term borrowing. Government of Canada has provided for a two-year Life insurance companies expansion of EDC's mandate to regulated by the Office of the help increase access to credit Superintendent of Financial for Canadian companies. Institutions are eligible to participate in the CLIAF, as are, This expansion is intended to with the Minister's approval, allow EDC to support domestic fraternal benefit societies and trade by participating in provincially regulated life domestic financing and insurers. Instruments eligible to insurance with private sector be guaranteed under the CLIAF financial institutions, private include newly-issued insurance providers and the commercial paper, bearer notes surety industry. and senior unsecured bonds and notes in which the EDC and National Bank underlying debt has been issued Financial Group announced on by a related entity. Other new May 5, 2009 that National Bank senior unsecured marketable of Canada became the first wholesale instruments may be major Canadian financial eligible subject to the Minister's institution to adopt EDC's approval. Eligibility for the CLIAF enhanced Export Guarantee requires a minimum issuance Program, enabling it to advance size of CS$1million for more loans to Canadian small- Canadian-denominated and medium-sized enterprises. issuances and CS$10 million for For loans up to and including foreign-denominated issuances. C$500,000, EDC has increased Further, instruments must have the coverage to banks to a a minimum term of three months maximum of 90 percent, from 75 from the date of issuance and percent. For loans between the guarantee will apply for a C$500,000 and C$10 million maximum of three years. inclusive, EDC now covers up to 75 percent, compared to 50 percent previously.

DENMARK1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Bank Aid Package I Almost all Danish banks are The Danish Central Bank issued Bank Aid Package I The social pension fund (Den In response to the financial participating, including Danske, more than DKK60 billion (c.€8 Sociale Pensionsfond) was situation at the time of The Bank Aid Package I is Nordea, Jyske and Sydbank (the billion) in Danish treasury bonds The Danish Government will set given a mandate to purchase up December 6, 2008, the designed to guarantee creditors four largest banks by market with a 4.5% coupon aimed at a up a new liquidation company to DKK22 billion one-year president of the Danish Central and depositors in distressed capitalisation in Denmark). balanced, low-risk investment (Afviklingsselskabet til sikring af property mortgage bonds at the Bank, Nils Bernstein, spoke at banks. The package is regulated Foreign branches of Danish for Danish pension funds. As a finansiel stabilitet A/S, "the December 2008 auction. the annual meeting of the through the Financial Stability banks may be covered if local result the pension funds Liquidation Company") that will Danish Bankers' Association on Act which requires banks to be banks are subject to a similar changed their investments from benefit from a State guarantee The rationale was that the state- the topic of economic initiatives members of the DPB (as defined scheme. euro-based treasury bonds to which will take on defaulted guaranteed mortgage bonds for in the banking sector. below) in order to participate in Danish treasury bond, which obligations of a participating social housing were expiring, the newly established guarantee The Danish State has also strengthened the Krone. bank. and as the State bears the Mr. Bernstein addressed the scheme. The DPB is a guaranteed all bank deposits of interest rate risk on social correlation between the already necessary contributor to the members of the DPB, so that all Exchange Rate The purpose of the liquidation housing, the Social Pension existing guarantee scheme and guarantee scheme. claims by "depositors and other company is to ensure the Fund might as well take part in the potential of a new financial ordinary creditors" are covered. The Danish Central Bank has a covering of all claims by the auction. aid package. Such an aid Det Private Beredskab The DPB contributes a total of fixed exchange rate policy "depositors and other ordinary package would lower the risk of DKK30 billion (c.€4 billion) (ERM2) with the ECB regarding creditors" where the distressed This had an immediate effect the State and the DPB and will DPB (Det Private Beredskab) is towards the risk over the two the Euro. If the exchange rate bank is a member of the DPB. It and the interest rate of the one- limit the damage for which the a non-profit private banking year duration period; whereas varies more than +/- 2.25% of will then found a subsidiary year property mortgage bond State and the DPB are liable. association, whose purpose is to the Danish State will cover the central rate, the Danish whose task will be to wind down fell. Many private homeowners help wind down distressed amounts above that without any Central Bank is empowered to the company by transferring its enjoyed a spin-off benefit from The suggestion has been the banks, savings banks and co- limitation (see recapitalization increase the benchmark lending assets and liabilities to a buyer. this measure. inspiration for new legislation, operative banks, as an measures). rate and/or to perform an If the DPB receives funds in the commonly known as Bank Aid alternative to bankruptcy. The intervention of the Krone. form of liquidation proceeds, etc. The Liquidation Company is Package II. Please see the DPB is founded by the Danish Some niche banks have chosen when winding down a bank, it currently shareholder in 60 column "recapitalization Banker's Association not to participate in the DPB and In the time of financial instability must repay the DPB members financial institutions. One fourth measures" for more information. (Finansrådet), which represents the guarantee scheme. These the ERM2 has had a significant proportionately to their of these are listed on the Danish the common interests of the being; DnB Nord Bank A/S, influence on the benchmark respective contribution stock exchange, NASDAQ Prolonged VAT and Tax financial sector vis-à-vis the Dansk Autoriseret Markedsplads lending rate activity and on the commitment. OMX. The total market value of payment credit public, the legislators and the A/S, Ekspresbank A/S, foreign currency reserve. the financial institutions amounts authorities. Lægernes Pensionsbank A/S Members of the DPB will to c.DKK350 billion (c.€47 The Government has given all and Leasing Fyn og Factoring The Danish Central Bank has contribute DKK7.5 billion billion). companies the possibility of According to Danish law, an Bankaktieselskab increased its reserves of foreign (c.€1 billion) per annum, payable delaying their VAT and Tax association becomes a legal currency in order to strengthen monthly as a fee for the Roskilde Bank payments by one month. This is entity after the founding general In addition, some small savings and defend the Krone. guarantee. estimated to provide the assembly has been held. The banks and many small co- When a bankruptcy of the business community with more legal relationship between its operative banks have equally Benchmark Lending Rate Additionally, DPB will initially Roskilde Bank was threatening, than DKK60 billion (c.€8 billion) members is defined in the chosen not to participate. Activity provide DKK10 billion to the the Danish Central Bank and the in extra liquidity. articles of the association. There liquidation company and is also Liquidation Company decided to is no general rule of written law With the exception of Swedish On October 24, 2008, the subject to a further take over the bank. Only the SP-Payment that applies to such Handelsbanken and Icelandic Danish Central Bank DKK10 billion to meet losses, healthy parts of the bank's

DENMARK1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES associations. Straumur-Burdaras Investment unexpectedly raised the providing for a maximum of activities were acquired, in order Through 1998 to 2003 a special Bank, all other foreign banks benchmark lending rate by half a DKK35 billion loss to the DPB to be sold in pieces later on. mandatory pension scheme was The top authority of the DPB is with branches in Denmark have percentage point to an eight- over the two-year term. implemented which meant that the board of representatives opted not to participate. year high of 5.50%, showing that Nordea Bank, Spar Nord Bank all employees were to bind 1% which decides if the DPB is to policymakers will defend the Any losses in excess of the and Arbejdernes Landsbank, of their salary to the so-called participate in the winding down Krone even as the economy funds provided by DPB will be respectively acquired nine, "SP". This has accumulated to of a distressed bank. This is risks entering a recession. met by the State. seven and five branches. approximately DKK25 billion normally done with a marginal (c.€3.3 billion). An agreement in majority. The board of From the eight year high, the Bank Aid Package II The remaining part of the Parliament means that the SP representatives is the same as Danish Central Bank has original bank has been declared amount can be withdrawn that of the Finansrådet. The consecutively cut the benchmark The purpose of the package is bankrupt. prematurely. The window for DPB is generally managed by lending rate eight times, to ensure that financial withdrawals will be June 1, 2009 the executive committee. bringing the rate to the current institutions have access to Bank Trelleborg to January 1, 2010. all time low of 1.55%. enough liquidity. Such measures In order to be eligible for are needed in order to cope with Sydbank took over Bank Tax Reductions participation in the guarantee The Danish Central Bank has the financial markets. The Trelleborg. This takeover is scheme, banks must have a followed the lead set forward by package is regulated by the Act subject to a multi-party lawsuit Taxation of the last earned banking license and be a the ECB and thereby indicated a of State Capital Injection to launched by a group of Krone will be reduced in order to member of the DPB. will to stimulate the growth Credit Institutions. stockholders that demand a increase consumption and the within the European Union. higher share price. amount available for a Members of the DPB are liable The Danish Act regarding household. This will take effect for their contribution, which is Furthermore, the strengthening financial institutions requires Ringkjoebing from 2010. fixed by reference to each of the Krone gave the Danish compliance with the stated Bank/Bonusbanken: bank's core capital. If existing Central Bank room for such rate solvency demand, with which The financing will primarily come members are to withdraw from cuts which also has narrowed some financial institutions were Vestjysk Bank took over from higher taxes on the DPB, they are still liable until the interest rate differential having difficulties complying. Bonusbanken, which had lost all contaminating environmental the end of a five-year notice between Denmark and the of its equity capital. The same activities. Denmark is thereby period. The liability can be EURO-countries to 55 basis This recent aid package gives day, Vestjysk Bank merged with thought to enhance the use of collected by the executive points. the Danish State authority to Ringkjoebing Bank, with the "green" energy. committee if the board of inject DKK100 billion (c.€13 former being the continuing representatives has decided to SWAP Agreements billion) in troubled financial company. The risk profile of financial take over a distressed company. institutions; DKK 75 billion institutions Such liabilities are earmarked to On September 29, 2008, the (c.€10 billion) to the banking Forstædernes Bank help distressed banks. Members Federal Reserve extended the sector and DKK25 billion (c.€3 The Danish FSA, on January 13, cannot be liable for more than bilateral SWAP line from US$5 billion) to the mortgage credit Nykredit Realkredit took over 2009, issued a statutory order their contribution commitment. billion to US$15 billion as well as sector. Those figures are based Forstædernes Bank. on the risks a financial institution prolonging the time-frame to upon the participation of all covered by the guarantee Up until October 13, 2008, April 30, 2009. financial institutions that are in Spar Mors scheme may take. The order current DPB members could need of capital. provides information of the elect not to be part of the On October 27, 2008, the Morsø Bank took over the maximum level of risk regarding scheme and other banks, Danish Central Bank and the The capital is provided as hybrid saving bank, Spar Mors. the lending growth, certain

DENMARK1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES including Danish branches of ECB established a bilateral core capital, which is defined as Lokalbanken accounts, large arrangements, foreign banks, could join the SWAP line of €12 billion in order a loan provided by the State. interest rate and shares. DPB and thus the guarantee to improve the liquidity of the The State requires an average Handelsbanken took over Furthermore, the order specifies scheme. Euro in the market. The bilateral interest rate on return of 10%. Lokalbanken. a requirement of a quarterly agreement is currently in use The individual interest rate is reporting with the Danish FSA. The guarantee will cover and will continue to exist as long calculated individually with the EBH Bank creditors of the participating as it is necessary. rating of the financial institution banks including holders of as a factor. The Liquidation Company took senior unsecured debt. On June 26, 2009, the Danish over EBH Bank since it was no Legislation, which has now been Central Bank and the Federal Financial institutions that apply longer capable of fulfilling the passed, has confirmed that both Reserve prolonged the existing for capital injections must have a solvency demands set by the subordinated debt (Tier 1 and temporary SWAP line of US$15 core capital percentage of 12% Danish FSA. Assets and Tier 2) and covered bonds are billion until February 1, 2010. afterwards. This obligation is to liabilities of the distressed bank excluded from the guarantee ensure a healthy financial were transferred to the scheme. sturdiness in order to withstand Liquidation Company, who will losses in the years to come and wind down the bank and its Banks participating in the to maintain a reasonable loan activities. guarantee scheme may not for portfolio. the duration of the scheme (until Fionia Bank December 31, 2010 with a The Danish FSA, on March 26, possibility of prolongation): 2009, issued a statutory order Fionia Bank and the liquidation on application requirements etc. company entered a framework a. pay dividends; This has opened up a previously agreement regarding the unknown option to convert the transfer of the banking activities b. set up new share buy-back injected hybrid core capital to in their present form to a newly programs; share capital at the request of established company. the financial institution. The c. establish new share option following requirements need to By transferring the banking programs or extend or renew be fulfilled for a financial activities and receiving a capital existing share option programs; institution to avail itself of this injection of DKK1 billion (c.€130 or option: million), the new bank should be able to continue its operations. d. give notice to wave the a) the financial institution must On May 20, 2009 the European scheme. be in compliance with the Commission approved the solvency requirements set framework agreement Furthermore, participating banks out in the Act and the must sign a statement Danish FSA must not The situation of the bank has authorising the scheme to sell assess that there is an proven worse than expected and banking activities to a buyer obvious risk that such the winding down of the bank designated by the scheme. compliance will not has been initiated. Spar Nord Bank A/S is expected to take For the above mentioned over the healthy parts of the

DENMARK1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES reason, some Danish branches continue; bank. of foreign banks have elected not to participate. b) shares of the financial institution must be listed on a regulated market; Løkken Sparekasse

c) the total hybrid core capital The lLiquidation Company and of the financial institution the Savings Bank, Løkken must represents more than Sparekasse, have entered into a 35% of its core capital; and framework agreement because the savings bank was unable to d) voting rights and ownership find a merger partner. restrictions must be cancelled. Subsequently, Nordjyske Bank took over Løkken's core If the requirements in a-d are activities from the Liquidation met, the financial institution may Company. convert upon its request. 20% of the injected hybrid core capital Gudme Raaschou can be converted at a time. A conversion can be repeated if Assets and liabilities, excluding the abovementioned share capital and subordinated requirements are still met. capital, have been transferred to the Liquidation Company. Lån The largest bank in Denmark og Spar Bank has taken over (Danske Bank) has applied for a the healthy parts of Gudme DKK 26 billion (c.€ 3.4 billion) Raachou. The winding down of loan in state hybrid core capital. the additional parts is currently Danske Bank fully owns the being executed. mortgage credit institution, Realkredit Danmark, which has applied for a DKK 2 billion (c.€ 0.25 billion) loan.

Danske Bank (the largest bank by capitalisation in Denmark) has in its application exercised the option for the right to convert hybrid core capital to share capital upon its request. If the option is exercised, the Danish

DENMARK1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES state may end up as shareholder in the bank for a value of DKK26 billion if the right to convert 20% at a time is exercised exhaustively.

The Danish Minister of Business and Economy has recently given a forecast of the Danish State's ownership in national banks if the right to convert injected hybrid core capital to share capital is fully exercised. This would lead to a State ownership of 66% of Danish banks, however the Minister states that that this scenario is highly unlikely and is not intended, thereby implying a potential sale of the shares to other investors.

1 This section is up to date as at July 24, 2009.

ESTONIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES The Government more than The Estonian Government has doubled its bank deposit agreed on a support package guarantee to €50,000 that involves almost doubling the (US$68,000) in line with other volume of state guarantees for European Union member states business loans, more than and introduced an investment doubling the volume of state pay-out guarantee up to 90% of export guarantees and various the investment to be paid out, options for state supported loan but not more than €20,000 per arrangements for exporting investor in one investment businesses as well as banks. company. The package is waiting for parliament approval.

Implementation of the measures is underway. According to the Ministry of Economic Affairs and Communications the whole package should be implemented by autumn 2009.

FINLAND

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES On December 12, 2008, the As of October 8, 2008, the The Government has set forth On October 20, 2008 financial Finnish Parliament approved the deposit guarantee limit was several amendments to the supervisors in Finland and Government's proposal to increased from €25,000 to 2009 budget and has proposed Iceland endorsed an provide guarantees for credit €50,000. The higher limit shall that altogether €20 million will be arrangement to fund the instruments issued by banks or be valid at least until the end of allocated to equity-like financial deposits in the Finnish branch of bank holding companies. 2009. The Finnish Deposit instruments, in order to ensure Kaupthing Bank h.f. According to the proposal, Guarantee Fund protects that loans to Municipality guarantees can only be granted customers' deposits in deposit Finance Plc (the only public Nordea Bank Finland plc, OP- to viable banks that meet all banks that have a license in sector owned credit institution in Pohjola Group and Sampo Bank solvency requirements. The Finland. Deposits in branch Finland) remain available for plc granted a fixed-term guarantees would be subject to offices of foreign banks acting in state-subsidized housing commitment to finance the market rates and may be drawn Finland are under the deposit production. deposits of all Finnish Kaupthing up to a total maximum of €50 guarantee of the home state of Bank depositors (about 10,000 billion. This temporary authority the relevant bank. On February 19, 2009, the customers) to the full extent to grant government guarantees Government submitted a including interest. This was a will remain in force until the end Branch offices of foreign banks proposal to Parliament for state market-based solution adopted of 2009. acting in Finland may apply for capital investment in deposit by the private sector, whereby an additional deposit guarantee taking banks. The state will offer the said banks will bear the The guarantees and market- from the Finnish Deposit banks interest bearing commercial risk and credit risk based payments collected on Guarantee Fund in order to subordinated loans, which can involved in the settlement. The these instruments will be cover a possible difference in be considered as banks' core decision did not alter the deposit governed by the Act on State the Finnish and foreign capital (Tier 1 capital). The protection principles in force in Lending and State Guarantees guarantee limit. However, in this subordinated loan will bear Finland. On October 24, 2008, (449/1988). The guarantees will case the maximum aggregate interest at a rate equalling the the Finnish Parliament granted a be granted without financial guarantee is the earlier limit interest-rate of the five-year state guarantee for the banks collateral. €25,000. Finnish Government bond plus 6 participating in the arrangement. percentage points. This guarantee covers claims for The conditions for guarantees deposits to a maximum of will include restrictions on banks' Banks that take out a €115 million. top management pay systems. subordinated loan commit themselves to paying interest The operations of Kaupthing before distributing dividends. Bank hf., Finnish Branch, terminated with effect from In addition, the conditions on January 30, 2009. The Branch subordinated loans include has repaid the above-mentioned restrictions applying to banks' loan. top management pay systems. Finland has contributed to a The Government's Budget rescue package for Iceland proposal for 2010 aims to together with Sweden, Denmark alleviate the effects of the and Norway in aggregate

FINLAND

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES economic downturn on local $2.5 billion. The loans will be government finances. The provided in relation to and in overall impact on local support of Iceland's economic government of the measures stabilization and reform program included in the budget proposal with the International Monetary is € 204 million more than this Fund (IMF). The loans are year. Central government intended to strengthen Iceland's transfers to local government for foreign exchange reserves. The basic public services will be loan agreements were signed on brought together under one July 1, 2009 between Iceland umbrella in the Ministry of and Denmark, Finland and Finance at the beginning of Sweden, and between 2010. Seðlabanki Íslands, guaranteed by Iceland and Norges Bank, guaranteed by Norway. Under the agreements the Nordic lenders stand ready to provide Iceland with total credits of €1.775 billion.

The loans' maturity of 12 years provides Iceland with important long-term financing and reflects the lenders' solidarity and long- term commitment to assist Iceland in its current serious financial and economic situation.

In Finland, Glitnir Bank Ltd is no longer part of the Icelandic Glitnir Bank h.f. group. The ownership of Glitnir plc transferred to the management of Glitnir Bank Ltd on October 14, 2008. Thereafter the bank decided on changing its name to FIM Bank Ltd and is now acting under a Finnish license.

The IMF Executive Board has

FINLAND

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES approved a financial package for Latvia on December 23, 2008. The Nordic countries are prepared to lend €1.8 billion for Latvia, contingent on the successful implementation of the reform package. The amount of the Finnish contribution is approximately €324 million.

On March 9, 2009, the Resolution Committee of the Icelandic Financial Supervisory Authority (FME) took control of the Icelandic securities company, Straumur-Burdaras Investment Bank hf, which owns the Finnish eQ Bank. According to the Finnish Financial Supervisory Authority, FME's decision will not have an impact on the Finnish operations of eQ Bank or its subsidiaries nor their customers. On October 6, 2008, Finland's Financial Supervision Authority issued a prohibition on any asset transfers out Finland by eQ Bank. This prohibition remains in effect.

FRANCE

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES On October 16, 2008, a new law Article L. 312-4 of the French The Ministry of Finance is using Commercial Paper & CDs was enacted aiming at "restoring Financial and Monetary Code ad hoc investment vehicle, the confidence in the financial and regulation n° 99-05 of the Société de prises de As of October 15, 2008, trading banking system and ensuring Banking Commission participations de l'Etat (the in short-term commercial paper adequate financing of the (Commission Bancaire) provides "SPPE") for recapitalization and certificates of deposit French economy". that deposits are guaranteed by purposes. maturing in one year or less has a "deposit guarantee fund" up to been authorized on Euronext Under this new law, a new €70,000 per depositary, per The French State guarantees Paris. Banks whose commercial government-backed entity financial institution. securities issued by the SPPE. paper is listed on a regulated (initially Société de The SPPE then subscribes to market are thus eligible for Refinancement des Activités des securities issued by financial short-term refinancing Etablissements de Crédit and institutions to strengthen their operations. renamed Société de capital ratios. Financement de l'Economie Fair Valuation of Financial Française or "SFEF" on On October 20, 2008, the Instruments November 6, 2008) has been French Government announced created. The French State owns that France's six largest banks On October 15, 2008, the 34% of its share capital, and the (BNP Paribas, Société National Accounting Board remaining 66% is owned by Générale, Crédit Agricole, Crédit (Conseil National de la financial institutions. Mutuel, Caisses d'Epargne, and Comptabilité), the French Banques Populaires) would get Financial Market Authority The SFEF will issue debt a total of €10.5 billion from the (Autorité des Marchés securities guaranteed by the SPPE in exchange for issuing Financiers), the Banking French State and then lend deeply subordinated debt Commission (Commission funds to financial institutions. securities without voting rights. Bancaire) and the Insurance and Any financial institution On December 8, 2008, the Mutual Funds Supervisory operating in France may borrow European Commission gave the Authority (Autorité de Contrôle funds through the SFEF, green light for the French des Assurances et des provided it furnishes sufficient capitalization measures. On or Mutuelles) issued a joint and adequate collateral and around December 11, 2008, the recommendation on the fair signs an agreement with the subscription of the valuation of certain financial French State (regarding inter abovementioned debt securities instruments due to financial alia commitment to use the was launched. market turbulence. funds made available to finance individuals, companies and local On January 29, 2009, the On April 28, 2009, the French public entities and regarding European Commission gave the Minister of Economy and the good corporate governance green light for a second tranche President of Paris Europlace practices). of French capitalization declared that the International measures. This second tranche Accounting Standards Board This system does not provide a will amount to €11 billion worth (IASB) should modifiy the fair guarantee of inter-bank debts of preference shares or hybrid

FRANCE

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES per se but allows the SFEF to securities. value accounting regime. inject liquidity into the inter-bank debt market and financial In connection with this second On the same line, the Basel institutions to refinance tranche of recapitalization committee issued on August 28, themselves. measures, the SPPE became, 2009 a press release indicating on April 7, 2009, the primary that new accounting standards Moreover, on an exceptional shareholder of BNP Paribas with should "recognise that the fair basis and in particular in 17.03% of the share capital after value is not effective when emergency cases, the French the subscription by the SPPE of markets become dislocated or State may directly guarantee preference shares (without are illiquid". securities issued by financial voting rights) for an amount of institutions, provided that the €5.1 billion. The SPPE also Credit Mediation French State is assured subscribed to preference shares sufficient collateral. issued by Société Générale In order to benefit from SFEF (€1.7 billion) on May 28, 2009 loans, the participating banks The State guarantee will be and loaned €2 billion to the have committed themselves to made available at commercial Caisses d'Epargne and the respecting an annual growth rates for debt securities issued Banques Populaires. Late May objective of their outstanding by the SFEF or, in emergency 2009, the SFEF announced the loans situated between 3 and cases, by financial institutions in launch of a commercial paper 4%, depending on the bank distress, before December 31, program for an amount of €20 networks, until the end of 2009, and with maturities of up billion. In late July, the SPPE December 2009. to five years. However, the subscribed to 3 billion worth of Ministry of Finance will request, preference shares issued by the The French State will ensure in October, an extension of the BPCE (the entity resulting from these undertakings are kept and system for an additionnal year. the merger of the Caisses will make public, on a monthly d'Epargnes and the Banques basis, the amount of outstanding All the guarantees made Populaires). As of August 12, loans of the participating banks. available by the new law 2009, the SPPE owned 19,84% Beyond the global follow-up of (including the recapitalization of the share capital of BPCE. the commitment undertaken by measures and the Dexia Group the banks, the French state shall guarantee program) shall not oversee that the measures that exceed €360 billion. are adopted are then properly implemented in the field, in To date, the SFEF has issued particular at the level of the around €80 billion worth of corporations. securities. The French President has appointed a "credit mediator" with the minister of economy, industry and employment.

FRANCE

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES A corporation that is facing a financing or cash problem and that cannot find a solution may refer the matter to the mediator. The mediator has received 13,442 corporation requests, 11,517 of which are under investigation or closed.

Regional commissions for the financing of the economy (commissions départementales de financement de l'économie) have been set up by the prefects (préfets) and ensure the follow- up of the financing of the economy in the field, with the local economic organizations.

Corporate Governance (Decree no. 2009-348 of March 30, 2009)

Companies that have received Government bailout funds, including car-makers or banks that have issued shares, preference shares or subordinated securities subscribed for by the SPPE, must enter into agreements (or amend existing agreements) to ban the allocation of stock options and shares to their chairmen and directors. Stock options and shares issued prior to the implementation of this decree are not caught. Any variable compensation must be approved by the Board for a maximum period of one year

FRANCE

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES and is subject to pre-determined quantitative and qualitative performance criteria which are not linked to the share price. In addition, such companies shall not distribute variable compensation where they have reduced their workforce by a considerable amount. This decree also forces the Board to publicly disclose its decisions on bonus payments.

This decree applies until December 31, 2010.

Creation of a unique authority for the prudential control in the financial sector.

The Ministry of Finance announced on July 27, 2009 the merger of the four authorities currently in charge of setting up and supervising the implementation of prudential rations in the financial sector. The merger will be carried out at the end of the year.

GERMANY

SPECIAL CENTRAL BANK ASSISTANCE RECAPITALIZATION ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES MEASURES MEASURES INSTITUTIONS OTHER MEASURES General Political Guarantee Under the Stabilization Act, Aareal Bank Nationalization of Financial an amount of up to €70 Sector Companies On October 18, 2008, the German On October 5, 2008, the billion (which can be SoFFin will strengthen the capital Financial Market Stabilization Act German Government increased by another €10 basis of Aareal Bank AG with a silent On April 9, 2009, the Rescue (Finanzmarktstabilisierungsgesetz) announced that it will ensure the billion) is available to participation (Tier I instrument) in Takeover Act (the "Stabilization Act") came into repayment of bank deposits with recapitalize banks where Aareal Bank of €525 million. The (Rettungsübernahmegesetz) force.1 The Stabilization Act German banks. Such guarantee necessary in the form of instrument has a coupon of 9% p.a. In came into force as part of the authorized a €500 billion financial is understood to be a "political equity, UT2 instruments or addition, SoFFin will guarantee debt Supplementary Financial Markets rescue package and created a guarantee" in addition to the silent participations (similar instruments in a volume of up to €4 Stabilization Act. Under the public Financial Market statutory and industry deposit to preferred shares). In return billion. Rescue Takeover Act the Federal Stabilization Fund (Finanzmarkt- insurance schemes. There will for recapitalization, the Government has the right to stabilisierungsfonds) ("SoFFin")2, be no additional legislation to SoFFin will take an equity or BayernLB expropriate shareholders of which is administrated by the support such "political quasi-equity stake in the financial sector companies and Financial Market Stabilization guarantee". relevant bank, and further On November 28, 2008, BayernLB owners of regulatory capital Agency (Finanzmarktstabilisie- conditions may be imposed. announced its application for instruments in such companies. rungsanstalt; the "FMSA"). Deposit Protection Improved guarantees up to €15 billion from Among others, the Government The Stabilization Act also SoFFin. Additionally, the owners of may nationalize shares and own Effective April 9, 2009, the On February 18, 2009, the revises various aspects of BayernLB (the Free State of Bavaria funds instruments (Bestandteile Stabilization Act was amended by Federal Government agreed on the corporate and takeover and the Association of Bavarian der Eigenmittel) in financial the Supplementary Financial draft legislation regarding law to facilitate and Saving Banks) sought recapitalization sector companies and its Markets Stabilization Act amendments to the German accelerate the measures in an aggregate amount of subsidiaries, and receivables or (Finanzmarktstabilisierungs- Deposit Protection and Investor recapitalization of financial €10 billion, which will be borne by the financial instruments owned by ergänzungsgesetz).3 Compensation Act sector companies. owners (€7 billion) and the SoFFin financial sector companies and (Einlagensicherungs- und (€3 billion). In addition, an ABS its subsidiaries. An expropriation The Act for the Further Anlegerentschädigungsgesetz). Access to the recapitalization investment portfolio will be covered shall only be permissible as Development of the Financial measures is subject to with €6 billion, of which €4.8 billion will ultima ratio measure to preserve Markets Stabilization (Gesetz zur On May 22 and June 12, 2009, certain conditions to be be guaranteed by the Free State of the stability of financial markets Fortentwicklung der the German Parliament fulfilled by the financial sector Bavaria. On December 8, 2008, the and against payment of an Finanzmarktstabilisierung), was (Bundestag) and the Chamber company applying for the European Commission approved the adequate compensation as adopted in July 2009 and will of Federal States (Bundesrat) recapitalization measures, recapitalization measures. On January further defined in the Rescue further amend the Stabilization Act passed the amendments to the including sound business 15, 2008, Bayern LB issued a Takeover Act. The right to initiate by introducing various asset relief Act on the Deposit Protection policies, undertakings with government-guaranteed bond with a expropriation measures expired and Bad Bank schemes.4 and Investor Compensation Act, respect to the supply of loans volume of €5 billion. The bond has a on June 30, 2009. 7 effective as of June 30, 2009 to small- and medium-sized maturity of three years and a coupon The time limit for supportive and December 31, 2010 enterprises, adequate of 2.75% p.a. Economic Stimulus Package II measures by the SoFFin under the respectively. compensation caps for the Stabilization Act, currently members of the management Commerzbank On February 20, 2009, a number December 31, 2009, is extended With the new legislation, among board (an individual of various economic stimulus by the Act for the Further others, the proposed compensation of more than On November 3, 2008, Commerzbank measures known as Economic Development of The Financial amendments to the EU €500,000 is deemed to be announced that it had entered into an Stimulus Package II

GERMANY

SPECIAL CENTRAL BANK ASSISTANCE RECAPITALIZATION ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES MEASURES MEASURES INSTITUTIONS OTHER MEASURES Markets Stabilization Act to Directive on Deposit-guarantee inadequate), and restrictions agreement with SoFFin according to (Konjunkturpaket II) have been December 31, 2010. Schemes (94/19/EC) shall be on the payment of dividends. which SoFFin will provide adopted by the German transposed into German law. Commerzbank with capital in the form Parliament. Part of such package Stabilization Measures Under the new legislation, the The German recapitalization of silent participation instruments (Tier is a loan and guarantee program existing statutory minimum scheme was approved by the 1 eligible) of €8.2 billion (increasing in an aggregate volume of €100 Via SoFFin, three main types of cover for deposits of €20,000 European Commission on Commerzbank's core capital ratio (Tier billion mainly targeted to measures may be granted on an shall successively be increased. October 27, 2008, as 1) to 11.2%) and guarantees for the companies outside of the application by a German financial From June 30, 2009, deposits modified by a communication issuance of debt instruments of up to financial sector. The program sector company (including banks are covered up to an amount of from the Commission on €15 billion. On December 13, 2008, supplements a prior program and insurers): €50,000, and from December December 5, 2008. With the European Commission confirmed known as Economic Stimulus 31, 2010 up to an amount of respect to the consideration, that the terms of the Commerzbank Package I consisting of 15 ▪ recapitalization of companies in €100,000. The existing the European Commission recapitalization are in line with the different elements and a volume the financial sector; deductible of the depositor of established an indicative Commission's requirements for an of €32 billion. 10% is repealed. corridor for interest rates of adequate compensation. ▪ guarantees of debt instruments 7% on preferred shares with Bad Banks and Asset Relief and liabilities, each with a maturity features similar to those of Commerzbank has agreed to pay to Schemes of up to 36 months (in exceptional subordinated debt and an SoFFin a coupon of 9% p.a. on the cases up to 60 months), to provide average rate of return of silent participation, plus a step-up in As a result of the the Act for the companies in the financial sector 9.3% on ordinary shares for years in which Commerzbank pays a Further Development of the access to liquidity and facilitate the the recapitalization of dividend. The silent participation is Financial Markets Stabilization refinancing in the capital markets; fundamentally sound banks. expected to qualify as Tier 1 capital. (Gesetz zur Fortentwicklung der and For the guarantee Commerzbank has Finanzmarktstabilisierung) as of On April 9, 2009, the to pay a commitment fee of 0.1% p.a. July 2009 there are three new ▪ the purchase by the SoFFin of Supplementary Financial on the undrawn facilities. A fee of asset relief and Bad Bank selected assets. Markets Stabilization Act 0.5% p.a. will be charged on schemes available to German amended, among others, the guaranteed interest-bearing debt banks or financial holding General Guarantee Scheme Stabilization Act, and further securities issued with a maturity of up companies and their national and modified German corporate to 12 months. Maturities over one year international subsidiaries: The SoFFin may guarantee debt and takeover law to facilitate will be subject to a fee of instruments and liabilities, each recapitalization measures. approximately 0.95% p.a. (1) Under the special purpose with a maturity of up to 36 months, vehicle ("SPV") scheme, a issued by financial sector As of July 9, 2009, the total On January 8, 2009, Commerzbank financial sector company has the companies after October 17, 2008 volume of recapitalization announced that SoFFin intends to right to transfer selected assets and before December 31, 2009. In measures by SoFFin provide additional equity totaling €10 to an SPV in general at the exceptional cases the maturity of amounted approximately billion. By means of a capital increase, higher of (i) 90 percent of their the guaranteed liabilities may be €24.5 billion. Commerzbank will issue approx. 295 book value as of June 30, 2008, up to 60 months, provided that the million ordinary shares to SoFFin at a (ii) 90% of the book value as of amount of guaranteed liabilities As of August 12, 2009, the price of €6 per share. After closing of March 31, 2009, or (iii) the real with a maturity of more than 36 total volume of the transaction, SoFFin will hold 25% value, and capped by the book months is limited to one third of all recapitalization measures by plus one share in Commerzbank. In

GERMANY

SPECIAL CENTRAL BANK ASSISTANCE RECAPITALIZATION ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES MEASURES MEASURES INSTITUTIONS OTHER MEASURES liabilities guaranteed by SoFFin. SoFFin amounted to €21.9 addition, SoFFin will provide additional value as of March 31, 2009. billion. SoFFin now publishes capital to Commerzbank in the form of Guarantees shall expire no later the amount of signed a second silent participation of €8.2 In return, the SPV issues to its than December 31, 2012. An contracts and not the amount billion. The terms of the silent parent company a bond with a aggregate amount of €400 billion of approved aid which is the participation will be similar to those maturity of up to 20 years. The is available for such guarantees. reason for the current offered in December 2008. SoFFin guarantees the number being smaller than repayment of such bonds. In Guarantees shall generally be the previously communicated On January 9, 2008, Commerzbank consideration, the financial sector issued in the form of guarantees figure. placed the first government- company must pay a fee at on first demand (Garantie auf guaranteed bond in Germany. The market-rate. erstes Anfordern) and shall benchmark bond has a volume of €5 generally only be granted if the billion. The bond has a maturity of In addition, the company must concerned financial sector three years and a coupon of 2.75% pay a balance payment. The company is equipped with p.a. amount of the balance payment adequate funds (angemessene is the difference between the Eigenmittelausstattung). On May 7, 2009, the European value for which the assets are According to SoFFin, a core Commission approved the framework transferred to the SPV and the capital ratio of 8% is considered agreement on governmental support so-called fundamental value, adequate. for Commerzbank AG with the SoFFin which is the expected real value of January 8, 2009. In connection with of the transferred assets at SoFFin shall receive adequate the understanding of the Commission maturity as set forth by an expert consideration for the granting of with Commerzbank, Commerzbank opinion. guarantees, which will generally agreed (i) to dispose of Eurohypo consist of a certain percentage of within the next five years, (ii) to divest The difference amount must be the maximum guarantee amount its subsidiaries Kleinwort Benson, paid by the bank in equal annual reflecting the default risk plus a Dresdner Van Moer Courtens S.A., down payments over the term of margin.5 Dresdner VPV NV, Privatinvest Bank the guarantee of up to 20 years. AG, Reuschel & co. KG and Allianz The scheme does not provide Dresdner Bauspar AG by the end of If at maturity the real market German banks with a blanket 2011, (iii) not to undertake any value is below the market value, guarantee, but rather permits acquisitions in the course of the next such loss must be borne by the SoFFin to issue guarantees on a three years, (iv) to reduce its balance bank and as long as such loss is case-by-case basis. sheet from €1,100 billion to €900 not paid to SoFFin, no billion and following the disposal of distribution may be made to As of March 2009, the total Eurohypo to €600 billion, (v) to give a shareholders. If assets perform volume of guarantees committed no price leadership commitment, and better than expected, the bank by SoFFin for debt instruments of (vi) not to pay out any dividends in receives the upside. individual banks amounted to 2009 and for the fiscal years 2009 and approximately €180 billion. 2010 only grant profit-related To qualify for the SPV scheme, a payments, if any, to equity related financial sector company must

GERMANY

SPECIAL CENTRAL BANK ASSISTANCE RECAPITALIZATION ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES MEASURES MEASURES INSTITUTIONS OTHER MEASURES As of July 9, 2009, the total instruments such as silent participa- inform SoFFin of all risks related volume of guarantees committed tions, hybrids, and profit-participation to the securities and adhere to by SoFFin for debt instruments of certificates without reversing ac-cruals the further conditions outlined in individual banks amounted to or special reserves. The necessary the Stabilization Act. Further, the approximately €143 billion. capital increase for the SoFFin transferring company must participation was approved by the perform stress tests as specified As of August 12, 2009 there have shareholders' meeting of by SoFFin. been no changes to the previous Commerzbank on May 17, 2009. month. (2) The consolidation scheme On June 5, 2009, Commerzbank AG under the federal laws is primarily Guarantee of Bank Debt in has finalised its agreement with targeted at Germany's public- connection with Asset SoFFin. SoFFin has acquired 25% sector banks, but is open to other Relief/Bad Bank Scheme plus one shares in the bank. banks, too. Commerzbank received a total of The Act for the Further around €1.8 billion from the capital An institution may request to Development of the Financial increase. In addition, the bank has transfer selected assets and non- Markets Stabilization (Gesetz zur received the second tranche of SoFFin core business lines to individual Fortentwicklung der silent participation of €8.2 billion. newly established public run-off Finanzmarktstabilisierung) allows companies (Anstalten in der German financial sector Commerzbank has announced that it Anstalt, "AIDA") held under the companies to transfer debt does not plan to issue any further FMSA. securities to (i) special purpose state guaranteed bonds and therefore vehicles held by the company plans to return the remaining AIDA may also secure risk against debt issued by the SPV guarantees amounting to €5 billion to positions without transfer of legal and guaranteed by the SoFFin, or SoFFin. In early August title of the assets by granting (ii) to individual newly established Commerzbank had already given back guarantees, by entering into public run-off companies guarantees in the amount of €5 billion sub-participations or in any such (Anstalten in der Anstalt, "AIDA") to SoFFin. matter as agreed with the FMSA. held by the FMSA, which among The details are to be described in others, may also secure risk Corealcredit Bank the AIDA's statutes, which also portfolios by granting guarantees. On April 23, 2009, Corealcredit Bank require the FMSA's consent. For details on the asset relief and announced that SoFFin has decided to Bad Bank schemes see column guarantee debt instruments in an The ongoing costs of the AIDA "Other Measures". On July 31, amount of up to €500 million. are to be covered by their assets. 2009 the European Commission In general, the owners of the approved the Act under EC HSH Nordbank bank are jointly liable for losses Treaty state aid rules.6 of the AIDA on a pro-rata basis. If On November 21, 2008, HSH the bank is a listed company, the Nordbank and SoFFin entered into an losses shall be paid from the agreement according to which SoFFin dividend payments. The owners

GERMANY

SPECIAL CENTRAL BANK ASSISTANCE RECAPITALIZATION ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES MEASURES MEASURES INSTITUTIONS OTHER MEASURES will provide HSH Nordbank with are jointly liable, unless a liquidity guarantees of up to €30 German State is involved. The billion. On January 12, 2009, the bank liability of the German placed a government-guaranteed Sparkassen is capped to amount bond with a volume of €3 billion. The of the statutory guarantee bond has a maturity of 3 years and a obligation as of June 30, 2008 coupon of 2.75% p.a. (Gewährträgerhaftung).

According to press articles, the SoFFin To qualify for the consolidation declined to provide HSH Nordbank scheme, the transferring entity with additional assistance measures. must have a sustainable According to such press articles, HSH business model and a adequate Nordbank has not fulfilled SoFFin's capitalization. Further, the AIDA requirement for assistance measures must notify the FMSA of all risks including a core capital ratio of 7% and related to the transferred assets did not provide a satisfactory business and comply with the further plan for its future strategy. conditions of the Stabilization Act. AIDA shall design a wind-off- The City of Hamburg and the plan for the transferred assets Government of Schleswig-Holstein and business lines. agreed to provide HSH Nordbank with €3 billion of fresh capital and For refinancing purposes of the guarantees amounting to up to €10 AIDA, the SoFFim may issue billion. guarantees for debt issued by the AIDA. According to press articles in March 2009, HSH Nordbank has filed a new (3) The consolidation scheme application with SoFFin for the under State laws allows the issuance of guarantees in the amount German States to set up own of €10 billion. run-off companies under State laws. To qualify for this scheme, Hypo Real Estate the transferring entity must have a satisfying business concept For information on the special and a sufficient capitalization. In emergency liquidity support package, addtion, the State-AIDA must see "Other Measures". notify the FMSA of all risks related to the transferred assets On October 29, 2008, Hypo Real and adhere to the further Estate announced that it plans to conditions of the Stabilization submit an application to SoFFin for Act. Also, State-AIDA must have

GERMANY

SPECIAL CENTRAL BANK ASSISTANCE RECAPITALIZATION ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES MEASURES MEASURES INSTITUTIONS OTHER MEASURES additional comprehensive support, a wind-off-plan for the transferred including potential recapitalization assets and business lines. measures. Such announcement was repeated on December 9, 2008. Both, the AIDA and the State- AIDA may not conduct business On November 21, 2008, SoFFin which requires authorization granted to Hypo Real Estate Group a under the Capital Requirements framework guarantee in an amount of Directive (2006/48/EC) or the €20 billion to cover the issuance of Markets in Financial Instruments debt securities maturing by January Directive (2004/39/EC). The 15, 2009. On December 9, 2008, this AIDAs and State-AIDAs are guarantee framework was increased subject to limited supervision by by €10 billion to an aggregate amount the German Financial of up to €30 billion. On January 12, Supervisory Authority 2009, SoFFin extended its framework (Bundesagentur für guarantee in the total amount of €30 Finanzdienstleistungsaufsicht, billion until April 15, 2008. The pro-rata BaFin). commitment fee remains unchanged, and the fee for guarantees drawn will Other be 0.5% p.a. On January 20, 2009, SoFFin extended its framework On August 1, 2009, the Act guarantee to Hypo Real Estate by an Strengthening the Financial additional €12 billion to the aggregate Markets and Insurance guarantee amount of €42 billion. Hypo Supervision (Gesetz zur Real Estate can use the additional Stärkung der Finanzmarkt- und guarantees to cover the issuance of Versicherungsaufsicht) came into debt securities maturing by June 12, force.8 2009. The Group will pay to SoFFin a pro-rata commitment fee of 0.1% of On July 25, 2009, the the undrawn portion of the framework amendment of the directive on guarantee. The fee for guarantees the reconciliation of group drawn will be 0.5% p.a. financial statements in accordance with IFRS On February 11, 2009, SoFFin (Konzernüberleitungsverordnung) extended its framework guarantee to came into force.9 Hypo Real Estate Group by an additional amount of €10 billion until June 12, 2008.

On March 17, 2009, the German

GERMANY

SPECIAL CENTRAL BANK ASSISTANCE RECAPITALIZATION ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES MEASURES MEASURES INSTITUTIONS OTHER MEASURES Government extended its guarantee for notes issued by Hypo Real Estate Group until December 31, 2009.

On March 28, 2009, SoFFin announced its participation in a capital increase of Hypo Real Estate Holding AG under authorized capital. SoFFin will subscribe for 20 million new shares in an aggregate amount of €60 million (corresponding to 8.7% of the issued capital of Hypo Real Estate Holding AG).

In addition, SoFFin issued a declaration of intent to Hypo Real Estate Holding AG and Hypo Real Estate Bank AG, according to which SoFFin will implement measures to achieve a sufficient recapitalization of Hypo Real Estate Holding AG and will extend further guarantees.

On April 14, 2009, SoFFin extended all existing guarantees granted to the HRE Group until August 19, 2009.

On April 17, 2009, SoFFin issued a public tender offer to the shareholders of HRE Holding AG, according to which it offers to pay €1.39 per share for the acquisition of shares in HRE Holding AG. SoFFin aims to hold 100 per cent of the shares of HRE Holding AG. The offer period expired on May 4, 2009.

On June 2, 2009, an extraordinary general meeting of HRE Holding AG shall decide on a capital increase of

GERMANY

SPECIAL CENTRAL BANK ASSISTANCE RECAPITALIZATION ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES MEASURES MEASURES INSTITUTIONS OTHER MEASURES up to €5.64 billion. The new shares shall be issued to SoFFin, and the subscription right of other shareholders shall be excluded. After the capital increase, SoFFin is expected to hold more than 90% of the shares in HRE Holding AG.

On May 7, 2009, the SoFFin announced that it holds 47.31% of the voting shares in HRE Holding AG following its public tender offer. On June 2, 2009, at an extraordinary shareholders' meeting of HRE Holding AG, the shareholders approved the increase of the share capital. All approximately 986.5 million new shares will be subscribed by the SoFFin for the issue price of €3 per share. The subscription rights of the shareholders other than SoFFin have been excluded. As a result of the capital increase, the participation of SoFFin will increase from currently 47.3% to 90%. With its majority of 90%, the SoFFin is in a position to squeeze out the remaining shareholders.

On August 17, 2009, SoFFin prolonged guarantees amounting to €52 billion until November 18, 2009.

On August 21, 2009, SoFFin announced that it intends to squeeze out the remaining shareholders and to pay a cash compensation of €1.30 per share.

GERMANY

SPECIAL CENTRAL BANK ASSISTANCE RECAPITALIZATION ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES MEASURES MEASURES INSTITUTIONS OTHER MEASURES IKB Deutsche Industriebank AG

On December 22, 2008, SoFFin authorized guarantees to IKB in an amount of up to €5 billion to guarantee the repayment of bonds to be issued by IKB. On January 19, 2009, the bank placed a government-guaranteed bond with a volume of €2 billion. The bond has a maturity of 3 years and a coupon of 2.875% p.a.

On July 3, 2009, SoFFin authorized additional guarantees of up to €7 billion for debt of IKB.

LBBW

LBBW is looking into a guarantee framework of between €15 to 20 billion to be provided by SoFFin or the owners as a funding reserve. In addition, the owners of LBBW are expected to participate in an envisaged capital increase of €5 billion.

Nord/LB

On February 10, Nord/LB issued a bond in a volume of €2 billion and a term of five years, which is guaranteed by the federal state of Lower Saxony. The bond has a spread of 70 basis points above midswaps and is subject to a nominal interest rate of 3.50%.

Sicherungseinrichtungsgesellschaft deutscher Banken

SoFFin guaranteed a bond in the

GERMANY

SPECIAL CENTRAL BANK ASSISTANCE RECAPITALIZATION ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES MEASURES MEASURES INSTITUTIONS OTHER MEASURES volume of €6.7 billion issued by the Sicherungseinrichtungs-gesellschaft deutscher Banken mbH (protection company of German banks, "SdB"). The SdB was set-up by German private banks to provide the German deposit insurance and investors protection schemes with a loan to compensate customers of the German banking subsidiary of insolvent Lehman Brothers.

VW-Bank, GMAC-Bank

According to press articles, VW Bank GmbH, the banking subsidiary of German car maker Volkswagen AG, will receive guarantees by SoFFin of up to €2 billion. VW Bank GmbH is the first banking subsidiary of car producers in Germany to receive SoFFin support.

According to press articles GMAC Bank, the banking subsidiary of General Motors, applied to SoFFin for the issuance of guarantees for bank debt. According to press articles, further banking subsidiaries of German car makers are investigating similar applications to SoFFin.

WestLB

WestLB has applied for guarantees in an aggregate amount of between €10 billion and €20 billion to cover the issuance of debt instruments. In addition, on May 12, 2009 the

GERMANY

SPECIAL CENTRAL BANK ASSISTANCE RECAPITALIZATION ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES MEASURES MEASURES INSTITUTIONS OTHER MEASURES European Commission approved a risk shield of €5 billion guaranteed by WestLB's owners, increased by the owners of WestLB by a further €4 billion.

WestLB is the first bank which applied for the establishment of a public run- off company under the Act for the Further Development of the Financial Markets Stabilization (Gesetz zur Fortentwicklung der Finanzmarktstabilisierung). WestLB intends to transfer structured securities in the amount of €6.4 billion and securities and non-strategic business lines amounting to €74 billion to such company.

Other Institutions

According to SoFFin, approximately 20 banks and one smaller insurer have applied to SoFFin for assistance measures. Several financial institutions have confirmed that they are investigating whether to apply for assistance measures from SoFFin.

1 On October 17, 2008, the Stabilization Act was published in the Federal Law Gazette (Bundesgesetzblatt) (BGBl. I, p. 1981). The main purpose of the Stabilization Act is to restore and sustain confidence and liquidity in the German financial market. The details and terms of conditions of such stabilization measures are set out in the Regulation regarding the Implementation of the Financial Markets Stabilization Fund Act (Finanzmarktstabilisierungsfonds-Verordnung; "Stabilization Fund Regulation"), which was released by the Federal Government under the Stabilization Act on October 20, 2008, and which came into force as of the same date. 2 The SoFFin is set up as a special fund (Sondervermögen) of the German Federal State without its own legal personality (nicht rechtsfähig). The German Federal State is directly liable for the liabilities of the SoFFin. The Ministry of Finance will be given a broad spectrum of powers to determine the eligibility of institutions (who should be deemed to be integral to the financial system) to participate in the scheme. 3 On March 20, 2009 the German Parliament (Bundestag) and on April 3, 2009 the Chamber of Federal States (Bundesrat) approved the Supplementary Financial Markets Stabilization Act (Finanzmarktstabilisierungsergänzungsgesetz). It amends, among others, the Stabilization Act and makes several adjustments, clarifications and simplifications to the current framework for assistance measures. The bill is expected to come into effect within the second week of April 2009, after its execution by the German Federal President and its publication in the Federal Law Gazette. The Supplementary Financial Markets Stabilization Act came into effect on April 9, 2009.

4 On July 3, 2009, the Bundestag adopted and on July 10, 2009, the Bundesrat did not object the Act for the Further Development of the Financial Markets Stabilization Act (Gesetz zur Fortentwicklung der Finanzmarktstabilisierung). The Act came into effect on July 23, 2009. 5 The German authorities have given a commitment to the European Commission that they will require a provision premium of 0.5%, plus, in all cases of debt instruments and other liabilities with a term of more than one year, a risk premium corresponding to the individual financial institution's credit default swap spread, being not less than the median of the financial institution's five-year credit default swap spread between January 1, 2007 and August 31, 2008 and which is not less than the amount specified in the recommendations of the European Central Bank of October 20, 2008, i.e., 0.5% plus the credit default swap spread. 6 In Germany there are various rumors about banks considering to make use of a run-off company under the Act for the Further Development of the Financial Markets Stabilization (Gesetz zur Fortentwicklung der Finanzmarktstabilisierung). 7 The German Government presented two draft bills for the restructuring of system-relevant financial institutions. Both drafts provide for the possibility to enforce state assistance without expropriation. 8 The Act Strengthening the Financial Markets and Insurance Supervision (Gesetz zur Stärkung der Finanzmarkt- und Versicherungsaufsicht) postulates among others, technical knowledge of the members of the supervisory board of banks and other financial institutions and limits the maximum number of supervisory board positions to 5. Furthermore changes of equity within a year are not regarded as regulatory equity. 9 Among others the new rules allow banks not to deduct temporary unrealized impairments of bonds or fixed income securities from equity.

GREECE

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Issuance Guarantee Law 3714/7.11.2008 "For the Securities Lending Facility Preference Shares Small and Very Small protection of borrowers", Businesses The Enhancement Liquidity Law increased the protection given to The Enhancement Liquidity Law The Enhancement Liquidity Law (No 3723/2008) provides that, in savings from €20,000 to provides that Greek State Bonds provides that the Greek State Greek banks participate in the return for appropriate fees and €100,000. of up to €8 billion and three will underwrite up to €5 billion of program proposed by the Credit collateral (as specified by the years of maturity may be issued preference shares, the specific Guarantee Fund for Small and central Bank of Greece and the The extended guarantee is set until December 31, 2009 and terms of which are determined Very Small Enterprises (the Ministry of Finance)1, the Greek to expire on December 12, lent to banks in return for by a decision of the Ministry of "Fund")2 for enhancing the State will guarantee up to a 2011. appropriate fees and collateral Finance.1 liquidity of small enterprises, by maximum of €15 billion for loans (to be specified by the central the issuance of loans for that are concluded until Bank of Greece and the Ministry Eligible banks are banks working capital, 80% of which is December 31, 2009 (having a of Finance).1 licensed by the Bank of Greece, guaranteed by the Fund, with an maturity of three months to three including cooperative banks, interest rate of Euribor+2,1, years). In order for the banks to In order for the banks to benefit regardless of whether they are subsidized by the Fund as well, benefit from this program they from this program they must listed or not. under the following terms: must meet the capital adequacy meet the capital adequacy ratios ratios set by the Bank of set by the Bank of Greece. The shareholders' assembly of (a) the loan should not exceed Greece. the participating banks had to €350,000 and should have a Pursuant to a relevant irrevocably resolve the share three-year duration; The Greek State will have the agreement to be concluded capital increase by the issuance right to participate in the board between the Greek State and of preference shares by (b) the loans cannot exceed of directors of each of each bank, the Bonds must be February 1 2009, further 30% of the average turnover of participating banks, through a returned to the Greek State extended to May 19 2009 the company for the last three representative who is appointed upon their expiration and pursuant to Law No 3756/2009. years; as an additional member of the cancelled. Board. This member has veto The price of issuance for the (c) the eligible companies must rights on decisions (either of the The banks that benefit from this shares (of each bank) must be have profits before amortizations Board or the shareholders' initiative should use the funds the nominal value of the for the last three years; and assembly) for the distribution of from the disposal of the Bonds common shares of the last profits, the wages or the to provide competitive housing issuance of each bank. (d) the banks will not require any granting of any kind of benefits and SME loans. guarantees for the remaining to members of the board, the The Greek State will subscribe unsecured 20% of the capital. managing director or senior for the new shares by executives and their deputies, December 31, 2009.3 The above program is also either upon instruction of the applicable to already issued Minister of Finance or in case he The preference shares must be loans under the condition that considers that such decisions redeemed by the banks, at the the banks waive off all other endanger the rights of issuance price, within five years securities given by the depositors or materially affects (but no sooner than July 1, companies. the solvency and the operation 2009) following the approval of In April 2009 the second phase

GREECE

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES of the bank. the Bank of Greece. of the program was launched and the following terms of the In any case, the aforementioned In case the banks cannot program were amended: benefits must not exceed the redeem the preference shares, total of the wages paid to the due to their inability to meet the (a) the loans should not exceed Governor of the Bank of Greece. capital adequacy ratios set by €125,000; Additional benefits, such as the Bank of Greece, the shares bonuses, are cancelled may be converted to common or (b) the eligible companies must throughout the duration of the other category of shares, by have positive results on average program. virtue of a decision of the for the last three years (2005, Ministry of Finance following the 2006, 2007); and For the same period, the opinion of the Governor of the distribution of dividends must Bank of Greece. (c) the interest rate of not exceed 35% of the net Euribor+2,1, is no longer profits of the bank, which is the The preference shares, which subsidized by the Fund. minimum set by law. are vested with a voting right to the assembly of the holders of The above guarantees may also preference shares, cannot be be used to finance enterprises transferred further by the Greek vital to the development of the State and cannot be listed in country. organized markets.

The preference shares carry a 10% fixed rate of interest on the subscription capital and have all characteristics as to be included in the equity of each bank.

The Greek State, as a holder of preference shares, will have the right to participate in the board of directors of each of the participating banks through a representative who is appointed as an additional member of the Board. This member has veto rights on decisions (either of the Board or the shareholders' assembly) for the distribution of profits, wages or the granting of any kind of benefits to members

GREECE

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES of the board, the managing director or senior executives and their deputies, either upon instruction of the Minister of Finance or in case he considers that such decisions endanger the rights of depositors or materially affects the solvency and the operation of the bank.

In any case, the aforementioned benefits must not exceed the total of the wages of the Governor of the Bank of Greece. Additional benefits such as bonuses are cancelled throughout the duration of the program.

For the same period, the distribution of dividends must not exceed 35% of the net profits of the bank, which is the minimum set by law.

Further, upon liquidation of a bank, the Greek State, as a holder of preference shares, has priority over the liquidation proceeds against all other shareholders.

1 The Ministry of Finance, taking into consideration (a) the provisions of the Enhancement Liquidity law, (b) the relevant reports of the Governor of the Bank of Greece, and (c) the European Commission's communication paper No 2008/C 270/02 "The application of State aid rules to measures taken in relation to financial institutions in the context of the current global financial crisis", has issued the Ministerial Decision No 54201/B 2884 with the following provisions: A. Preference Shares: The €5 billion state aid by way of participation in capital increase and the subscription of preference shares shall be allocated to the eligible credit institutions after taking into consideration the following criteria: (i) the capital adequacy requirements for each credit institution (namely, Tier 1 must be between 8% and 10%) (such criterion weights 0,5 of the overall criteria); (ii) the market share of each credit institution and its role to the financial stability (such criterion weights 0,4 of the overall criteria); and (iii) the attribution of each credit institution to the housing and SME loans (such criterion weights 0,1 of the overall criteria).

Pursuant to Ministerial Decision No21861/B 1269: "The issuance price for the subscription for preference shares shall be paid by Greek State Bonds issued with a minimum term of five (5) years, bearing a six month Euribor (plus spread) interest rate. Such shares may be repurchased at their initial issuance price either by exchange with Greek State Bonds or their cash equivalent. If a repurchase is covered by Greek State Bonds, the nominal price of the bonds should equal the nominal value of the bonds initially issued to cover such a subscription. Further, the maturity date of these bonds should be the date of such a repurchase or any date within the next three (3) year time period and their market price should equal their nominal value. In any other case, any discrepancy between the market price and the nominal value of such bonds shall be settled, through payments between the credit institution and the Greek State. Finally, at the date of the repurchase of the preference shares, the credit institutions shall pay to the Greek State the interest corresponding to the preference shares." B. Issuance Guarantee: The guarantee of up to a maximum of €15 billion for bank credit will be given to credit institutions that will submit their petition until December 31, 2008 and each petition shall be restricted to the proportion of the guarantee to which each credit institution is entitled. The aforementioned guarantee does not cover interbank deposits. Such guarantee will be granted either with or without collateral as determined in the Ministerial Decision. Such collateral is blocked throughout the guarantee and is monitored for each credit institution separately by the Bank of Greece. The annual fees for the guarantee, pursuant to the standards set by the European Central Bank shall be of 50 base units (if no collateral is given) or 25 base units (if collateral is given). The €15 billion guarantee shall be allocated to the eligible credit institutions after taking into consideration the following criteria: (i) the liquidity status of the credit institution and in particular the risk that its capital adequacy may be compromised; (such criterion weights 0,5 of the overall criteria); (ii) the market share of each credit institution and its role to the financial stability (such criterion weights 0,3 of the overall criteria); (iii) the size and duration of the credit institution's liabilities on December 31, 2009 (such criterion weights 0,1 of the overall criteria); and (iv) the attribution of each credit institution to the housing and SME loans (such criterion weights 0,1 of the overall criteria). C. Securities Lending Facility: the Bonds are of no interest rate, are listed in the Athens Exchange and are issued in lots of €1,000,000 each. They are issued at their nominal value and transferred in return for collateral to the credit institutions by virtue of a bilateral agreement executed between the credit institution and the Greek State. The credit institutions must pay the same fees as for the Issuance Guarantee Scheme. Apart from the provisions of the Enhancement Liquidity Law, the credit institutions must use the funds as collateral to refinancing or fixed facilities from the European Central Bank and/or as collateral for interbank financing for liquidity reasons. The Bonds shall be allocated between the financial institutions under the following criteria: (i) the liquidity status of the credit institution and in particular the risk that its capital adequacy may be compromised; (such criterion weights 0,5 of the overall criteria); (ii) the activity of the credit institution in money markets and its ability to reallocate stability (such criterion weights 0,3 of the overall criteria); (iii) the size and duration of the credit institution's liabilities until December 31, 2009 (such criterion weights 0,1 of the overall criteria); and (iv) the attribution of each credit institution to the housing and SME loans (such criterion weights 0,1 of the overall criteria). The credit institutions that will participate in either of the above schemes shall report quarterly to the Bank of Greece on the use of the funds. In its turn, the Bank of Greece reports accordingly the Supervisory Board that is constituted with the same Enhancement Liquidity Law for the purpose of monitoring the overall use of the State aid by the credit institutions. The Issuance Guarantee funds and the Securities Lending Facility funds may be re-allocated pursuant to a relevant decision of the Ministry of Finance and following the recommendations of the Governor of the Bank of Greece, depending on the level of the needs and the absorbency of each program, but shall not in any case exceed the maximum of €23 billion. D. Collateral provided by the participating Banks in the Issuance Guarantee Scheme and the Securities Lending Facility to the Bank of Greece: (i) all collateral accepted by the Central European Bank (as described in the Currency Policy Council Act 54/2004), as in force; (ii) foreign currency Greek State Bonds; (iii) up-to-date loans to companies, not operating in the financing sector, already assessed by the Bank of Greece eligible External Credit Assessment Institutions; (iv) up-to-date loans to companies guaranteed by the Greek State or by a legal entity that it is of acceptable credit standing pursuant to the provisions under (iii) above; (v) up-to-date loans to maritime companies that satisfy the criteria set in an Act of the Governor of the Bank of Greece (No. 2589/20.8.2007); and (vi) up-to-date housing loans to individuals granted with securities (A class mortgage or prenotation of mortgage) or B class mortgage or prenotation of mortgage provided that the A class prenotation is in favor of the same credit institution. 2 Credit Guarantee Fund for Small and Very Small Enterprises (TEMPME) is a société anonyme, licensed by the Bank of Greece as a financial institution and aims to support small and very small enterprises by providing guarantees and counter-guarantees and undertaking part of their financial and commercial risk.

3 The Ministry of Finance has promoted measures for the protection of the enhancement liquidity scheme by virtue of an amendment to the Enhancement Liquidity Law (art. 28 of the Law No 3756/2009). Pursuant to the aforementioned provision, the credit institutions participating in the scheme may only distribute dividends in shares for the financial year 2008. Such shares should not have been repurchased by them. Furthermore, the said credit institutions are not allowed to acquire their own shares.

HONG KONG1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES On October 14, 2008, following Hong Kong joined the growing On October 14, 2008, the On September 30, 2008, the a run on the Bank of East Asia, number of countries easing their financial secretary pledged that HKMA announced five the first bank run in more than a monetary policy, when on HKMA would establish a temporary measures for decade, the Hong Kong October 9, October 30 and Contingent Bank Capital Facility providing liquidity assistance to Monetary Authority ("HKMA") December 17, 2008, the HKMA for the purpose of making licensed banks in Hong Kong. announced it will use the cut its base rate ("Base Rate"), available additional capital to The measures were effective Exchange Fund2 to guarantee which now stands at 0.5%. locally incorporated licensed from October 2, 2008 until the the repayment of all customer banks, should this become end of March 2009. deposits held with all Authorized The HKMA has also announced necessary. This measure will Institutions3 in Hong Kong the adjustment to the remain in force until the end of The measures that remain in following the principles of the methodology for determination 2010. force are: existing Deposit Protection of the Base Rate. Prior to the Scheme, but including adjustment, the Base Rate was As of August 20, 2009, no banks (1) the HKMA will, in response Restricted-License Banks and set at either 150 basis points in Hong Kong have needed to to requests from individual Deposit-Taking Companies as above the prevailing US Federal use the Contingent Banking licensed banks and when it well as Licensed Banks.4 Funds Target Rate ("FFTR") or Capital Facility. considers necessary, conduct the average of the five-day foreign exchange swaps The guarantee applies to both moving averages of the (between the US dollar and HK Hong Kong-dollar and foreign- overnight and one-month dollar) of various durations with currency deposits with HIBORs6, whichever was higher. licensed banks. Authorized Institutions in Hong After the adjustment, the spread Kong, including those held with of 150 basis points above the (2) the HKMA will, in response Hong Kong branches of prevailing FFTR was reduced to to requests from individual overseas institutions, until the 50 basis points. licensed banks and when it end of 2010. It will cover the considers necessary, lend term amount of deposits in excess of On March 26, 2009, the HKMA money of up to one month to that protected under the Deposit announced that it has decided individual licensed banks Protection Scheme.5 that the smaller spread of 50 against collateral of credit quality basis points will be retained. acceptable to the HKMA. However, certain deposits such as time deposits with a maturity On August 13, 2009, as the U.S. On November 6, 2008, the longer than 5 years, structured Federal Open Market HKMA announced two deposits (such as foreign- Committee decided to keep the refinements to measure (2) currency linked and equity- FFTR at 0-0.25 %, the HK MA above. The two refinements are linked deposits), secured announced again that the base as follows: deposits (such as deposits used rate would continue to be set as as collateral to secure a banking 50 basis points above the lower (1) the maximum tenor of the facility), bearer instruments boundary of the target range at collateralized term lending will (such as bearer certificates of 0.5%. be extended from one month to deposit) and offshore deposits three months. On December 8, 2008, the Hong

HONG KONG1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES are not protected. Kong Government announced (2) while the interest rate for the that it would provide up to HK$ collateralized term lending 100 billion under the Special continues to be determined with Loan Guarantee Scheme reference to market interest ("SpGS"), which would help to rates, the HKMA will take into make available loans of about account the fact that such HK$142 billion in the lending is secured by collateral commercial lending market. in determining the applicable interest rate. With the enhanced measures which have taken effect since June 15, 2009, the maximum loan amount for each enterprise will be HK$12 million, with HK$6 million being revolving credit. The loans can be used for meeting the working capital needs of general business uses and they should not be used for repaying, restructuring or repackaging other loans. All firms in Hong Kong, except listed companies and lending institutions, can apply for such guarantee. The loan guarantee period is up to a maximum of five years from the first drawdown date of the loan or up to 31 December 2014, whichever is earlier.

Apart from the SpGS, the Government is also running another loan guarantee scheme called the SME Loan Guarantee Scheme ("SGS"). The SGS, which is an on-going scheme introduced in 2001, aims to help small and medium enterprises ("SMEs") secure loans from the financial market. With effect

HONG KONG1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES from 6 November 2008, the maximum loan amount for each SME will be HK$ 6 million. The loan can be used for a wide range of purposes7. All SMEs8, except lending institutions, can apply for such guarantee. The loan guarantee period is up to a maximum of five years.

On March 26, 2009, the HKMA announced that the Lender of Last Resort ("LOLR") Policy Statement has been amended to expand the types of assets and facilities eligible for obtaining Hong Kong dollar liquidity. In particular, foreign exchange swaps have been included among the basic instruments to be used by the HKMA to provide LOLR support, and the definition of eligible securities for repos has also been expanded to include securities in foreign currencies with acceptable ratings.

On May 26, 2009, the HKMA announced the signing of a Memorandum of Understanding with De Nederlansche Bank N.V. ("DNB") for a liquidity arrangement to be applied for non-routine situations. Under the arrangement, Dutch banks operating in Hong Kong or Hong Kong banks operating in Netherlands can approach the HKMA or DNB to ask for liquidity assistance if needs arise. The

HONG KONG1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES provision of liquidity assistance will be based on collateral, and it will remain at the sole discretion of the respective central bank. If a Dutch bank in Hong Kong approaches the HKMA to request the activation of the arrangement and the request is accepted, the Dutch bank will deliver euro cash collateral to the HKMA, vice versa.

1 Hong Kong, according to the latest press release by HKMA on July 7, 2009, had approximately US$207.0 billion in foreign reserves as of the end of June 2009. 2 A fund established in 1935 by the Exchange Fund Ordinance (Cap 66) (originally enacted as the Currency Ordinance) as a reserve to back the issue of Hong Kong's banknotes. 3 An institution authorized under the Banking Ordinance (Cap 155) to carry on the business of taking deposits. 4 The guarantee covers all protected deposits as defined in the Deposit Protection Scheme Ordinance (Cap 581), were the Ordinance to apply to all authorized institutions. 5 Previously, Hong Kong depositors had stood to receive compensation limited to HK$100,000 (US$12,800). 6 The rate of interest offered on a Hong Kong dollars loan by banks in the interbank market for a specific period ranging from overnight to one year. 7 The loans secured by the SME loan guarantee can be used by SMEs to secure loans for the purpose of acquiring business installations and equipment (e.g., machinery, tools, computer software and hardware, communication systems office equipment, transport facilities, furniture, fixtures (e.g. air-conditioning systems, built-in cabinets and lighting systems. However it does not cover decoration works),, etc.) or to meet the working capital needs of general business uses, or a combination of both. 8 SME is defined by the Government of Hong Kong Special Administrative Region as a manufacturing business which employs fewer than 100 persons in Hong Kong; or a non-manufacturing business which employs fewer than 50 persons in Hong Kong.

HUNGARY

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Bank Bailout Package Deposit Guarantee Interest Rate Bank Bailout Package IMF/World Bank/ECB Loan

On December 15, 2008, the On October 15, 2008, a On October 22, 2008, the On December 15, 2008, the Hungary has obtained financial Hungarian Parliament approved legislative change was enacted Central Bank of Hungary Hungarian Parliament approved support from the IMF, the EU a 600 billion forint (€2.2 billion) to increase the limit of insured increased its base rate from a 600 billion forint (€2.2 billion) and the World Bank in the bank bailout package, which deposits by the National Deposit 8.5% to 11.5% to defend the bank bailout package, which amount of €19.8 billion after was promulgated on December Insurance Fund (OBA) from 6 to Hungarian forint against was promulgated on December Hungarian assets were 22, 2008, as Act CIV of 2008 on 13 million forints (€45,000) per speculation. The Central Bank 22, 2008, as Act CIV of 2008 on battered as foreign-currency the strengthening of the stability financial institution, and the 10% subsequently cut its growth and the strengthening of the stability borrowing by local companies of financial intermediaries. The own-risk component was inflation forecasts for 2009 and of financial intermediaries. The and consumers, along with bailout package enables the removed (statutory guarantee). 2010, and as the Hungarian bailout package enables the slower growth, a wider budget Government (i) to provide debt According to legislation forint has begun to stabilize, in Government (i) to provide debt deficit and higher government guarantees to Hungarian banks promulgated on May 29, 2009, the past eleven months it guarantees to Hungarian banks debt than elsewhere in east up to the aggregate amount of starting from June 30, 2009, the gradually decreased the base up to the aggregate amount of Europe, raised concern that the HUF 1,500 billion (€5.5 billion); amount of the statutory deposit rate to 7.5%. HUF 1,500 billion (€5.5 billion), country may have difficulties in and (ii) to recapitalize troubled guarantee is expressed in euros and (ii) to recapitalize troubled securing funding. banks – with or without their as the HUF equivalent of Central Bank Measures banks – with or without their consent – up to a total of HUF €50,000. This amount, consent – up to a total of HUF The IMF will provide a 600 billion (€2.2 billion). The depending on the prevailing HUF Liquidity Measures: The 600 billion (€2.2 billion). The 17-month, SDR10.5 billion bailout package is financed from HUF/EUR exchange rate, is Central Bank has introduced the bailout package is financed from (€12.3 billion) Stand-By the IMF loan drawn, or to be around or is slightly more than following HUF liquidity the IMF loan drawn, or to be Arrangement under its drawn, between 2008 and 2010. the previously applicable HUF13 measures: drawn, between 2008 and 2010. exceptional access policy, the million. EU will provide €6.5 billion to Debt Guarantee Scheme (i) public debt securities Recapitalization Scheme facilitate fiscal consolidation, In addition, on October 15, auctions: the Central Bank and the World Bank will provide The debt guarantee scheme is 2008, an unlimited governmental agreed with primary dealers that Upon the request of an eligible €1 billion. available to banks licensed in guarantee was declared in market makers will provide bank, the Government may Hungary which meet prudent respect of bank deposits in continuous quotes for certain acquire non-voting dividend Hungary has also secured a capital requirements. It is excess of what is insured by the public debt securities and preference shares or voting €5 billion loan from the ECB. available to guarantee OBA (governmental guarantee). increase their holdings of public preference shares entitling it to obligations arising from loans or debt securities by an agreed veto, among other things, EIB Loan debt securities which are amount, and the Central Bank matters relating to dividend denominated in euros, Swiss will conduct auctions for the distribution. In this voluntary In addition, on the basis of a francs, or forints, and only if purchase of these securities; recapitalization scheme the facility signed on January 26, repayment is to be made by the bank and the Government must 2009, the European Investment bank in the currency in which (ii) variable interest rate loan enter into an agreement setting Bank (EIB) is lending €440 the obligation is denominated. tenders: the Central Bank is out the value of the shares and million to part finance Banks that wish to have assisting primary dealers and the rights and obligations of the Hungary's national contribution recourse to the scheme must banks in financing purchases of Government in respect of the to the implementation of priority issue preference shares entitling public debt securities by bank's operation. The bank will projects in the areas of the Government to veto introducing a six-month loan have a call option to acquire the research and innovation

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SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES decisions on dividend tender at variable interest rates; shares from the Government, identified under the Hungarian distribution, and must undertake and the Government will have a National Strategic Reference limitations on management (iii) two-week loan tenders at put option to sell the shares to Framework for the period 2007- compensation. fixed interest rates; the bank. 2013.

On April 14, 2009, the (iv) Central Bank deposit rate In case of a forced EBRD, EIB, World Bank Government approved cut: the Central Bank has recapitalization, the Government Assistance Government Decree no. decreased the interest rate on may acquire the right to exercise 89/2009. (IV. 14.) on the overnight Central Bank loans all shareholders' rights in On February 27, 2009, the procedural rules of the debt and deposits to + / - 50 basis respect of the general meeting EBRD announced that together guarantee scheme. According to points around the relevant of the bank, including decisions with the EIB and the World these rules, banks may have asset's interest rate; on recapitalization, if (i) the bank Bank they have pledged to recourse to the scheme subject needs access to the special provide up to €24.5 billion to to the approval of the finance (v) the Central Bank has liquidity loan of the Central Bank support the banking sectors in minister and the opinion of the widened the scope of of Hungary for more than 20 the region and to fund lending Central Bank, the Supervisory acceptable collateral for Central days in excess of a specific to businesses hit by the crisis. Council of the Hungarian Bank financing (municipal bonds amount, (ii) if the bank fails to The initiative will include equity Financial Supervisory Authority, and certain mortgage securities satisfy prudent capital and debt financing, credit lines, and the Government Debt have become acceptable requirements, (iii) if the and political risk insurance. For Management Agency security), and reduced the Government is forced to make a details of the concrete concerning the applicant bank's minimum rating criteria from A to payment to the bank's creditors measures under the pledge liquidity, solvency, its role in the BBB; under the debt guarantee see the 'Recapitalization financial system, its scheme, or (iv) if the insolvency Measures' column. undertakings with respect to its (vi) easing of reserve of the bank would seriously financing activities, and the legal requirements of banks relating harm the system of financial Regulatory Measures consequences it is willing to face to certain types of liabilities from intermediaries in Hungary. The if a violation of such an 5% to 2%. Government must declare the PSZAF Circular: On February undertaking arises. satisfaction of these 25, 2009, PSZAF, the FX Liquidity Measures: The circumstances in a government Hungarian financial regulator, The debt guarantee scheme is Central Bank has introduced decree. Existing shareholders issued a circular to banks in intended to remain in effect until several FX liquidity measures, of of the bank will have a right to which it briefly set out its December 31, 2009. which the following are still in sell their shares to the recommendations for handling effect: Government within 120 days the crisis. Among other things, after the entry into effect of the PSZAF advised banks that they (i) an overnight FX swap facility government decree, at a price to should not declare dividends, for domestic banks, facilitated by be determined on the basis of and that they should refrain an agreement between the the shareholder's stake in the from using innovative financial Central Bank and the ECB; bank and the value of the bank's products such as structured equity as per the interim balance securities, structured FX linked (ii) EUR/CHF swaps on the sheet of the bank to be prepared swaps, and speculative FX basis of a cooperation as of the date preceding the options. In addition, PSZAF agreement between the Central

HUNGARY

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Bank and the Swiss National entry into effect of the warned that applications for Bank, signed on January 28, government decree. exemptions from certain 2009 (local banks need CHF to discretionary capital adequacy finance their large CHF loan The recapitalization scheme is requirements would be turned portfolios). The Central Bank, intended to remain in effect until down. the Swiss National Bank, the December 31, 2009. ECB, and the National Bank of Regulatory Commissioner: Poland have announced that FHB: On March 31, 2009, as According to legislation they will further extend the part of the voluntary promulgated on April 3, 2009, availability of these swaps until recapitalization scheme, the PSZAF will be authorized to October 31, 2009; Government and Land Credit appoint a regulatory and Mortgage Bank Ltd. (FHB), commissioner to oversee the (iii) six-month EUR/HUF FX a large mortgage lender, signed operation of banks whose swap: a euro liquidity FX swap an agreement according to capital adequacy ratio does not tender funded with €5 billion has which the Government will comply with applicable been introduced for banks which provide FHB with a capital requirements and whose undertake to keep their lending injection worth 30 billion forints foreign parent institutions fail to to corporates in 2009 at 2008 (€110 million) in exchange for provide the necessary funding year-end levels and which agree non-voting dividend preference to the Hungarian subsidiary. not to withdraw funds from shares and a special veto share. Hungary; FHB agreed to maintain its mortgage lending portfolio at (iv) three-month EUR/HUF FX previous levels. swap: commencing from March 9, 2009, the Central Bank In addition to the capital injection introduced a euro liquidity FX under the bailout legislation, on swap tender funded with €2.2 March 25, 2009, the billion, the unused amount Government and FHB agreed remaining from the €5 billion that FHB will be granted a 120 allocated for the six-month billion forint (€440 million) credit EUR/HUF FX swap. line to boost lending to private individuals and SMEs. Both measures are financed from the €20 billion IMF/World Bank/ECB loan.

OTP: Besides FHB, according to a loan agreement signed on March 25, 2009, OTP, Hungary's largest bank, will also receive a Government loan

HUNGARY

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES worth 400 billion forints (€1.48 billion). The loan is not part of the bailout scheme, although OTP agreed to appoint a person designated by the Government in its supervisory board. OTP agreed to supplement the loan with 200 billion forints (€0.7 billion) of its own funds to provide financing to SMEs. The loan is financed, similarly to the FHB loan, from the €20 billion IMF/World Bank/ECB credit line.

In addition, on July 10, 2009, the EBRD announced that, as part of the joint pledge by the EBRD, the World Bank Group and the EIB to provide over €24.5 billion in support of the banking sectors in the region, the EBRD is providing a €200 million subordinated loan to OTP on commercial terms. The subordinated loan facility will be available for draw-down for a period of six months. A further €20 million is being used to acquire OTP treasury shares, which will take the EBRD's existing stake in OTP to 2%.

MFB/Eximbank: On April 14, 2009, the Government and the Hungarian Development Bank (MFB) signed an agreement according to which MFB will receive a HUF170 billion (€578 million) loan from the Government. The loan is financed from the €20 billion

HUNGARY

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES IMF/World Bank/ECB credit line. MFB will use €436 million to repay expiring loans and bonds, while it will lend the remaining €142 million to the Hungarian Export-Import Bank (Eximbank), due to the fact Eximbank did not qualify to receive the funds directly from the Government. MFB agreed to increase its corporate loan portfolio by HUF55 billion (€203 million) by the end of 2010. Eximbank will use the loan to facilitate export- import activities.

In addition, the European Investment Bank (EIB) is lending €100 million to MFB to finance projects by mid-cap companies (with more than 250 and fewer than 3,000 employees) and improve their access to long- term finance during the financial crisis. The loan can be drawn in five installments of €20 million until December 31, 2010.

UniCredit: On May 8, 2009, the EBRD announced that, as part of the joint pledge by the EBRD, the World Bank Group and the EIB to provide over €24.5 billion in support of the banking sectors in the region, the EBRD is making funds worth a total of EUR 432.4 million available to UniCredit subsidiaries across eight eastern European countries. The Hungarian UniCredit subsidiary will receive

HUNGARY

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES €50 million, which must be used to support SMEs.

Erste: On July 10, 2009, the EBRD announced that, as part of the same EBRD/World Bank/EIB joint pledge, the EBRD is providing a senior loan of €100 million to Erste Bank Hungary for on-lending to private SMEs.

Alleviating fears that parent institutions may abandon their local subsidiaries, on May 21, 2009, six international banks with the largest presence in Hungary, Bayerische Landesbank (MKB), Erste Group Bank AG, Intesa SanPaolo (CIB Bank), KBC Group (K&H Bank), Raiffeisen Bank Holding and UniCredit Bank Austria issued a joint statement declaring that branches in Hungary continue to enjoy special attention and adequate capital supply.

ICELAND

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES The Government of Iceland has On October 10, 2008, the Board Signing of Agreement on Glitnir On October 24, 2008, the repeatedly (in press releases of Governors of the Central Settlement between Icelandic Government reached and Ministerial statements) Bank of Iceland decided on Kaupthing Bank and New On October 14, 2008, the FSA an agreement ad referendum declared that all bank deposits temporary modifications in Kaupthing Bank. decided to transfer a part of with a mission from the IMF on in domestic commercial banks, currency outflow.5 Glitnir's operations to a new an economic stabilization savings banks and their Kaupthing's Resolution bank that has been formed and program that could be supported branches in Iceland are fully On October 15, 2008, the Board Committee and the Icelandic is fully owned by the Icelandic by a stand-by arrangement with guaranteed. The statement, of Governors of the Central Government signed, on State, the New Glitnir. The the fund. It is stated that the which does not have the force of Bank of Iceland decided to lower September 3,2009 an decision means, inter alia, that economic program will be law, only extends to domestic the policy interest rate by 3.5% agreement on settlement the New Glitnir takes over all of supported by an SDR1.4 billion deposits and not to deposits with to 12%. between Kaupthing Bank and Glitnir's deposits in Iceland, and (US$2 billion) loan under a two- Icelandic banks held overseas.1 New Kaupthing Bank in also the bulk of the bank's year Stand-By-Arrangement. On October 28, 2008, as a accordance with an agreement assets that relate to its Icelandic Iceland would be able to draw On October 6, 2008, the Act on condition of the loan from the announced on July. 20, 2009 operations, such as loans and SDR560 million Authority for Treasury IMF, Iceland's central bank other claims. (US$830 million) immediately Disbursements due to Unusual raised interest rates by 6% to The agreement gives the after the Board approval. It is Financial Market Circumstances, 18%. Resolution Committee two Landsbanki also expected that an etc. was passed with immediate alternatives: Either Kaupthing agreement with the IMF will force by the Icelandic On November 28, 2008, the Bank can acquire approx. 87% On October 9, 2008, the FSA encourage lending from other Parliament. According to the Central Bank of Iceland of the share capital in New decided to transfer a part of sources. Act, all deposits shall take guidelines, issued in early Kaupthing Bank from the Landsbanki's operations to a priority over all general and October 2008 on temporary Icelandic Government, leaving new bank that has been formed On November 19, 2008, the unprioritized claims against the modifications in currency the Government with approx. and is fully owned by the Executive Board of the IMF financial undertaking. outflow, were revoked. The 13% stake; or Kaupthing Bank Icelandic State, the New approved Iceland's request for a revocation of these guidelines can decide not to participate in Landsbanki. The decision two-year stand-by arrangement. The Icelandic Financial means that there are no longer the New Kaupthing Bank's means, inter alia, that the New Iceland will receive Supervisory Authority (the restrictions on current account capitalisation for the time being, Landsbanki takes over all of US$2.1 billion from the IMF. "FSA") has decided to transfer a related transactions. but it has the option to acquire Landsbanki's deposits in Additional loans of up to part of Landsbanki, Glitnir and up to 90% of share capital which Iceland, and also the bulk of the US$3 billion have been secured Kaupthing operations to new However, the economy it can exercise between 2011 bank's assets that relate to its from Denmark, Finland, Norway, banks that have been formed programme of the Stand-By and 2015. Icelandic operations, such as Sweden, Russia and Poland. and are fully owned by the Arrangement from the Executive loans and other claims. The Faroe Islands have Icelandic State. The decision Board of the International The Resolution Committee announced that they would lend means, inter alia, that the new Monetary Fund entails needs to decide which Kaupthing Iceland US$ 50 million. The entities take over all of the "old" continuing restrictions on the alternative it wishes to pursue funds made available through entities' deposits in Iceland. movement of capital between before October 31, 2009. Until On October 21, 2008, the FSA the IMF will be used to support Furthermore, the decision states Iceland and other countries and then, the creditors have the decided to transfer a part of the currency. It is to be that the new entities will take the subsequent lifting of those opportunity to carry out due Kaupthing's operations to a new expected that the currency over the obligations of the restrictions as soon as a diligence regarding New bank that has been formed and market will stabilize soon and branches of the "old" entities in sufficient stability has returned Kaupthing Bank and the is fully owned by the Icelandic that international money Iceland due to deposits from transaction agreements. The State, the New Kaupthing. The transfers will subsequently

ICELAND

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES financial undertakings, the to the foreign exchange market. Resolution Committee will then decision means, inter alia, that return to normal.7 Icelandic Central Bank and other reach a decision after the New Kaupthing takes over customers. The Parliament has passed a consultation (at the Creditors all of Kaupthing's deposits in The Act on Financial legislative bill from the Minister Meeting October 20, please see Iceland, and also the bulk of the Undertakings No. 161/2002 was Icesave2 to adopt rules restricting the below) with the creditors. bank's assets that relate to its amended on November 14, cross-border movement of Icelandic operations, such as 2008. It was reported on October 22, capital. This authorization has Landsbanki loans and other claims3. 2008 that the UK and Iceland been utilized by the Central According to Act No. 129/2008 are hoping to agree on a loan of Bank. The Government and the Kaupthing's U.K. subsidiary, amending Act on Financial up to £3 billion to cover British Resolution Committee of Old Kaupthing, Singer & Friedlander Undertakings, No. 161/2002 with depositors in Icesave, the online The aim of the Rules is to Landsbanki have agreed to a Ltd., has been placed in subsequent amendments, a banking unit of Landsbanki, the maintain restrictions on capital further period to allow administration. lawyer or an authorized public collapsed Icelandic bank. outflows that could have a completion of due diligence by auditor who has been engaged negative impact on the the Resolution Committee, its Certain other subsidiaries of the by a financial undertaking to act It was reported on October 11, reconstruction of the foreign advisers and creditor Icelandic banks have either as an assistant in reorganizing 2008 that the Dutch and exchange market. The Rules representatives and the been sold or placed in its financial affairs will not be Icelandic Governments have stipulate that those who acquire finalisation of the terms of a administration by local liable for compensation agreed on a solution regarding foreign currency must submit it bond instrument to be issued by authorities. damages as a result of the Dutch depositors of to a domestic financial New Landsbanki in connection decisions or actions taken in his Landsbanki Icesave savings institution; however, such with compensation. It is Kaupthing Bank hf. and Glitnir capacity as assistant, unless accounts. foreign currency may be envisaged that this bond Bank hf. were placed into such decisions or actions deposited to a foreign currency instrument will be issued by moratorium proceedings as of represent violations committed The agreement states that the account in such an institution. August 14, 2009 in tandem with November 24, 2008. by intent or gross negligence. Icelandic Government will Restrictions are placed on the the capitalisation by the compensate each Dutch movement of capital by parties Government referred to below. Landsbanki Íslands hf. was Another amendment was made depositor up to a maximum of intending to exchange Icelandic The parties have also agreed a placed into moratorium on Article 98 stipulating that €20,887. The Dutch krónur for foreign currency. process to conclude all proceedings as of December 5, judicial proceedings will not be Government will provide a loan negotiation of other 2008. filed against a financial to Iceland to enable this Furthermore, the Rules prohibit compensation to be provided to undertaking while it is in a restitution and the Dutch Central trading between domestic and Old Landsbanki. moratorium, unless such Bank is to settle the depositors' foreign parties in domestic proceedings are specifically claims. securities and other króna- Agreement between the authorized by law or if it is a denominated financial Government of Iceland and criminal procedure and On November 16, 2008, the instruments. Foreign parties are the Resolution Committe of sanctions that can be levied on Government of Iceland agreed prohibited from purchasing Glitnir finalised. a financial undertaking are to cover deposits of insured króna-denominated securities petitioned. However, this depositors in the so-called through the intermediation of Following the heads of provision is disputed. Icesave accounts in accordance domestic parties, unless they agreement announced on July with EEA law. They also entail already own króna-denominated 20, 2009, the Government of The Parliament has passed a that the EU, under the French assets that can be used for this Iceland announced the signing legislative bill from the Minister Presidency, will continue to purpose. Furthermore, foreign of definitive agreements with the to adopt rules restricting the

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SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES participate in finding parties are prohibited from Resolution Committee of Glitnir cross-border movement of arrangements that will allow issuing securities in Iceland. regarding the capitalisation of capital. This authorization has Iceland to restore its financial Domestic parties are also Islandsbanki and the basis for been utilized by the Central system and economy. prohibited from investing in compensation to Glitnir and its Bank. Furthermore, it was agreed to foreign securities. Foreign creditors following the creation facilitate financial assistance to borrowings, provision of of Islandsbanki in October 2008. The Government of Iceland has Iceland, including agreeing on a guarantees to foreign parties, As announced on August 14, decided to examine any and all stabilization package from the and derivatives transactions 2009, the Government of possibilities of Iceland seeking IMF.4 unrelated to trading of goods Iceland has now capitalised redress before the European and services are restricted or Islandsbanki with ISK65 billion Court of Human Rights for the Spron hf. prohibited, as are loans granted of tier 1 capital through the issue application by UK authorities of by domestic parties to foreign of Government bonds, giving the the Anti-Terrorism, Crime and On March 21, 2009 the FME parties. bank a core tier 1 ratio of Security Act 2001 against assumed the powers of a approximately 12 per cent. This Landsbanki last year. meeting of the shareholders of The restrictions now adopted on puts Islandsbanki on a secure Spron hf., immediately the basis of the newly-passed financial footing for its future On April 15, 2009 the Icelandic suspended the Board in its legislation include foreign operations and development. Parliament, passed an act entirety and appointed a exchange transactions related to amending the Act on Financial Resolution Committee. The the movement of capital As described in the Undertakings, No. 161/2002, Resolution Committee made the between Iceland and other announcement of July 20, 2009, with subsequent amendments. decision to close the bank´s countries. These restrictions are under the agreements, Glitnir The Amendment Act consists of branches that day. It is the a necessary part of the has the opportunity to acquire 11 articles and 4 temporary opinion of the Financial measures intended to restore control of Islandsbanki. In this provisions. The temporary Supervisory Authority, Iceland stability in the foreign exchange event the Government of Iceland provisions describe the (the FME) that on the same day, market. They will be lifted as will continue to support the procedure applicable for Spron hf. was unable to render soon as circumstances allow. capital of Islandsbanki with financial undertakings which payment of the amount ISK25billion in the form of tier 2 were already under the control customers demanded, of certain Exemptions on Rules on capital and a minority ordinary of resolution committees or deposits, in accordance with Foreign Exchange share holding of 5 per cent. which had entered into a applicable terms. Therefore, Glitnir has until October 15, moratorium prior to the with regards to the The Central Bank of Iceland has 2009 to decide whether to Amendment Act coming into aforementioned, the Depositors' made some exemptions on acquire control of Islandsbanki. force. and Investors' Guarantee Fund Rules on Foreign Exchange. (the Fund) has become The State and the municipalities In the event Glitnir decides not In relation to such financial obligated to render payments in are granted exemptions, as are to acquire control of undertakings, e.g. Landsbanki accordance with Article 9 of Act companies in which the State Islandsbanki the Government Islands hf., Glitnir bank hf., No. 98/1999 on Deposit and the municipalities own a will continue to own Kaupthing bank hf., the Guarantees and Investor majority holding and which Islandsbanki. In this case, the resolution committees shall Compensation Scheme, to the operate in accordance with compensation will take the form continue their activities without customers of Spron hf. who did special legislation. Companies of bond instruments to be issued changing their names. However, not receive the amount of their that are parties to investment by Islandsbanki and an option the resolution committees shall

ICELAND

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES deposits. agreements with the Icelandic over 90% of the Government's fulfill certain obligations and act Government and those that shareholding in Islandsbanki as a winding-up committee in Act on State Guarantee have been granted permits to exerciseable between 2011 and relation to certain matters as search for oil by the Minister of 2015 at a price which provides further described in the A Bill regarding authorisation for Industry are exempt. for the Government to receive Amendment Act. For winding-up the Minister of Finance, to issue Furthermore, resolution an appropriate level of return on activities, other than those a State guarantee of the loans committees appointed on the its investment. carried out by the resolution granted by the governments of basis of the Act on Financial committees, boards shall be the UK and the Netherlands to Undertakings are exempt. appointed by the District Court, the Depositors and Investors upon a written petition from the Guarantee Fund of Iceland, was Companies that have over 80% resolution committees (the passed as law by the Parliament of their revenues and expenses "Winding-up Board"). of Iceland on August 28, 2009.7 abroad may apply to the Central Accordingly, there will be a Bank for an exemption from division of tasks between the specified articles of the Rules resolution committees and the pertaining to securities trading winding-up boards in the abroad, borrowing and lending, winding up of such financial guarantees and derivatives undertakings. trading, and the obligation to submit foreign currency. The On April 29, 2009 a Winding-up Central Bank will publish a list of Board was appointed in relation the companies granted such to Landsbanki Islands hf. On exemptions on its website. May 14, 2009 a Winding-up Board was appointed for In addition, commercial banks, Landsbanki and Straumur- savings banks, and credit Burdaras Investment Bank hf. institutions have been granted On May 25, 2009 a Winding-up extended authorisation to Board was appointed for engage in foreign exchange Kaupthing Bank hf. transactions.

Other minor changes involve the clarification of the lack of limits on direct investment; however, it is emphasised that the movement of capital from Iceland in connection with the sale of direct investments is prohibited.

It should be noted that the

ICELAND

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES legislation on which the Rules are based is temporary and will expire at the end of November 2010.

1 It should be noted that a significant volume of banking business by Iceland's banks is conducted overseas. 2 Icesave, the online British arm of Landsbanki, announced that its customers can no longer withdraw or deposit money. More than 300,000 British customers had around £4 billion deposited in Icesave accounts and now face the prospect of making a claim under the U.K. Government deposit guarantee scheme. Depositors with more than £50,000 and non-retail depositors are not protected by this scheme. 3 The decisions of the Icelandic Financial Supervisory Authority, due to unusual circumstances, are posted on the following website (in English translation): http://www.fme.is/?PageID=867. 4 A press release from the Prime Minister's Office of the Agreed Guidelines Reached on Deposit Guarantees is posted on the following website (in English translation): http://eng.forsaetisraduneyti.is/news-and-articles/nr/3229. 5 The temporary modifications in currency outflow can be found on the following website: http://sedlabanki.is/lisalib/getfile.aspx?itemid=6493. 6 A press release from the Prime Minister's Office is posted on the following website (in English translation): http://eng.forsaetisraduneyti.is/news-and-articles/nr/3272. 7 A translation of the Act can be found on the following webpage: http://www.iceland.org/media/info/010909_Act_on_state_guarantee.pdf

INDIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Deposits in Indian banks are The Reserve Bank of India Cash Reserve Ratio ("CRR") already insured up to a ("RBI") has come up with maximum of Rs.100,000 per various assistance measures in CRR is the minimum average depositor. order to infuse liquidity into the daily balance that a bank is system, some of which are: required to maintain with the RBI. In October 2008, the CRR Banks of 9% was reduced by 250 basis points to 6.5%. On November 1, (i) On November 1, 2008, it was 2008, it was again reduced to decided to provide refinance 6% retrospectively with effect facilities to all banks from RBI up from October 25, 2008 and to to 1% of each bank's net 5.5% with effect from November demand and time liabilities as on 8, 2008. October 24, 2008 at the repo rate up to a maximum period of On January 2, 2009, there was a 90 days. However, as per a further reduction in the CRR clarification issued by the from 5.5% to 5% with effect from Reserve Bank of India, on January 17, 2009. December 1, 2008, this facility can be rolled over and will Repo Rate continue up to June 30, 2009. The availability of the facility Repo rate is the rate at which under Vide RBI notification the banks borrow money from dated April 22, 2009 has been the RBI. On October 20, 2008, extended till March 31, 2010. the repo rate was reduced by 100 basis points from 9% to 8%. (ii) Further, banks have also On November 1, 2008, it was been allowed to borrow up to decided to reduce the repo rate 1.5% in cash from the RBI to on- further by 50 basis points to lend it to Non-Banking Financial 7.5% effective November 3, Companies and Mutual Funds to 2008. In order to further reduce meet their funding requirements. the marginal cost of funds to the banks, this repo rate has been Consequently, on November 3, further reduced by 100 basis 2008, a 14-day window of points, from 7.5% to 6.5%, with Rs. 600 billion has been opened effect from December 8, 2008. to enable such funding by banks. On January 2, 2009, the repo rate was reduced by 100 basis Whilst this was initially points from 6.5% to 5.5% with envisaged as an ad-hoc facility, immediate effect. On March 4,

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SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES on November 15, 2008, this 2009, the repo rate was further special term repo facility was reduced by 50 basis points from extended till end-March 2009. 5.5% to 5% with immediate Banks have been permitted to effect. On April 21, 2009, the avail of this facility either on repo rate was further reduced by incremental or on rollover basis 25 basis points from 5% to within their entitlement of up to 4.75% with immediate effect. 1.5% of each bank's net demand and time liabilities. The Reverse Repo Rate: availability of the special term repo facility for banks under The reverse repo is the rate at Vide RBI notification dated April which RBI borrows money from 21, 2009 has been extended till banks. With effect from March 31, 2010. December 8, 2008, the reverse repo rate has been reduced by Under the extended 100 basis points, from 6% to arrangement, the RBI has also 5%. On January 2, 2009, the commenced a special fixed rate reverse repo rate was reduced term repo at 4.75% per annum by 100 basis points from 5% to against eligible securities, on a 4% with immediate effect. On periodic basis. March 4, 2009, the reverse repo rate was further reduced by 50 Foreign Institutional Investors basis points from 4% to 3.5% ("FIIs") with immediate effect. On April 21, 2009, the reverse repo rate (i) On October 6, 2008, was further reduced by 25 basis restrictions on the issue of points from from 3.5% to 3.25% Offshore Derivative Instruments with immediate effect. by FIIs were removed. Statutory Liquidity Ratio (ii) On October 16, 2008, limits ("SLR") for FII investments in corporate bonds were enhanced SLR is the amount of liquid substantially to a cumulative assets in the form of cash, gold level of US$ 6 billion. Through a or approved securities that a Press Release dated January 2, bank is required to maintain in 2009, the Government of India its reserves. On November 1, ("GOI") has increased the FII 2008, the RBI reduced the SLR investment limit in rupee rates by 100 basis points to 24% denominated corporate bonds with effect from November 8, from US$ 6 billion to US$15 2008. As a result, the banks

INDIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES billion. have an option of selling Rs.400 billion of government (iii) On October 23, 2008, securities which until now restrictions requiring FIIs to formed part of their statutory purchase shares of stock investments. exchanges and security market infrastructure companies only Market Stabilization Scheme from the secondary market have (MSS) been lifted, and FIIs are now allowed to buy them even before In pursuance of an agreement they are listed. between the RBI and the Government of India, the RBI Non-Banking Financial issues instruments in the nature Companies ("NBFCs") of treasury bills and dated securities, by way of auction, on The Government of India has behalf of the Government of opened up various fund raising India. The money so raised is options for NBFCs. impounded in a separate account with the RBI and is (i) On October 29, 2008, appropriated only for the systematically important non- purpose of redemption and/or deposit taking NBFCs (i.e., non- buy-back of the treasury bills deposit taking Non-Banking and/or dated securities issued Financial Companies having an under the MSS. asset size of Rs.1 billion or more) were allowed to augment As a measure of infusing their capital funds by issue of liquidity into the system, the RBI Perpetual Debt Instruments has put in a mechanism to buy ("PDI") in the form of bonds and back dated securities issued debentures with a minimum under the MSS. The securities investment of Rs.500,000 per proposed to be bought back and issue by an investor. the timing and modalities of these operations are notified (ii) On November 1, 2008, from time to time. systematically important non- deposit taking NBFCs were Fiscal Stimulus Package further allowed to raise short- term foreign currency To contain the impact of the borrowings under the approval global financial meltdown on the route up to 50% of the net Indian economy, the owned funds or US$10 million, Government of India unveiled

INDIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES whichever is higher. fiscal stimulus packages on December 7, 2008, January 2, (iii) On February 18, 2009, the 2009 and February 24, 2009. Government of India approved a scheme for providing liquidity Highlights of the fiscal stimulus support to eligible non-deposit package announced on January taking systemically important 2, 2009 are as follows: NBFCs through a special purpose vehicle for meeting (i) An SPV will be designated to temporary liquidity mismatches provide liquidity support against in the operations. Such NBFCs investment grade paper to are required to meet certain NBFCs fulfilling certain specific criteria to be eligible for conditions. The scale of liquidity such liquidity support. This potentially available through this includes: (i) having a Ccapital to mechanism will be Rs.25,000 Rrisk Aasset Rratio ("CRAR") of crores. 12% by March 31, 2009 and 15% by March 31, 2010; (ii) a (ii) An arrangement will be net profit in the preceding two worked out with leading public years; and (iii) the net non- sector banks to provide a line of performing assets as on the last credit to NBFCs specifically for balance sheet date should not the purchase of commercial be more than 5%. However, on vehicles. account of difficulty in raising equity capital in the current (iii) Credit targets of public economic environment, RBI on sector banks are being revised May 26, 2009 notifed its upward to reflect the needs of decision to defer the the economy. The Government implementation of CRAR of 12% will closely monitor, on a and 15 % from March 31, 2009 fortnightly basis, the provision of and March 31, 2010 to March sectoral credit by public sector 31, 2010 and March 31, 2011 banks. respectively.

Financial Institutions

The RBI provided an advance of Rs. 25,000 crore to financial institutions under the Agricultural Debt Waiver and Debt Relief Scheme pending release of

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SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES money by the Government.

Housing Finance Companies ("HFCs")

(i) On November 15, 2008, HFCs complying with capital adequacy norms and other prudential norms laid down by the National Housing Bank ("NHB") have been allowed to raise short-term foreign currency borrowings under the approval route from multilateral or bilateral financial institutions, reputed regional financial institutions and foreign equity holders with minimum direct- equity holdings of 25%.

The resources should be used only for the sole purpose of refinancing the short-term liabilities for a maximum maturity not exceeding three years and the maximum amount not exceeding 50% of the net owned fund of the HFC or US$ 10 million, whichever is higher.

The all-in-cost ceiling should not exceed six months Libor + 200 bps (for the respective currency of borrowing or applicable benchmark), and the borrowings should be fully swapped into rupees for the entire maturity.

(ii) In order to boost lending to the housing sector, from

INDIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES December 8, 2008 onwards, loans granted by banks to HFCs for on-lending to individuals for purchase/construction of dwelling units will be classified under priority sector, provided that the housing loans granted by HFCs are not in excess of Rs. 20 lakh per dwelling unit per family. This facility will apply to all such loans granted by banks to HFCs up to March 31, 2010. However, the eligibility under this measure will be restricted to 5% of the individual bank's total priority sector lending.

(iii) In order to provide further liquidity support to the housing sector, particularly to the HFCs, on December 11, 2008 the Reserve Bank of India decided to provide a refinance facility of Rs. 4,000 crore to the NHB until March 31, 2010 against NHB's loans and advances to HFCs. This facility will be available at the prevailing repo rate for 90 days, during which the amount can be flexibly drawn and repaid and, at the end of which, the amount can also be rolled over.

Export-Import Bank of India ("EXIM Bank")

On December 11, 2008, the Reserve Bank of India, decided to provide a refinance facility of Rs. 5,000 crore to the EXIM Bank until March 31, 2010, as a

INDIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES result of which EXIM Bank will be in a position to disburse foreign currency lines of credit to exporters. This facility will be available at the current repo rate of 6.5% for 90 days, during which the amount can be flexibly drawn and repaid and, at the end of which, the drawal can also be rolled over.

Micro, Small and Medium Enterprises ("MSMEs")

MSMEs have been affected by the slowdown in exports and the indirect effect of the global crisis on domestic demand. To support this sector, it has been proposed, in the union budget released on July 6, 2009, to facilitate the flow of credit at reasonable rates by providing a special fund out of a rural infrastructure development fund to SIDBI. This fund of Rs.4,000 crore will incentivise banks and state finance corporations to lend to MSEs by refinancing 50% of incremental lending to MSEs during the current financial year.

Prudential Guidelines on Restructuring of Advances by Urban Cooperative Banks ("UCBs")

Urban cooperative banks are entities that undertake banking business as a cooperative

INDIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES society registered either under the Cooperative Societies Act of a state. Given the spillover effects of the global recession on the Indian economy, RBI vide its notification dated March 6, 2009 introduced revised guidelines on the restructuring of advances by UCBs. A brief over view of these guidelines is as follows:-

(i) UCBs may restructure the accounts classified under 'standard', 'sub-standard' and 'doubtful' categories such that no account will be taken up for restructuring unless the financial viability is established and there is a reasonable certainty of repayment from the borrower, as per the terms of restructuring package.

(ii) The accounts classified as 'standard assets' should be immediately re-classified as 'sub-standard assets' upon restructuring. Similarly, the non- performing assets, upon restructuring, would slip into further lower asset classification category.

(iii) Subject to certain conditions, interest income for restructured accounts classified as 'standard assets' will be recognized on an accrual basis. Interest for accounts classified as 'non performing assets' will be

INDIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES recognized on cash basis.

(iv) A special regulatory treatment for asset classification, i.e., retention of the asset classification of the restructured account in the pre restructuring asset classification category, will be available to the borrowers engaged in important business activities. Availability of such treatment is however subject to certain conditions.

Extension of Period of Credit for Rupee Export Credit Interest Rates:

In order to alleviate the difficulties faced by exporters due to weakening of external demand, the Reserve Bank of India has decided that, from November 28, 2008 onwards, the interest rate on Post- Shipment Rupee Export Credit up to 180 days will not exceed BPLR minus 2.5 percentage points. This ceiling was applicable until April 30, 2009. However, the validity of this ceiling has been extended until Octobert 31, 2009 under Vide RBI notification dated April 29, 2009.

On December 6, 2008, it was further decided that the above mentioned interest rate of BPLR minus 2.5 percentage points may also be extended to

INDIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES overdue bills up to 180 days from the date of advance.

On December 16, 2008, it was further decided that scheduled commercial banks may charge interest rates not exceeding BPLR minus 4.5% on pre- shipment credit up to 270 days and post-shipment credit up to 180 days on the outstanding amount for the period from December 1, 2008 to March 31, 2009 to the exporters in the sectors of textiles (including handloom), handicrafts, carpets, leather, gems and jewellery, marine products, and small and medium enterprises. However, the total subvention will be subject to the condition that the interest rate, after subvention, will not fall below 7%, which is the rate applicable to the agriculture sector under priority sector lending. Interest Subvention of 2% with effect from December 1, 2008 until March 31, 2009 on pre- and post-shipment rupee export credit given by scheduled commercial banks has also been extended to the above mentioned exporters. As per the interim budget released on February 16, 2009, it has been proposed to extend the above mentioned facility beyond March 31, 2009 until September 30, 2009 as this is expected to involve an additional financial

INDIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES outgo of Rs. 500 crore during financial year 2009-10. This proposal has been implemented by RBI vide its notification dated March 25, 2009. However, as per the union budget released on July 6, 2009, it has been proposed to extend this interest subvention from the current deadline of September 2009 to March 31, 2010. This proposal has been implemented by RBI vide its notification dated July 31, 2009.

With respect to scheduled UCBs also holding AD category I licences, the GOI vide RBI notification dated June 18, 2009 extends interest subvention of 2% points with effect from June 01, 2009 till September 30, 2009 on pre and post shipment rupee export credit, for employment oriented export sectors such as textiles (including handloom), handicrafts, carpets, leather, gems and jewellery, marine products, and small & medium enterprises. Also, in view of such interest subvention facility extended by the GOI in respect of rupee pre-shipment credit up to 270 days and post-shipment credit up to 180 days for export sectors as specified above, scheduled UCBs holding AD category I licences are now required to charge interest at 2% points below the interest rates charged from exporters in other

INDIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES categories of export sectors for the same period, on the outstanding amount of credit for the period June 01, 2009 to September 30, 2009. However, the total subvention will be subject to the condition that the interest rate, after subvention will not fall below 7%.

However, vide RBI notification dated September 16, 2009, the extension of interest subvention of 2 % points with effect from June 1, 2009 till September 30, 2009 on rupee export credit extended by scheduled UCBs holding AD category I licences, to certain aforementioned categories of export sectors, has been further extended till March 31, 2010.

Reduction of Interest Rates

In order to boost the housing sector by making home loans available at cheaper rates, public sector banks from December 16, 2008, onwards have decided to charge a concessional rate of 9.25% for loans below Rs.20 lakh and 8.5% for loans less than Rs.5 lakh. Furthermore, the interest rates for micro industries and small and micro enterprises have also been reduced by 100 and 50 basis points, respectively.

INDIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Extension of Time Line for Forex Swap Facility

Vide its press release dated November 7, 2008, RBI had extended a forex swap facility for tenors up to three months to public and private sector banks having overseas operations in order to provide them flexibility in managing their short term funding requirements at their overseas offices. This facility was available until June 30, 2009. In view of the continuing uncertain credit conditions globally, the availability of this facility has now been extended until March 31, 2010 vide RBI press release dated February 5, 2009.

Increase in Interest Rate Ceiling on Export Credit in Foreign Currency:

Due to increase in the banks' costs of raising funds abroad, they were finding it difficult to extend credit within ceiling on export credit in foreign currency, i.e., LIBOR + 100 basis points. Therefore, RBI vide its press release dated February 5, 2009, increased the ceiling on export credit in foreign currency from LIBOR + 100 basis points to LIBOR + 350 basis points with immediate effect. This increase is, however, subject to the condition that the banks will not

INDIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES levy any other charges, i.e., service charge, management charge, etc. except for recovery towards out-of-pocket expenses incurred. Similarly, the ceiling interest rate on the lines of credit with overseas banks has also been increased on February 5, 2009 from six months LIBOR/EURO LIBOR/EURIBOR + 75 basis points to six months LIBOR/EURO LIBOR/EURIBOR + 150 basis points, with immediate effect.

IRELAND

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES On October 20, 2008, the The protection limit for Ireland's The Minister for Finance On January 15, 2009, the Irish The Credit Institutions (Financial Minister for Finance made the existing deposit protection announced details of a Government announced its Support) Act 2008 (the "Act") Credit Institutions (Financial scheme was extended on recapitalization program for decision to nationalize the third provides the Minister for Finance Support) Scheme 2008 (the September 20, 2008 to Bank of Ireland and Allied Irish biggest bank in the State, Anglo with broad powers to provide "CIFS Scheme"). €100,000 per depositor per Banks on February 11, 2009. Irish Bank Corporation plc financial support in respect of institution, from its previous limit Earlier plans had also provided ("Anglo Irish Bank"). The the borrowings, liabilities and The CIFS Scheme gives effect of €20,000. This increase was for the recapitalization of Anglo decision was taken after obligations of any credit to the State bank guarantee given statutory effect on June Irish Bank. However, following consultation with the Central institution or subsidiary specified announced by the Irish 30, 2009. the nationalization of Anglo Irish Bank and the Financial by order. The Act also amends Government on September 30, Bank, its planned Regulator, which confirmed that Irish merger control rules. 2008. Under the CIFS Scheme, Note also that the CIFS Scheme recapitalization was postponed Anglo Irish Bank remained the Minister for Finance has described in the first column but went ahead in a different solvent. The nationalization Financial support is defined as guaranteed certain "covered covers all retail, corporate and form on June 29, 2009 (see became effective on January 21, including loans, guarantees, liabilities" of "covered inter-bank deposits (to the opposite). 2009, pursuant to the Anglo Irish exchange of assets and any institutions" from September 30, extent not covered by the Bank Corporation Act, 2009. other kind of financial 2008 to September 29, 2010 existing depositor protection In summary, under the accommodation or support. The inclusive. The EU Commission scheme). recapitalization program for In announcing the Minister for Finance has power has approved the CIFS Scheme Bank of Ireland and Allied Irish nationalization plan, the Minister to provide support on "such as being compatible with EC Banks, the Irish Government for Finance explained that the commercial or other terms and Treaty state aid rules. invested €3.5 billion of Core Tier funding position of the bank had conditions as the Minister thinks 1 capital in each of the weakened and that recent fit". The CIFS Scheme is only open institutions. Bank of Ireland was unacceptable practices had to systemically important credit recapitalized on March 31, 2009 caused serious reputational The Scheme described in the institutions and certain named and Allied Irish Banks was damage to the bank at a time first column was made pursuant subsidiaries of such credit recapitalized on 3 May 2009. when overall market sentiment to the Minister for Finance's institutions. Institutions covered The investment was funded from towards it was negative. The powers under the Act. by the CIFS Scheme are listed the National Pension Reserve Minister has confirmed that on the website of the Fund. In return for the Anglo Irish Bank will continue to On June 18,2009, the Minister Department of Finance. investment, the Government trade normally as a going for Finance announced the received preference shares in concern, with appropriate Government's decision to Liabilities covered by the CIFS each of Bank of Ireland and government support as establish the "Central Bank of Scheme are known as "covered Allied Irish Banks. These necessary. Ireland Commission". This new liabilities". They comprise all shares have a fixed annual structure will replace the current retail and corporate deposits (to dividend of 8%, payable in cash Anglo Irish Bank's shares have split structure of the Central the extent not covered by or ordinary shares in lieu of a been suspended from listing on Bank and the Financial existing deposit protection dividend, and confer 25% of the the Irish Stock Exchange and Regulator. schemes in Ireland or any other voting rights in respect of the London Stock Exchange. jurisdiction); inter-bank deposits; appointments of directors and Under the nationalization, all The new Central Bank senior unsecured debt; covered change of control. Warrants shares in Anglo Irish Bank pass Commission will be chaired by bonds (including asset covered attached to the preference to the Minster. An Assessor will the Governor of the Central securities) and dated shares give an option to the be appointed by the Minister to Bank and will be responsible for

IRELAND

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES subordinated debt (Lower Tier 2) Government to purchase up to determine the compensation, if both the supervision of individual (subject to certain restrictions), 25% of the ordinary share any, payable to Anglo Irish Bank firms and the stability of the but excluding any intra-group capital of each bank existing on shareholders. financial system generally. borrowing and any debt due to the date of issue of the the ECB arising from preference shares, calculated on On June 29, 2009, following Eurosystem monetary a post-dilution basis. Bank of receipt of EU approval, the operations. Ireland and Allied Irish Banks Government provided €3 billion will be able to redeem the of additional capital to Anglo Under the CIFS Scheme, the preference shares within five Irish Bank. Further capital of €1 Irish Financial Regulator, in years at the issue price, or after billion has since been provided consultation with the Minister for five years at 125% of the issue in a process which was Finance, will impose conditions price. completed on September 25, that regulate the commercial 2009. conduct and competitive behavior of covered institutions. On April 7, 2009, the Irish The conditions are described in Government announced its detail in the CIFS Scheme. decision to create the National Asset Management Agency In a statement issued on ("NAMA"). NAMA will be a September 16, 2009, the commercial, semi- state entity Minister for Finance outlined the under the government, direction Government's proposed Credit and management of the National Institutions (Eligible Liabilities Treasury Management Agency. Guarantee) Scheme 2009 (the Following that announcement, "ELG Scheme"). the National Assets Management Agency Bill 2009 The ELG Scheme is intended to (the "Bill") was published on facilitate the ability of credit September 10, 2009 and began institutions in Ireland to issue its passage through the debt securities and take Oireachtas (the Irish Parliament) deposits with a maturity post- on September 16, 2009. September 2010 on either a guaranteed or non-guaranteed The basic objective of NAMA is basis. This is in line with EU to stabilise Irish credit trends where the average term institutions by strengthening of state cover for bond issues their balance sheets and extends beyond 2010. reducing uncertainty over their bad debts, so as to facilitate Eligible liabilities for the lending to individuals and purposes of the ELG Scheme businesses. will be any of the following: (a) all deposits (to the extent not

IRELAND

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES covered by deposit protection On September 16, 2009, the schemes in the State (other than Minister for Finance indicated the CIFS Scheme) or any other that €77 billion in assets will be jurisdiction); (b) senior transferred from credit unsecured certificates of institutions participating in the deposit; (c) senior unsecured NAMA scheme to NAMA. commercial paper; and (d) other These assets will include loans senior unsecured bonds and in respect of the purchase of notes. land for development, associated work in progress Eligible liabilities will have to arrangements, certain property satisfy certain eligibility criteria, investment loans and the largest such as: (a) an eligible liability property-backed exposures of (including deposits) must not participating credit institutions. have a maturity in excess of five The Minister for Finance has years; and (b) an eligible liability confirmed that the €77 billion to must be incurred during an be paid by NAMA represents an "issuance window" from the average 30% "haircut" on the commencement date of the ELG book value of the assets. Scheme to 29 September 2010, subject to the approval of the EU NAMA will purchase eligible Commission at six monthly assets from participating credit intervals that the issuance institutions by issuing window can remain open. Government backed bonds to the participating credit All liabilities guaranteed under institutions. the CIFS Scheme outlined above as at the date of It is anticipated that the transfer commencement of the ELG of assets to NAMA will take Scheme will remain place on a phased basis unconditionally and irrevocably beginning, if the Bill passes, in guaranteed under the CIFS November 2009, with Scheme. The ECB pricing completion in relation to the two recommendations on largest credit institutions in government guarantees for bank Ireland, Allied Irish Banks and debt dated October 20, 2008 will Bank of Ireland, targeted for apply to liabilities guaranteed mid-2010. under the ELG Scheme. The design and operation of The proposal for the ELG NAMA will take full account of Scheme is subject to the the European Commission's approval of the Oireachtas (the

IRELAND

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Irish Parliament) and EU State communication on the treatment aid approval in due course. of impaired assets and is subject to EU state aid approval.

ITALY1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES On December 4, 2008, the Law No. 190/2008 authorizes Law No. 190/2008 provides that, Law No. 190/2008 authorizes Law No. 190/2008 authorizes Italian Parliament approved Law the Ministry of the Economy to in the event of severe liquidity the Ministry of the Economy, to the Ministry of the Economy to No. 190, which, inter alia, guarantee Italian banks' crises, the Ministry of the subscribe for or guarantee guarantee, on market terms, incorporates the measures depositors for a 36-month Economy is authorized to capital increases of Italian banks newly issued bank liabilities adopted by the Government on period. guarantee loans granted by the (including the parent company of having a maturity of up to five an urgent basis1 for the Bank of Italy to Italian banks or an Italian banking group) that years. stabilization of the credit system This guarantee is in addition to the Italian branches of foreign the Bank of Italy determines to and the improvement of capital the existing deposit guarantee banks. be inadequately capitalized. Law No. 190/2008 empowers adequacy of Italian banks ("Law introduced by Legislative Decree These transactions must be the Ministry of the Economy to No. 190/2008"). Following No. 659 of December 4, 1996, On October 13, 2008, the Bank effected giving consideration to effect temporary exchanges publication in the Official which provides for a guarantee of Italy, through a press release, market conditions. In order to between government securities Gazette, Law No. 190/2008 equal to a maximum of announced: (i) the reduction, benefit from these measures, and assets held by banks or came into effect on December 7, €103,291.38 per depositor. with immediate effect, of the (i) the recapitalization must not liabilities of Italian banks having 2008.2 minimum threshold for loans to have been completed prior to a maturity of up to five years and Law No. 190/2008 does not be issued for refinancing October 9, 2008 and (ii) the issued after October 13, 2008 Law No. 190/2008 authorizes specify the maximum amount of transactions, from €1,000,000 to bank must adopt or have (see also the temporary the Ministry of the Economy and the guarantee. €500,000; and (ii) the adopted a more comprehensive exchange program implemented Finance (the "Ministry of the implementation of a temporary stabilization and financial by the Bank of Italy and Economy") to guarantee, on exchange program between strengthening plan covering at discussed under "Special market terms, transactions government securities held by least the subsequent 36 months. Central Bank Assistance carried out by Italian banks to the Bank of Italy and assets held Measures"). obtain securities eligible for use by Italian banks. The Bank of Italy is required to in refinancing transactions within evaluate the existence of the Law No. 190/2008 provides that the Eurosystem. The temporary exchange above-mentioned conditions, the the Bank of Italy may grant program is capped at €40 billion. adequacy of the plans and loans secured by pledge or policy on dividends approved by assignment of receivables to the applicant bank. Italian banks to satisfy their liquidity requirements. The These shares, for so long as pledges or assignments of they are held by the Ministry of receivables issued in the Economy, are (i) without accordance with such provision voting rights; (ii) preferred in the are enforceable vis-à-vis any distribution of dividends to all debtor and third parties and they other classes of shares and become effective on the date of (iii) redeemable by the issuer, execution of the security provided that the transaction will agreement. The secured loans not affect the financial condition granted by the Bank of Italy and solvency of the bank or the under this provision are not group to which the bank subject to clawback under Italian belongs. insolvency rules.

ITALY1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES On January 28, 2009, the Italian Parliament adopted Law No. 2 ("Law No. 2/2009"), approving Law Decree No. 185 of November 28, 2008, which, among other measures to sustain the economy, authorizes the Ministry of the Economy, to subscribe for financial instruments issued by Italian listed banks (or by the parent company of Italian listed banking groups), upon their request. This program is set to expire and cease every effect after 10 years from the approval of Law No. 2/2009. On February 25, 2009, the Ministry of Economy adopted the required ministerial decree which sets forth the specific terms and conditions for the subscription of the financial instruments (the "Ministerial Decree").

The instruments issuable pursuant to Law No. 2/2009 must be without voting rights and otherwise qualify as regulatory capital instruments. These instruments are not transferable without the consent of the issuer and may be convertible into ordinary shares at the option of the issuer. Early repayment or redemption at the option of the issuer may also be provided for, provided that the Bank of Italy attests that the proposed early repayment or redemption will not adversely

100

ITALY1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES affect the financial condition of the issuer or its solvency.

Their yield may be subject, in whole or in part, to the availability of distributable profits.

The subscription by the Ministry of the Economy is conditioned upon the following conditions:

a) the transaction as a whole must be (i) economically sound ("economica") according to the criteria set forth hereinafter, (ii) effected after due consideration is given to market terms, and (iii) aimed at ensuring an improved flow of financing to the real economy and appropriate capital adequacy levels in the banking system.

b) the issuer must undertake to ensure adequate levels and conditions of financing to small and medium businesses and families and adequate liquidity levels for creditors of public administrations;

c) the issuer must undertake to adopt dividend policies consistent with the need to maintain appropriate levels of capital; and

d) the issuer must adopt a code of conduct regulating, inter alia, executive compensation policies

101

ITALY1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES (including "golden parachutes") and traders compensation.

The transaction is economically sound ("economica") if the financial instruments bear an interest equal to the greater of:

(a) (i) 7.5% with respect to year 2009, to be increased by 0.25% for each of the subsequent four fiscal years, and further increased by 0.5% for each subsequent two-year period until reaching 15% for 2039 and subsequent years; or alternatively (ii) 8.5% with respect to years 2009 through 2012, to be increased by 0.5% for each of the subsequent four fiscal years, and further increased by 0.50% for each subsequent two-year period until reaching 15% for 2039 and subsequent years; and

(b) a percentage of the dividend of the ordinary share, as indicated in the borrower's financial statements, equal to (i) 105% for year 2009, (ii) 110% for 2010; (iii) 115% for years from 2011 to 2017, and (iii) 125% for 2018 and subsequent years; and

(c) a percentage of the nominal value of the financial instruments equal to the average yield on the 30-year Treasury Bonds (Buoni del

102

ITALY1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Tesoro Poliennali or BTP), as calculated in the first quarter of each year in which interest is being paid, increased by 300 basis points for years 2011 and 2012 and by 350 basis points for 2013 and subsequent years.

Furthermore, the transaction may also be considered economically sound ("economica") if the financial instruments are subscribed for by private persons for at least 30% of the aggregate size of the issuance (of which at least 20% is subscribed for by persons other than shareholders holding more than 2% of the share capital of the issuer);

The amount available for each bank cannot exceed 2% of the total assets of the relevant banking group weighted by the risk and it must be limited to the minimum amount necessary to reach the purposes of Law 2/09.

The Ministerial Decree also provides that the banks that participate in this program must carry out their activities in a way that does not represent an abuse of the assistance received and without pursuing aggressive expansion strategies. Furthermore, the Ministerial Decree indicates that the subscription by the Ministry of Economy is made upon

103

ITALY1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES request of a bank. The application must be filed with the Bank of Italy and the Ministry of Economy at least 30 days prior to the expected subscription date.

On August 5, 2009, Law. No. 102/2009 came into effect (the "Anticrisis Law")3 The Anticrisis Law increases the amount of tax deductable write-downs and reserves on non performing loans (other than loans secured by State guarantees) granted by financial institutions after the tax period ending on December 31, 2009.

1 On October 9, 2008, the Italian Government issued Law Decree No. 155 and on October 13, 2008, Law Decree No. 157. 2 Law No. 190/2008 requires further ministerial decrees to be implemented. The law provides for a 60-day term for the issuance of the ministerial decrees running from October 9, 2008; in the absence of the ministerial decrees, no concrete action can be taken under the program. Thus far, the only measure that has been used is the Bank of Italy's temporary exchange program between government securities held by the Bank of Italy and assets held by Italian banks. 3 The Anticrisis Law converted into law the measures adopted on a urgent basis with Law Decree No. 78 of July 1, 2009.

104

JAPAN

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES The Government has relaxed On December 19, 2008, the BoJ Japan, China, South Korea and On December 12, 2008, the regulations on companies decided to introduce outright other Asian countries are Japanese Government buying up their own shares. purchases of commercial paper working to form an $80 billion announced an economic issued by companies to raise reserve-pool scheme from mid- stimulus package valued at short-term funds. 2009 to boost liquidity in the 23 trillion yen, which includes region. 10 trillion yen in Government spending and 13 trillion yen to stabilize the financial system (including 10 billion yen to recapitalize banks and 2 trillion yen to purchase commercial paper through the Development Bank of Japan). This brings the Japanese Government's total economic stimulus package announced to date to around 44 trillion yen.

On December 19, 2008, the BoJ decided to increase its outright purchase of JGBs from 14.4 trillion yen per year to 16.8 trillion yen per year, effective immediately. The BoJ also decided to expand the range of JGBs accepted in outright purchase and to introduce purchases from specific maturity segments. On March 18, 2009, the BoJ announced that it would increase the amount of outright purchases of Japanese government bonds from 16.8 trillion yen per year to 21.6 trillion yen per year.

On December 19, 2008, the BoJ also decided the terms and conditions of the new operation utilizing corporate debt, of which introduction had been decided at

105

JAPAN

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES the Monetary Policy Meeting held on December 2, 2008.

On December 19, 2008, the BoJ decided to include the Development Bank of Japan Inc. as a counterparty in operations such as commercial paper repo operations.

On January 22, 2009, the BoJ decided to purchase up to 3 trillion yen of commercial paper and asset-backed commercial paper rated a-1 or higher and with the residual maturity up to 3 months, with certain restrictions.

On February 3, 2009, the BoJ announced that it will resume the purchase of stocks held by financial institutions so that the financial institutions may offload some of their stocks and reduce market risks. The total purchase amount is for 1 trillion yen.

The BoJ has also decided to purchase up to 1 trillion yen of corporate bonds rated single A or higher and have a remaining term of one year or less from the last date of the month in which the Bank of Japan will make such a purchase. The limit per issuer of the corporate bonds is 50 billion yen.

On April 22, 2009, the Diet enacted the Industrial Revitalization Law which will

106

JAPAN

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES enable the government-backed Japan Finance Corporation to guarantee investments by designated financial institutions such as the Development Bank of Japan. The guarantee will be limited to investments in companies that have announced a plan to improve profitability within three years. Among other requirements, eligible companies must also have at least 5,000 employees in Japan and, between October 2008 and September 2009, revenue must have decreased by at least 20% on a quarterly basis or at 15% on a semi-annual basis compared to the same periods of the previous year. The guarantee will be from 50% to 80% of investments. Elpida Memory, Inc. will be the first company to benefit from the Industrial Revitalization Law.

The Japanese government decided on June 22, 2009 to guarantee 80% of the loans from the Development Bank of Japan to Japan Airlines. The loan from the Development Bank of Japan is expected to be 60 to 80 billion yen.

107

LUXEMBOURG

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Following the recapitalization of As of January 1, 2009, the level Fortis In a statement made to the the Dexia group (see the of the protection of the deposit Luxembourg Parliament on the Recapitalization Measures guarantee in Luxembourg has The Luxembourg Government financial crisis on October 15, column), a Grand-Ducal been increased from €20,000 to has announced, on the basis of 2008, Prime Minister Jean- Regulation was enacted on €100,0003. an agreement of September 28, Claude Juncker declared that October 10, 2008, authorizing 2008 with the Dutch and Belgian "… the Luxembourg the Luxembourg Government to Governments, that as a first step Government and the grant a financial guarantee to it would invest €2.5 billion in Luxembourg Central Bank will the Dexia group (the Fortis Banque Luxembourg S.A. take all necessary steps to "Regulation"). ("Fortis") in the form of a secure the liquidity of money convertible loan.4 The market funds established under This Regulation further aims at Luxembourg Government would Luxembourg law." implementing an thus take 49% in the capital of intergovernmental agreement Fortis. In a statement of July 9, 2009, between the Luxembourg, the Luxembourg Government Belgian and French On October 6, 2008, the announced that it had received Governments that, pursuant to Luxembourg Government the green light from the the common press release of announced that it had sold 16% European Commission to grant these Governments1, aims to of Fortis to the BNP Paribas a loan of €320 million to the assure depositors that the Dexia group. Under the agreement, former Kaupthing Bank group will have sufficient BNP Paribas will hold 67% in Luxembourg S.A. in order to liquidity. Fortis,5 while the Luxembourg ensure its smooth restructuring State will hold 33% in Fortis and in the interest of the depositors.9 Pursuant to the Regulation, the will acquire 1.1% of the share Government is authorized to capital of BNP Paribas. guarantee, for the account of the Luxembourg State, funding Dexia obtained by the Dexia group2 with credit institutions and The Luxembourg, Belgian and institutional depositories as well French Governments and the as bonds and debt instruments shareholders of Dexia agreed to issued by the Dexia group to recapitalize the Dexia group on institutional investors (the September 30, 2008. Pursuant abovementioned credit to this agreement, the institutions, institutional Luxembourg Government depositories and institutional announced that it would investors being referred to as subscribe to the issuance by the "Creditors"). In order to be Dexia B.I.L. S.A. of convertible eligible for the guarantee, this bonds/loan of €376 million,6 funding and the bonds and debt which if converted would instruments must have been represent roughly 20% in Dexia

108

LUXEMBOURG

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES issued between October 9, 2008 B.I.L. S.A. and October 31, 2009, and must mature before October 31, 2011.

In accordance with the state aid rules of the EC Treaty, on November 19, 2008 the European Commission approved this state financial guarantee for the Dexia group.7

Further to the European Commission's approval and in accordance with the Regulation, a first demand guarantee has been granted in favour of the Dexia group (and its Creditors) on December 9, 2008 by Luxembourg, Belgium and France.8

The guarantee of the Luxembourg State cannot exceed €4.5 billion. It is granted jointly but not severally with Belgium and France.

1 Communiqué (Public release), Communication conjointe des gouvernements français, belge et luxembourgeois relative à Dexia, October 9, 2008, available at www.gouvernement.lu. 2 i.e., Dexia S.A. and Dexia Banque Belgique S.A., Dexia Banque Internationale à Luxembourg S.A., Dexia Credit Local de France S.A. as well as their issuing vehicles. 3 Loi du 19 décembre 2008 concernant le budget des recetteset des dépenses de l'Etat pour l'exercice 2009. 4 Article d'actualité (News), Les gouvernements belge, luxembourgeois et néerlandais investissent 11,2 milliards d'euros dans Fortis, September 29, 2008, available at www.gouvernement.lu. 5 Article d'actualité (News), Fortis Banque Luxembourg devient BGL-BNP Paribas, 06-10-2008, available at www.gouvernement.lu. 6 Article d'actualité (News), Les gouvernements belges, français et luxembourgeois ainsi que les actionnaires investissent 6,4 milliards d'euros dans Dexia, September 30, 2008, available at www.gouvernement.lu 7 See Press release at http://europa.eu/rapid/pressReleasesAction.do?reference=IP/08/1745&format=HTML&aged=0&language=FR&guiLanguage=fr. 8 Communiqué de presse conjoint des États belge, français et luxembourgeois relatif à Dexia: signature d'une convention, December 10, 2008, available at www.gouvernement.lu. 9 Article d'actualité (News), Restructuration de Kaupthing Bank Luxembourg S.A.: les déposants à Luxembourg et en Belgique retrouvent accès à leurs comptes ou dépôts, July 9, 2009, available at www.gouvernement.lu.

109

THE NETHERLANDS

SPECIAL CENTRAL BANK RECAPITALIZATION ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES INSTITUTIONS OTHER MEASURES As of October 23, 2008, a Credit On March 10, 2009, the Minister DNB will grant special credit to The Dutch State announced on Fortis Although the following subject is Guarantee scheme set up by the of Finance announced that the individual financial institutions October 9, 2008, a €20 billion not directly related to the Dutch Dutch State of €200 billion is increase of the guaranteed against adequate collateral, if fund to recapitalize financial On October 3, 2008 the Dutch Government's efforts to stabilise operational for non-complex amount under the deposit and for as long as necessary. institutions, of which almost €14 State acquired all of Fortis financial markets by dealing with senior unsecured debt guarantee scheme from €40,000 The short-term financing of billion has now been committed Group's Dutch activities for a banks' impaired assets or instruments issued by banks. to €100,000 per person per bank these institutions against to individual institutions (see total consideration of €16.8 recapitalisation, it may be an These guarantees are available (regardless of the number of collateral will hence be secured. Assistance to Individual billion. These activities include incentive for regaining until December 31, 2009 to accounts) will apply indefinitely. Institutions). Fortis' interest in ABN AMRO, confidence in the financial institutions with a Dutch banking This increase was first Fortis Bank Nederland N.V. and sector. license that have a substantial announced on October 7, 2008 Funds will be directly available Fortis Corporate Insurance N.V. business in the Netherlands.1 to apply for one year. All EU to fundamentally sound and With effect as from January 1, member states are obliged to viable financial institutions that The sale of these entities to the 2010, all Netherlands banks will Instruments eligible to be guarantee a minimum amount of may run into liquidity or capital Dutch State was challenged comply with a code, drawn up by guaranteed are limited to €100,000 from January 1, 2011. problems. before the Belgian courts, the Netherlands Bankers' securities denominated in EUR, together with the sale of Fortis Association (NVB), restricting, US$ and GBP with maturities Where two people have a joint Bank S.A./N.V. to the Belgian amongst others, bonuses to be from three months to five years. account, either accountholder State and the subsequent sale granted to a bank's can claim payment under the thereof to BNP Paribas. On management board to one Fees to be paid by participating deposit guarantee scheme. The December 12, 2008, the year's fixed annual pay and financial institutions will depend maximum joint deposit covered Brussels Court of Appeal held obliging the bank's management on their creditworthiness and will is therefore €200,000. that the share transfers required board to repay unjustified be based on historical credit the approval of the general bonuses. default swap spreads (or an All Dutch banks that operate meeting of shareholders. approximation if necessary), under a license from the Dutch All Netherlands banks have with an addition of 50 basis Central Bank (De At an extraordinary meeting of subjected themselves to this points. Maturities of less than a Nederlandsche Bank (DNB)) are shareholders held in February code, not only with respect to year will have a fixed fee of 50 covered by the Dutch deposit 2009, the shareholders of Fortis their operations in the basis points. guarantee scheme. voted against the sales referred Netherlands but also with to above. respect to their activities in other Participating institutions will also DNB has activated the deposit member states of the European be required to meet certain guarantee scheme for As regards the sale to the Union. additional requirements on accountholders of Belgian State and to BNP corporate governance with Icesave/Landsbanki Ísland hf. Paribas, in March 2009, Fortis, The Dutch Minister of Finance respect to bonuses and on October 13, 2008, and for the BNP Paribas and the Belgian envisages introducing a resignation premiums. accountholders of N.V. De Government reached a new statutory restriction of bonuses Indonesische Overzeese Bank agreement on the proposed granted to a bank's Up to the date of this overview, (Indover) on November 11, transactions, which agreement management board, on January the following financial 2008. was approved by the 1, 2010. companies have issued debt shareholders meeting of Fortis instruments under the guarantee Holding on April 28 and 29, scheme: LeasePlan, NIBC 2009. The acquisition of the

110

THE NETHERLANDS

SPECIAL CENTRAL BANK RECAPITALIZATION ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES INSTITUTIONS OTHER MEASURES Bank, SNS Bank, ING Bank, Dutch activities of Fortis by the and Fortis Bank Nederland. Up- Dutch State was already an to-date information. Actual accomplished fact and as such information on debt issues under will not be renegotiated. the guarantee scheme may be Therefore, with respect to this obtained on the website of the transaction, no new agreement Dutch State Treasury Agency was submitted for approval to (see www.dsta.nl). the Fortis shareholders meeting.

In June 2009, the Dutch State sold its 100% shareholding in Fortis Corporate Insurance N.V. to Amlin plc.

The Minister of Finance recently announced additional measures to improve the solvency of Fortis Bank Nederland and ABN AMRO (which will be combined to form a single bank), including issuance of €0.8 billion mandatory convertible notes to the Dutch State and a 'capital relief instrument' to effect a partial risk transfer with respect to a €34.5 billion portfolio of Dutch mortgages to the State.

ING Groep N.V.

Issuance of Tier 1 securities

ING Groep N.V. ("ING") announced on October 19, 2008 that it had reached an agreement with the Dutch Government to strengthen its capital position.

ING has issued non-voting core Tier 1 securities for a total

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SPECIAL CENTRAL BANK RECAPITALIZATION ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES INSTITUTIONS OTHER MEASURES consideration of €10 billion to the Dutch State.

The Government has obtained the right to nominate two Supervisory Board members (and has exercised this right on October 22, 2008), who will have the right to veto fundamental decisions.

All members of ING's Executive Board have relinquished their bonuses over 2008, both in cash payments and in options or shares. Resignation premiums have been restricted to one year's fixed annual pay.

Illiquid Assets Bank-up Facility

On January 26, 2009, ING and the Dutch State reached an agreement on an Illiquid Assets Back-up Facility covering 80% of ING's Alt-A mortgage securities.

Under the terms of the Back-up Facility, a full risk transfer to the Dutch State will be realized on 80% of ING's €27.7 billion portfolio of Alt-A RMBS at ING Direct USA and ING Insurance Americas. The Dutch State therefore will participate in 80% of any results of the portfolio. This risk transfer will take place at a discount of 10% of par value. ING will remain the legal owner of 100% of the securities and will remain exposed to 20%

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THE NETHERLANDS

SPECIAL CENTRAL BANK RECAPITALIZATION ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES INSTITUTIONS OTHER MEASURES of any results on the portfolio.

The transaction closed in the first quarter of 2009.

The effects of the transaction on ING's capital and balance sheet include a reduction of equity volatility, and a positive impact on shareholders' equity of €5 billion through a reduction of the negative revaluation reserve. Risk-weighted assets will be reduced by approximately €15 billion, raising ING Bank's Tier 1 ratio by approximately 40 basis points to 9.5% and the core Tier 1 ratio by 32 basis points to 7.4%, both on a pro forma basis.

For the duration of the Back-up Facility, ING will maintain the corporate governance measures agreed upon issuing core Tier 1 securities to the State in November 2008 (see above). In addition, the government- nominated members of the ING Supervisory Board will have approval rights on certain executive appointments. The Executive Board of ING has agreed to forego all bonuses until a reviewed remuneration policy will be completed. This policy will include criteria on sustainability for the Executive Board and is expected to be proposed to the annual General Meeting of Shareholders in

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THE NETHERLANDS

SPECIAL CENTRAL BANK RECAPITALIZATION ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES INSTITUTIONS OTHER MEASURES 2010.

The European Commission has announced that it will extend an investigation into whether the Dutch Government has violated state aid rules in providing security for the €27.7 billion pool of illiquid assets of ING. This investigation may result in ING having to repay part of the amounts received to the Dutch Government.

AEGON

On October 28, 2008, the Dutch State reinforced the capital position of AEGON Group by €3 billion.

The Government obtained €3 billion in securities, which have largely the same features as shares. The capital reinforcement is made available to AEGON via the Association AEGON, which was AEGON's largest shareholder.

The Government has obtained, and has subsequently exercised, the right to nominate two Supervisory Board members, who will have the right to veto fundamental decisions.

All members of the Executive Board will relinquish their bonuses over 2008, both in cash

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THE NETHERLANDS

SPECIAL CENTRAL BANK RECAPITALIZATION ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES INSTITUTIONS OTHER MEASURES payments and in options or shares. AEGON will develop a sustainable remuneration policy. Resignation premiums will be restricted to one year's fixed annual pay.

SNS REAAL N.V.

On November 12, 2008, the Dutch State has reinforced the capital position of SNS REAAL N.V. (hereafter: SNS) by €750 million. The Government has obtained €750 million in securities, which have largely the same features as shares.

The Government has obtained, and subsequently exercised, the right to nominate two Supervisory Board members, who will have the right to veto fundamental decisions. All members of SNS's Executive Board have relinquished their bonuses over 2008, both in cash payments and in options or shares. Resignation premiums have been restricted to one year's fixed annual pay.

1 On October 21, 2008, the Dutch Government issued specific rules on its Credit Guarantee scheme, which is administered by the Dutch State Treasury Agency (see ). In order to be eligible to apply for the guarantee, the bank must inter alia be authorized to perform banking activities, be domiciled and conduct substantial business in the Netherlands, in addition to satisfying certain solvency ratios. The rules were amended and restated on February 18, 2009.

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NEW ZEALAND

GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED (WHOLESALE FACILITY) (RETAIL SCHEME) ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES A Wholesale Funding Guarantee The New Zealand Government On October 23, 2008, spurred Additional liquidity facilities have Facility (the "Wholesale Facility") has guaranteed all deposits in by fears of a recession, New been provided by the Reserve has been established to facilitate institutions that 'opt-in' to the Zealand's central bank cut its Bank of New Zealand to access to global financial Retail Scheme to a limit of benchmark interest rate by a registered banks. markets by registered banks. NZ$1 million per depositor per record full percentage point to guaranteed institution. 6.5%, warning that financial The Wholesale Facility is market turmoil will further available to financial institutions Institutions with total deposits at constrain the economy. that have a rating of BBB- or more than NZ$5 billion will be better and have substantial New charged a 10 bps p.a. fee for Cuts of 150 basis points were Zealand borrowing and lending guaranteed deposits in excess made on December 4, 2008 and operations. It is not available to of NZ$5 billion. A further fee will January 29, 2009 meaning that institutions that are primarily be charged on the growth of the official cash rate at 3.5% financing a parent or related deposits held by guaranteed was at its lowest level since company, non-financial issuers institutions that have a total being introduced as the key (e.g., corporate or local authority deposit value of less than official interest rate in 1999. issuers) or collective investment NZ$5 billion.1 schemes. Further cuts of 50 basis points The Retail Scheme extends were made on March 12, 2009 All newly issued senior beyond registered banks to non- and April 30, 2009 bringing the unsecured negotiable or bank deposit takers (finance official cash rate to a further transferable debt securities by companies, building societies record low of 2.5%. eligible financial institutions in all and credit unions) and to major currencies are eligible for collective investment schemes coverage. The Wholesale (such as unit trusts).2 Facility covers any paper issued until the earlier of its maturity or The opt-in scheme takes the for up to five years. form of a bilateral contractual agreement between the Eligible institutions are required Government and the individual to "opt-in" to the Wholesale institutions which take up the Facility and must then apply for guarantee. The Treasury has an eligible instrument to be discretion to decline applications covered. A fee of between 70 to participate in the Retail bps p.a. and 200 bps p.a. will be Scheme.3 charged on each issue differentiated upon the Participating institutions in the "riskiness" of the issue and the Retail Deposit Guarantee term of the security. As part of Scheme are exempted from the "opt-in" process institutions certain provisions of the will enter into a guarantee facility Securities Act 1978 and the

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NEW ZEALAND

GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED (WHOLESALE FACILITY) (RETAIL SCHEME) ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES with the Crown and then the Securities Regulations 1983, Crown will issue the actual subject to certain conditions. guarantee as a separate The exemptions relate to document. Accompanying the required information about guarantee will be an opinion as guarantors in registered to enforceability issued by a prospectuses and solicitor of the Treasury in their advertisements. capacity as a legal advisor to the Crown. The current scheme will end on October 12, 2010 and the The Treasury has reduced the Government has announced fees that apply to the Wholesale that the Retail Scheme will be Facility in order to take into extended for a further 14 months account the changing market to December 31, 2011. The environment. planned extension is in order to maintain confidence in financial Once an institution has been institutions while achieving an approved, application may be orderly exit from the scheme. As made for an individual part of the extension the pricing instrument to be covered by the will be adjusted to match longer guarantee. The guarantee itself term normal market pricing. does not provide for the guarantee of any individual instrument – this must be done separately. If approval is given by the Crown an eligibility certificate will be granted.

Deposit-taking institutions that wish to participate will be expected to have opted-in to the Retail Scheme. Any institution which joins the Wholesale Facility will be required to agree that the securities eligible for a wholesale guarantee (whether actually guaranteed or not) are not covered by the Retail Scheme.

The Wholesale Scheme will

117

NEW ZEALAND

GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED (WHOLESALE FACILITY) (RETAIL SCHEME) ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES require institutions to enter into a deed of guarantee which gives them access to the guarantee but does not in and of itself guarantee any debt. In order for a debt instrument to be guaranteed an institution will need to apply for a guarantee eligibility certificate.

Participating institutions are required to have: additional capital buffers; prudential supervision; and undertaken that the foreign exchange risk associated with foreign currency borrowing will be hedged and managed.

1 The fee charged on institutions with less than $5 billion in deposits will only apply to the increase in total deposits since the scheme was announced (above the 10% allowed growth per annum). A further fee will be imposed upon non- bank deposit takers that are non-rated or rated BB (or below) of 300 bps p.a. New non-bank deposit takers wishing to join the scheme will need to be rated BBB- or better in order to be eligible. 2 Non-bank deposit takers and collective investment schemes will be subject to stringent requirements under the Retail Scheme. In order to be eligible, non-bank deposit takers will be subject to increased reporting requirements, limitations on entering transactions with related companies and personal undertakings from directors. Collective investment schemes will access the Retail Scheme by way of a Deed of Nomination which allows those schemes to benefit from the Guarantees already in place without being subject to the $1 million cap. Each scheme will only be guaranteed if it: invests only in New Zealand Government securities or debt securities issued by institutions participating in the Retail Scheme; and does not increase investments in participating institutions (other than registered banks) beyond the levels that existed as at October 12, 2008. The Wholesale Scheme and the Retail Scheme will be administered by the New Zealand Treasury. Further information can be found on its website: www.treasury.govt.nz. 3 Participating institutions in the Retail Deposit Guarantee Scheme are exempted from certain provisions of the Securities Act 1978 and the Securities Regulations 1983, subject to certain conditions. The exemptions relate to required information about guarantors in registered prospectuses and advertisements.

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NORWAY

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES NOK2 million per person. The Central Bank of Norway, On February 8, 2009, the State On October 24, 2008, the On July 1, 2009, Norway, Norges Bank, has since Finance Fund was established Norwegian Government Sweden, Denmark and Finland October 1, 2008 made the with total capital in the amount presented a NOK350 billion signed loan agreements with following measures: of NOK50 billion. In order to Government bond swap facility Iceland with total credits of ensure that financial institutions to be administered by Norges €1.775 billion. The agreements ▪ Offered two-year fixed-rate will be able to access this capital Bank on behalf of the Ministry of are meant to support Iceland's loans particularly designed to and through this, increase their Finance. economic stabilization and secure funding for small lending capabilities, the fund will reform program with the IMF. banks. The loans are offered invest in financial instruments Under the swap arrangement, The Norwegian loan agreement by auction on market terms to which will count towards capital government securities are has a credit of €480 million. banks operating in Norway adequacy requirements (tier exchanged in return for and are provided against capital). The fund will be a Norwegian covered bonds. The In mid-June 2009 Norges Bank collateral in the form of separate legal entity. arrangement is governed by and the IMF signed an securities. guidelines issued on agreement on financial support The fund will supply banks with November 3, 2008. The for the IMF. The main element of The maximum bid for a two- core capital through two types of guidelines set out the the agreement is that Norges year loan is NOK1 billion. financial instruments, both with requirements for the securities Bank will provide a borrowing requirements regarding a and their valuation. facility in the form of a drawing ▪ Offered banks new three- continuous rate of return and arrangement of up to SDR3 month fixed-rate loans of redemption within five years. By the end of June 2009, billion, equaling nearly NOK30 maximum NOK10 million and Where redemption does not Norwegian banks had been billion. six-month fixed-rate loans of occur within five years, the offered nearly NOK149 billion up to NOK1 billion. instruments will be converted to under the arrangement. On January 26, 2009, the ordinary shares. Norwegian Government ▪ Entered into an agreement A number of securities and presented additional measures with the US Federal Reserve A bank wishing to use this core funds are pre-approved and to strengthen the economy and under which Norges Bank capital contribution scheme will listed at the website of Norges secure the employment. The may borrow up to be subject to caps on salaries Bank (www.norges-bank.no), NOK20 billion aid package US$15 billion against and bonuses for its managers. but other types of collateral may consists of NOK3.25 billion on collateral in NOK. The The agreement between the be approved upon application. targeted tax releases for trade agreement expires in State Finance Fund and the and industry as well as a April 2009. bank will also contain provisions Bonds and short-term paper NOK16.75 billion increase at the on dividend limitations and from Norwegian and foreign fiscal budget's expenditure side. ▪ Offered banks NOK for € or reporting requirements for the issuers are accepted as US$ in auction based bank. collateral. Norwegian bond and FX-swaps to banks active in money market funds may be the Norwegian money The deadline to apply for used as collateral on certain market. injection of capital from the State conditions. Finance Fund is September 30, On April 17, 2009 the Revised 2009. Securities issued by foreign Lending Regulation came into entities must have a S&P or

119

NORWAY

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES force, with changes regarding: The Government has also Moody's credit rating. Securities established a Norwegian State issued by foreign private entities • Auctions and buy-backs of F- Bond Fund with a capital of are required to be listed on the loans and F-deposits. NOK50 billion. This fund is stock exchange. intended to make it possible for • Limits on interest-bearing industrial companies to get It is required that securities in deposits of the banks. funding not only directly from foreign currency issued by banks, but also in a private entities have a minimum • Capitalization of interest. strengthened bond market. The volume outstanding equivalent State Bond Fund will be to at least €100 million. • Availability of borrowings to a administered by bank in respect of Folketrygdfondet, the The bonds will be made assets/capital base vs. administrator of the Norwegian available to the banks for collateral. domestic sovereign wealth fund. periods of up to three years against collateral. Banks may • Requirements of increases of surrender covered bonds, collateral in light of a bank's including bonds issued by a borrowings and accrued mortgage association within the interest bank group. The facility will be made available against a On September 23, 2009, the market-based premium. There central bank decided to keep the will, however, be a floor price on key policy interest rate at 1.25 the premium. The facility will be per cent. administered by Norges Bank on behalf of the Ministry of Finance. Bi-weekly auctions are planned as long as there is a demand for such government bonds.

A bank may only pledge up to 20% of the outstanding volume of its loans and up to 35% of its total collateral in the form of securities issued by Norwegian banks.

Banks' claims on mortgage companies issuing covered bonds will be eligible as collateral for loans. A bank's issued bonds or short-term

120

NORWAY

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES paper are not accepted as collateral.

The value of a security will, as a main rule, be based on the security's market value adjusted according to set rates available on the website of Norges Bank.

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PEOPLE'S REPUBLIC OF CHINA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Monetary and Financial BOC, CCB and ICBC Risk Control Measures Policies Since September 2008, Central The Administration over the The Chinese central bank, Huijin Investment Co., Ltd. Transfer of State-owned Assets People's Bank of China (the ("Huijin"), an investment arm of in Financial Enterprises was "PBOC"), announced on the Chinese Government, has promulgated by the Ministry of November 3, 2008, that it will increased its shareholdings in Finance on March 17, 2009. loosen its strict control over each of the Bank of China, According to the new rules, credit plans of PRC commercial China Construction Bank, and China moved to prevent the sale banks to boost economic the Industrial and Commercial of state-owned stakes in growth. Bank of China through share financial companies at below- purchases on the secondary market prices. There were Mr. Zhou Xiaochuan, governor market. The total value of such complaints that domestic state- of the PBOC, published an share purchases is estimated to owned banks sold stakes to article on the central bank's be over RENMNIBI1.3 billion foreign investors and employees official website on March 23 and (approximately US$190 million). at below-market prices. The 24, 2009. Mr. Zhou pointed out Huijin may continue to increase new rules will be effective May that it is clear that the Chinese its shareholdings in the three 1, 2009. government intends to lower banks on the secondary market. interest rates on deposits to The National Development and expand domestic demands. On March 4, 2009, the deputy Reform Commission general manager of China promulgated the "Circular on On March 23, 2009, the PBOC Investment Corporation ("CIC") Further Strengthening the and China Banking Regulatory said Huijin will continually Supervision over Financial Commission (the "CBRC") jointly increase its shareholdings in Derivative Business by Central- promulgated the Guiding Bank of China, Industrial and Government-owned Enterprises" Opinions on Further Commercial Bank of China and (the "Circular"). The Circular Strengthening Credit China Construction Bank where expressly requires those COEs Restructuring to Promote the deemed appropriate given the engaged in financial derivative Steady and Rapid Development state of the market. business to (A) strictly of China's National Economy implement the examination and (the "Opinions"), in which it is ABC approval procedures, (B) strictly emphasized that while adhere to hedging principles and maintaining a reasonable On November 6, 2008, Huijin refrain from any speculation increase in the total quantity of injected capital of 130 billion activities, (C) rigorously and the monetary credit facilities, Yuan to the Agricultural Bank of effectively manage and control something must be done to China (the "ABC") and therefore risks relating to financial further strengthen credit holds 50% shares of the ABC. derivative business, (D) restructuring so as to promote The other majority shareholder standardize the workflow for the steady and rapid of the ABC is the MOF. financial derivative business, (E) development of China's national report to SASAC on a regularly

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PEOPLE'S REPUBLIC OF CHINA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES economy. The Opinions Xinhua Life basis on the development of expressly encourage banking their financial derivative financial institutions to offer On March 30, 2009, the State business, and (F) pursue the more loans and highly Council approved the takeover responsible persons for diversified financial support to by Huijin of the shareholdings in responsibilities for any losses small and medium enterprises Xinhua Life Insurance Co., Ltd. arising from the financial which are basically well ("Xinhua Life") from China derivative business. operated and have good credit, Insurance Protection Fund competitive power, market share Limited. The parties will begin On April 13, 2009, China's and purchase orders but are negotiations on the transaction banking regulator, the CBRC, currently experiencing business price following the publication of said it will step up efforts to or financial difficulties. The Xinhua Life's 2008 audit report. control risk management in Opinions also encourage Xinhua Life is the fourth largest Chinese banks as domestic commercial banks and vehicle life insurance company in China. lending continued to grow in financing companies to jointly After this transaction, Xinhua March. In addition, China will support eligible vehicle financing Life will become a state- ask foreign investors to commit companies to issue bonds, controlled life insurance to a lockup period of five years expand the scale of vehicle loan company. or more when they acquire securitization and open more stakes in Chinese banks, as an channels for financing vehicle China Eximbank and Sinosure effort to shield domestic banks financing companies. from the impact of stake sales It was reported on September by overseas investors. The According to a statement posted 15, 2009 that the State Council CBRC said it has released new on China's central bank's has selected Huijin to inject rules to make it easier for small- website on June 12, 2009, the capital into the Export-Import and medium-sized banks to PBOC would maintain a Bank of China ("China open more branches. Under the "moderately loose" monetary Eximbank") and China Export & new rules, the CBRC will policy amid the worsening global Credit Insurance remove a cap on the number of financial crisis. Corp.("Sinosure"). Details of the branches and outlets that can be capital injection plan for the two opened by the banks. The On June 1, 2009, CBRC and the companies have yet to be CBRC also said it would transfer Ministry of Finance (the "MOF") determined. Prior to the approval power to the provincial jointly announced the Opinion to selection of Huijin, both the MOF level to simplify branch Improve Financial Risk and the PBOC had been expansion procedures for Management for Financial considered as lead agencies for smaller banks. Institutions to Deal with Current the capital injection. Huijin is a Financial Crisis (the "Opinion"). wholly owned subsidiary of On December 6, 2008, the The Opinion calls for more sovereign wealth fund the CIC. CBRC promulgated new M&A moves to strengthen financial financing rules entitled and risk management by the "Guidelines on Risk Management of Loans Extended

123

PEOPLE'S REPUBLIC OF CHINA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES financial institutions. by Commercial Banks for Mergers and Acquisitions" which Deposit Reserve Ratio / give Chinese commercial banks Benchmark Deposit and unprecedented freedom to make Lending Rates loans to finance the M&A transactions. More than half a On October 8, 2008, the year after the implementation of Chinese central bank, the the new M&A financing rules, People's Bank of China foreign banks in China have also ("PBOC"), decided to lower the received the green light. Renminbi deposit reserve ratio by 0.5%, effective from October Others 15, 2008, and to lower the one- year benchmark deposit and On March 6, 2009, Mr. Zhou lending rates by 0.27%, Xiaochuan, the governor of the respectively, effective from PBOC, stated that the pilot October 15, 2008. The interest programs of Renmnibi rates of loans and deposits with international trade settlement other maturities were adjusted are to commence imminently. accordingly. These programmes would reduce "institutional obstacles On October 30, 2008, the PBOC for cross-border trade settlement decided to further lower the one- in Renmnibi". On March 10, year benchmark deposit and 2009, Hong Kong was selected lending rates by 0.27% to 3.60% as the first pilot region to be and 6.66% respectively, allowed to use Renmnibi to effective from the same day. settle international trade. On The interest rates of loans and July 2, 2009, the PBOC deposits with other maturities released a rule, the Renmnibi were adjusted accordingly. trade rule, permitting companies in selected cities to settle cross- On November 27, 2008, the border trades using the Yuan, as PBOC further lowered the one- part of efforts to reduce reliance year benchmark deposit and on the US dollar for international lending rates by 1.08%, trade. On April 8, 2009, the respectively. The interest rates State Council announced a pilot on loans and deposits with other program to allow exporters and maturities were adjusted importers in five cities to settle accordingly. On December 5, cross-border trade deals in 2008, the PBOC further lowered Renmnibi. The cities are the deposit reserve ratio by 1% Shanghai, Guangzhou,

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PEOPLE'S REPUBLIC OF CHINA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES for large banks and 2% for Shenzhen, Zhuhai and medium- and small-sized banks. Dongguan. The latter four are all The prevailing one-year deposit in South China's Guangdong and lending rates are 2.52% and province. 5.58%, respectively. In recent months, the PBOC has On December 23, 2008, the signed bilateral three-year PBOC further lowered the one- currency swap agreements with year benchmark deposit and the central banks or monetary lending rates by 0.27%, authorities of Republic of Korea, respectively. The interest rates Hong Kong, Malaysia, the of loans and deposits with other Republic of Belarus, Indonesia maturities were adjusted and Argentina totalling Renminbi accordingly. On December 25, 650 billion. The purpose of 2008, the PBOC lowered the these currency swap deposit reserve ratio by 0.5%. arrangements is to promote bilateral trade and investment so On February 24, 2009, the as to boost economic PBOC issued buyback notes to development and heighten the public market in the value of confidence in the money market. Renminbi 80 billion (approximately US$11.7 billion). On March 25, 2009, the State Council gave the green light to The PBOC raised 28-day and speed up the process of turning 91-day repo rates by 5 basis Shanghai into a major points on July 7, 2009 in the international financial and second such raise since June shipping center by 2020. The 30, 2009. The last time the State Council urged Shanghai to PBOC raised the 28-day repo develop into a multi-functional rate before June 30, 2009 was financial center by 2020 to keep December 23, 2008. up with "China's economic influence and the Renminbi Others international position".

On October 30, 2008, the CBRC On April 8, 2009, China's announced progress with the insurance industry regulator, first set of guidance notes for CIRC, specified the proportion of Basel II implementation. The insurance fund that insurers CBRC's Basel II Research and were allowed to invest in Implementation Taskforce has infrastructure projects in an released five pieces of guidance effort to reduce risks. Life for commercial banks for pre-

125

PEOPLE'S REPUBLIC OF CHINA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES release internal review, including insurance companies will be Classifying Credit Risk Exposure allowed to invest a maximum of in Banking Book, the 6 percent of their total assets of Supervisory Guidance on last quarter, while property Internal Rating System for Credit insurance companies could Risks, Regulatory Capital invest up to 4 percent of their Measurement for Special total assets of last quarter. Lending, Regulatory Capital Measurement for Credit Risk China's big four state-owned Mitigation, and Regulatory banks will be allowed to run their Capital Measurement for own insurance companies under Operational Risk. a pilot program. The big four banks are the Industrial and The PBOC will create a new Commercial Bank of China, department to manage Bank of China, China exchange rate policies and Construction Bank and the monitor cross-border short-term Agricultural Bank of China. capital flows. According to an Besides the big four, a number unidentified PBOC official, it is of medium-sized banks, such as likely that the new department China Merchants Bank, have will be modeled on the also submitted applications to Exchange Rate Policy Division the regulators, eyeing the of the Monetary Policy business potential in the Department. Wang Yu, deputy insurance sector - a sector that director of the Monetary Policy has grown at an annual average Department, was named as a of 20 percent in the past likely head of the new decade. department by the same official, who added that the details were On June 16, 2009, China finally not yet ready to be made public. took the step of lifting its nine- month unofficial moratorium on The CBRC, China's banking initial public offerings. regulator, urged banks to strengthen risk control and On July 20, 2009, CSRC said optimize credit structure to that it will start accepting prevent possible financial risks applications for listing on the amid a surge of bank loans. Growth Enterprise Market from Rapid expansion of bank loans July 26, 2009. in the first half of 2009 boosted the country's economic growth, but it also increased the

126

PEOPLE'S REPUBLIC OF CHINA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES possibilities of financial risks, Liu Mingkang, chairman of the CBRC said in a speech posted on the regulator's website on July 19, 2009.

It was reported on September 23, 2009 that the CBRC is drafting a regulatory guideline on executive compensation of commercial banks. Early this year, the MOC circulated a draft rule of "Administration Measures on Executive Compensation of State-owned and Stated- controlled Financial Enterprises" for public consultation. Although the formal rule has not yet promulgated so far, on September 16, 2009, a document titled "Guiding Opinions regarding Further Regulating Executive Compensation of State-owned Enterprise" was jointly promulgated by several governmental authorities which sets up restriction on executive compensation of all stated owned enterprises, including State-owned and Stated- controlled financial enterprises.

127

PORTUGAL

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES State Guarantee The Government has increased Accounting of Bond Porfolios Recapitalization Program Banco Português de Negócios Increase of Core Tier 1 Capital the coverage of the deposit Requirements The Government of Portugal guarantee scheme from €25,000 The Bank of Portugal published The Government has approved The Government announced on passed legislation fully effective to €100,000. This enhanced Regulation nr. 6/2008 on a recapitalization program of up November 2, 2008 that it will The Governor of the Bank of from October 24, 2008 pursuant coverage will be fully in force October 14, 2008 aimed at to €4,000 million to be used to submit, for parliamentary Portugal announced on to which it will guarantee at its until December 31, 2011. allowing credit institutions to recapitalize banks, to help them approval, the nationalization of November 2, 2008, that discretion the funding of credit disregard the potential gains and reach an 8% Core Tier 1 ratio (a BPN. In the mean time, the Portuguese banks will be institutions of up to €20 billion. Although the Portuguese losses of their bond portfolios for ratio that will become Bank of Portugal appointed two required to hold a minimum of Minister of Finance has the calculation of their own mandatory). The program has government administrators who 8% of Core Tier 1 capital The maturities of the covered represented in the media that funds, to the extent that such entered into force on are also directors of the state- (against the 4% previously credits may range between the Portuguese State would gains and losses are not related November 25, 2008. owned bank CGD. Its shares required by the Bank of Portugal three months and five years. cover all the deposits held with to impairment. will be valued by two and the Portuguese market Portuguese credit institutions, The stated purpose of this independent entities to practice that sets it currently at However, inter-bank deposit the fact is that until now only the This measure is of significant program was said to be the determine the amount that 7%). operations in the money market, increase from €25,000 to importance in the current protection of national banking shareholders will receive as subordinated debt operations, €100,000 per depositor has financial crisis scenario since institutions against hostile compensation for the Legislation Protecting operations already covered by been implemented. due to the low liquidity of bonds takeovers, and to create a level nationalization. Consumers any other type of guarantee or the banks are not able to sell playing field for the Portuguese security and financing Transposition of Directive them out of their trading banking sector, since other This measure was aimed at On November 3, 2008, operations in jurisdictions not 2009/14/EC portfolio, and until now have jurisdictions have already ensuring the safety of deposits legislation was enacted requiring complying with internationally been obligated to account for implemented similar measures and at preventing systemic risks. prior approval of the Bank of accepted transparency A decree-law was passed on them as potential gains or aimed at helping the financial The nationalization comes after Portugal for advertising complex standards are excluded from this July 20, 2009, which transposed losses in the calculation of own sector. The reaction from credit rescue plans directed at its financial products (including scheme. Directive 2009/14/EC and (in funds. institutions to this measure was recapitalization and asset sales structured instruments), relation to various matters not favourable. have failed, which included a establishing a duty to provide a Qualifying institutions must covered by the Directive) altered Eligible Collateral in proposal to the State for the prospectus to clients before demonstrate that the guarantee the regime applicable to the Eurosystem Operations: The bill makes provision for two acquisition of preferential shares subscription of such products is required for the normal investors' indemnification distinct regimes: amounting to €600 million. and in general broadening the functioning of the institution. scheme and depositors Further to the European Central According to public statements duty of information and guarantee scheme. Bank measure of broadening the (i) An increase in the equity by the Governor of the Bank of assistance to banking institution The guarantee is available to types of assets eligible as levels of credit institutions which Portugal, the financial disruption customers, primarily at the Portuguese credit institutions As far as the deposit guarantee collateral in Eurosystem under the applicable legislation was the result of alleged consumer credit pre-contractual which inter alia demonstrate that scheme is concerned, this operations, the Bank of Portugal possess the necessary liquidity doubtful operations by the bank stage. the same is necessary in order legislative measure will maintain has issued an instruction, and soundness conditions; and that, until recently, had not been to obtain funding. some of the essential features of effective between December 1, revealed on BPN accounts, This legislation has been the existing regime but will also 2008 and December 31, 2009, (ii) Direct state intervention in reports and investigations supplemented by Regulation nr. A fee will be paid by credit enhance credit institutions' confirming that the following the recovery and remedial aggravated by the current 1/2009, issued by CMVM (the institutions amounting to information duties to customers may be elected: processes for credit institutions market situation and causing it national securities regulator) and (i) 50 bps where the guarantee's on the existing deposit which have or are at risk of severe losses and a serious Bank of Portugal's Notice nr. duration is one year or less or guarantee schemes and shorten (i) debt instruments having an equity, solvency or liquidity shortfall. In the 5/2009 of August 20, which set (ii) the institutions' median five some of the reimbursement denominated in US dollars, yen liquidity level of less than the beginning of February, the out the requirements of

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SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES years CDS spread plus 50 bps periods to 20 business days and pounds sterling, which are legal minimum. current management of BPN information to be provided, as where the guarantee's duration (Portuguese law already issued, held and settled in the announced that the Bank has well as a standard template for is more than one year. provides a more favorable Eurozone and whose issuer is These measures will only apply estimated imparities amounting providing such information to regime concerning anticipated established in the European to the capitalization operations to €1.8 billion. customers. If the Portuguese State decides payments within the first seven Economic Area; of Portuguese-based credit to honor a payment claim days of the triggering of the institutions carried out before Banco Privado Português A new regime applicable to presented under the guarantee, deposit guarantee, which will be (ii) syndicated loans fulfilling the December 31, 2009. Consumer Credit, transposing it may (i) subscribe for capital maintained). requirements laid down in recent On November 19, Banco Directive 2008/48/EC entered in issued by the credit institution; decisions and regulations of the (Re)capitalisation can be carried Privado Português requested a force on July 1, 2009. (ii) decide on various corporate Also, a clarified and detailed list ECB; out through distinct transactions, €750,000,000 guarantee for a matters of the credit institution, of exclusions from the deposit including (i) acquisition of the period of three years from the The Bank of Portugal has such as distribution of dividends guarantee scheme has been (iii) certain types of debt credit institution's own shares or government. On November 24, enacted regulations imposing or remuneration of managers; or established (excluded from the instruments issued by credit (ii) increase in the share capital the Governor of the Bank of new rules on disclosure duties (iii) impose compulsory deposit guarantee scheme, institutions and marketed in non- of the credit institution through Portugal advised the imposed upon the opening of administration. amongst others, are (i) qualified regulated markets as listed by ordinary shares, preference Government not to issue such a current and deposit accounts investors; (ii) holders of shares ECB; shares which do not carry voting guarantee, in view of the small and also on the offering to The legislation authorizes the amounting to more than 2%; (iii) rights and shares which confer dimension of the Bank, and of customers of structured financial scheme to continue until persons that have performed (iv) certain assets rated as special rights; (iii) other capital the fact that only a fraction of its deposit products, the main December 31, 2009. Until now, management, audit or similar "BBB-"; securities which are admissible business is directed to the innovation of which are the according to information publicly functions and (iv) anyone who by law or the articles of the granting of credit to customers prohibition on banks to sell available, Banco Espírito Santo has benefited from the events (v) subordinated assets that are company; (iv) joint venture (the main business of this bank financial products named as and Caixa Geral de Depósitos that caused the credit institution covered by guarantees provided agreement or other contracts is private banking). Nonetheless, "banking deposits" when the were already granted a to be in trouble. by guarantors with a solid which have similar effects. the State has agreed to provide customers are not able to totally guarantee by the State under financial situation; and a guarantee covering the recover the amounts deposited. the guarantees scheme covering The issue of the above financial repayment obligations under an In addition, the prospectus for an issuance of bonds. Banco (vi) fixed term deposits created instruments may also be €450,000,000 loan recently structured banking deposits Espírito Santo has already by the credit institutions before destined for credit institution granted by a syndicate of shall follow a standard model, closed a debt issue amounting the Bank of Portugal, in shareholders, the public or both, Portuguese banks to BPP. The and be subject to prior approval to €1.5 billion on January 8, accordance with an instruction with a full or partial underwriting guarantee was issued under the from the Bank of Portugal. 2009. issued by the regulator. or placement guarantee by the general regime, as the state. Government has understood New Rules on Disclosure of Other banks have in the Softening of the Impact of that the exceptional state Information meantime sought the comfort of Pension Funds Actuarial Upon receipt of a duly-reasoned guarantee scheme recently tapping capital markets with the Losses proposal of the Bank of approved was not applicable to On November 3, 2008, support of a State guarantee. Portugal, a capitalisation the BPP case. The guarantee is legislation was passed to Recent cases include State The Bank of Portugal has operation may take on the covered by security over certain increase the information to be guarantees provided on April 6, approved a regulation until 2012 nature of a debt issue BPP's assets granted in favour provided to the Bank of Portugal 2009 in respect of the allowing banking institutions to (convertible to or exchangeable of the State. This state by the credit institutions, obligations of Banco Finantia gradually soften the negative for ordinary or preference guarantee shall expire on particularly in relation to (i) the S.A. under a €100 million bond impact of the actuarial losses of shares) without breaching the December 2009 but may be risks incurred, including the issuance and on April 16, 2009 their pension funds in 2008 in limits set out in the Portuguese extended for an additional exposure level of different types the calculation of their own

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SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES in respect of the obligations of funds. Companies Code. maximum period of 12 months. of financial instruments; (ii) the Banco Internacional de Funchal, risk management and control S.A. under a €500 million bond Analysts expect that this The financial institutions that On December 1, 2008, the Bank practices to which they are or issuance to raise the funds measure will have a relevant benefit from this aid will have of Portugal decided to may be subject; and (iii) the required to reinforce its liquidity impact in the calculation of certain obligations imposed on reorganize BPP and has methods used in valuing their position and the correction of solvency ratios of certain them, such as financing the compulsorily appointed three assets, in particular those which maturity mismatches in its Portuguese banking institutions. economy, including families and people to serve on BPP's board are not traded in high liquidity balance sheet. SMEs, the implementation of of directors. The regulator also and transparent markets. good corporate governance decided on the same date that practices and a pay and BPP would be temporarily Possible Waiver or Increase of dividends policy as well as released for a period of 3 Requirements Applicable to increased contributions to the months from all its obligations, in Investment Funds Deposit Guarantee Fund particular the obligations arising (conditions to be set by order of from its portfolio management The above-mentioned legislation the Ministry of Finance). business. Such release has also provides for the temporary been successively extended for waiver of compliance with The reaction from credit further periods of 3 months and, certain matters related to institutions to this measure was unless extended for a further investment fund management, favourable. period of three months, it will at the request of the interested expire on December 1, 2009. parties; (i) the portfolio On May 8, 2009, an composition regime, its limits, implementing order was In early July 2009, Orey techniques and instruments for published regulating the Antunes, a Portuguese financial investment fund management; procedures for accessing this group, presented a proposal to (ii) the terms and conditions for recapitalization plan. This acquire BPP. However, the financing investment funds; implementing order details: (i) proposal was neither accepted (iii) carrying out operations with application procedures and by the Bank of Portugal nor by related funds and entities; conditions; (ii) rules on the Bank the bank syndicate which had (iv) the vagaries which of Portugal's decision process; lent money to BPP under the investment funds are liable to, (iii) conditions applicable to the state guarantee mentioned in particularly with regard to debt issue, such as the issued the paragraphs above. mergers, splits, transformation, debt instruments' remuneration; liquidation and division of funds. (iv) restrictions on the payment of dividends; (v) caps on the Conversely, the same legislation remuneration of the credit imposes additional duties on institution's directors; (vi) duties investment funds and their of the credit institutions respective managers, benefiting from these measures; depositaries or marketing and (vii) provisions concerning entities in exceptional situations the breach of the including turmoil in the financial

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SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES abovementioned duties. instruments market.

Decrease of the Nominal Review of the Financial Sector Value of Shares without Penalty Regime Reduction of Share Capital Legislation entered into force on The Government has passed June 20, 2009 concerning the legislation, entering into force on enhancement of the penalty March 21 2009, allowing regime for the financial sector in companies to reduce the criminal and administrative nominal value of their shares. offence matters, modernizing - and bringing into line - the This legislation serves the punitive framework and the purpose of facilitating amounts of the fines to the size recapitalization operations in the and characteristics of the current current financial and market financial sector. In addition, scenario and will only be extensive provisions on applicable until December 31, remuneration and disclosure 2009. duties are included in this law.

According to the Act, This law applies to public companies listed in regulated interest entities as defined in markets may reduce the nominal Portuguese law (Legislative value of their shares without Decree 225/2008 of November, reducing their share capital 20) and comprises, among whenever: others, listed companies, pension funds, insurance (a) The nominal value of the companies and financial shares before reduction is equal institutions. or inferior to their balance sheet accounting value, as established The main features of Law in a financial statement certified 28/2009 of June 19, 2009 are: by the company's auditor; and - Approval by the general (b) A resolution for the raising of meeting of remuneration capital is simultaneously or policies; previously passed. - Disclosure on the annual The amount of reduction must accounts of the remuneration be set in accordance with the policies and of aggregate and corporate interest and current individual remuneration of the market conditions, and the

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SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES reduction will only take place company's officers; following an approval from the Portuguese securities regulator. - Updating of the fines established for unauthorized Additionally, the portion of share exercise of regulated financial capital corresponding to the activities; amount of the reduction of nominal value shall only be used - Bans on financing to offshore for the following purposes: (i) entities located in Non raising the shares' nominal Cooperative Countries and value; (ii) issuing new shares to Territories; and be allotted to existing shareholders, which will be - More stringent penalties entitled to ordinary preemption applicable to both insider rights in the event of a share dealing and market manipulation issue, with a view of fostering practices. the egalitarian treatment of shareholders.

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REPUBLIC OF KOREA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES On October 19, 2008, the On November 6, 2008, the Foreign Currency Liquidity Recapitalization of State-run Purchase of Troubled Project Bond Market Stabilization Korean Government announced Korean Government published Provision Banks Financing Loans of Savings Fund that it will guarantee the foreign- its proposal regarding Bank currency debt of local banks amendments to the enforcement On October 6, 2008, the Korean On November 3, 2008, the On November 13, 2008, the borrowed up to June 30, 2009. decree for the Depositor Government provided US dollar Korean Government announced On December 3, 2008, the Korean Government announced Protection Act so that foreign- liquidity in the amount of US$15 plans to inject funds into state Korean Government announced plans to set up a KRW10 trillion On October 30, 2008, the currency deposits would be billion by utilizing the foreign run banks and other financial plans to arrange for the Korea bond market stabilization fund National Assembly approved the covered by deposit insurance. equalization fund. institutions to strength their Asset Management Corporation that will mainly invest in bonds Korean Government's bank debt This proposal was confirmed credit extension capacity. (KAMCO) to purchase KRW1.3 issued by corporations and guarantee program up to a limit and promulgated on On October 19, 2008, the trillion worth of troubled project financial companies. of US$100 billion. Each bank November 26, 2008. Korean Government announced The actual amounts of such fund financing loans from mutual participating in this program will plans to provide loans of US$20 injections in respect of the savings banks. On November 24, 2008, the be subject to a 1% per annum billion to local banks by utilizing relevant financial institutions Bank of Korea announced its guarantee fee. the foreign equalization fund and reflected in the annual In accordance with such plan, plans to provide liquidity up to the Bank of Korea announced government budget for 2009 that on December 30, 2009, KAMCO KRW5 trillion to banks and other On November 14, 2008, 18 local plans to provide US$10 billion to were approved by the National made its first purchase of financial companies through the banks executed a memorandum local banks through swap Assembly on December 15, KRW500 billion of troubled purchase of government bonds of understanding pertaining to transactions. 2008 and executed accordingly project financing loans from 30 and other low-risk securities the Korean Government's bank by the Korean Government in mutual savings banks. In held by such banks and financial debt guarantee program and the On November 13, 2008, the January 2009 are as follows: addition, on March 18, 2009, companies, the proceeds of banks' plans for efficient Bank of Korea announced plans KAMCO made its second which will be used to finance management with the Financial to provide US$10 billion to local - The Korea Development Bank: purchase of KRW1.2 trillion of their investment in the BMSF. Supervisory Service. banks for export financing of KRW900 billion troubled project financing loans small and medium businesses. from 51 mutual savings banks On December 9, 2008, the On February 18, 2009, the - Industrial Bank of Korea: BMSF task force1 formed the Korean Government lowered the Since December 2, 2008, the KRW500 billion Restructuring Fund under BMSF as a non-redeemable guarantee fee rate of the bank Bank of Korea has provided KAMCO private equity fund with a term of debt guarantee program from US$16.4 billion to local banks, - The Export-Import Bank of three years. The BMSF will be 1% to 0.70% per annum. utilizing its US$30 billion Korea: KRW300 billion On February 19, 2009, the set up as a fund of funds, with currency swap line with the Korean Government announced each underlying fund focusing On April 9, 2009, Hana Bank Federal Reserve of the United - Credit Guarantee Fund and its plan to establish the its investment on a particular issued US$1 billion of senior States. Since April 2009, a Kibo Technology Fund: KRW1.1 Restructuring Fund under type of bond (e.g., bank bond, fixed rate 3-year notes based on portion of this swap line that was trillion KAMCO to purchase troubled corporate bond, etc.). the bank debt guarantee utilized has been repaid and the assets from financial institutions. program. outstanding utilized amount as - Korea Housing Finance This Fund will be financed by On December 17, 2008, the first of September 25, 2009 is Corporation: KRW200 billion the issuance of government- BMSF (KRW5 trillion) was set On April 29, 2009, the National US$4.1 billion. guaranteed bonds. up and commenced operations. Assembly approved the Korean - Korea Asset Management Government's revision proposal KRW Liquidity Provision Corporation: KRW400 billion On March 13, 2009, the Korean of the bank debt guarantee Government announced detailed program, extending the On September 18, 2008, the plans relating to the

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REPUBLIC OF KOREA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES effectiveness of the program to Bank of Korea provided KRW6.5 management of the foreign-currency denominated trillion to the financial market Restructuring Fund. debt issued until the end of through repo transactions, etc. On December 15, 2008, the December 2009 (from June Korean Government announced - The funds required for the 2009) and extending the On October 23, 2008, the Bank that it had made investments-in- Restructuring Fund will be maximum term of the guarantee of Korea increased the credit kind of KRW1.65 trillion in the appropriated by issuing from three years to five years. line for support of small and aggregate to the following three government-guaranteed bonds, medium businesses from state-run banks: with a maximum amount of On June 19, 2009, Hana Bank KRW6.5 trillion to KRW9 trillion. KRW40 trillion. issued Malaysian ringgit 1 billion - The Korea Development Bank: (approximately US$284 million) On October 24, 2008, the Bank KRW500 billion - Use of proceeds will include of 2 1/2 and 3 year notes based of Korea provided KRW2 trillion the purchase of troubled assets on the bank debt guarantee to non-bank financial institutions - Industrial Bank of Korea: of financial institutions and program. indirectly through repo KRW500 billion assets being disposed by debtor transactions with Korea companies in restructuring Securities Finance Corp. - The Export-Import Bank of proceedings. Korea: KRW650 billion On October 27, 2008, the Bank - The Restructuring Fund will be of Korea included bank bonds On March 23, 2009, the Korean operated for a limited period of as securities eligible for repo Government announced that an time, maturing in 2014. transactions and announced that aggregate amount of KRW2.3 it would purchase KRW5 trillion trillion was reflected in the On April 29, 2009, the National to 10 trillion of bank bonds revised supplementary budget Assembly approved the bill through repo transactions to for the purpose of investments in submitted by the Korean provide liquidity to the banking five state-run financial Government amending the sector. institutions to bolster their relevant law to enable the support of small-and-medium- launch of the Restructuring On January 13, 2009, the Bank sized enterprises (SMEs) and Fund. of Korea provided KRW1.5 disposal of troubled assets. trillion of liquidity to the financial Such supplementary budget was On May 18, 2009, the Korean market through repo subsequently approved by the Government announced plans to transactions. National Assembly. launch a KRW20 trillion Restructuring Fund in 2009 to Recapitalization of engage in the purchase of Commercial Banks troubled assets of financial institutions and assets being On December 18, 2008, the disposed by debtor companies Korean Government announced in restructuring proceedings. plans to set up a KRW20 trillion of Bank Recapitalization Fund On June 29, 2009, KAMCO (BRF) to support banks to made its first purchase utilizing strengthen their financial

134

REPUBLIC OF KOREA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES stability. the Restructuring Fund of KRW816 billion of troubled On February 25, 2009, the project financing loans from Korean Government announced local banks. detailed plans relating to the fund-raising for, and management of, the BRF.

- The KRW20 trillion required for the BRF will be comprised of: (a) a KRW10 trillion loan from the Bank of Korea, (b) a KRW2 trillion loan from The Korea Development Bank and (c) KRW8 trillion from institutional and general investors.

- Use of proceeds will be limited to lending activities for SMEs and companies under restructuring.

On March 31, 2009, the Korean Government announced the completion of the first round of purchase by the BRF of hybrid bonds and subordinated bonds issued by eight banks in the amount of approximately KRW4 trillion.

Financial Market Stabilization Fund:

On March 13, 2009, the Korean Government announced its plan to launch the Financial Market Stabilization Fund (FMSF) with the Korea Policy Banking Corporation (f.k.a. Korea Development Fund) for the

135

REPUBLIC OF KOREA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES purpose of enhancing the soundness of financial institutions and reinforcing the support functions for real economic sectors.

- The funds required for the FMSF will be appropriated by issuing government-guaranteed bonds.

- Use of proceeds will include equity investments, loans and loan guarantees for financial institutions.

On April 29, 2009, the National Assembly approved the bill submitted by the Korean Government amending the Act on Structural Improvement of Financial Industry to enable the launch of the FMSF.

1 The BMSF task force is constituted of seven civilian members representing banks and other financial companies investing in the BMSF.

136

RUSSIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES On March 31, 2009, the Russian With effect from October 17, With effect from September 18, According to the Russian There have been reports that On December 4, 2008, Russian Government announced that it 2008, the Central Bank of 2008, the CBR, aiming to Minister of Finance Alexey Russia will acquire up to US$ 20 Prime Minister Putin suggested will provide government Russia (the "CBR") increased stabilise the situation in the Kudrin, as of September 30, billion of equity in various that the DIA provide Russian guarantees on bonds issued by the maximum amount, which in Russian financial markets and to 2009, VEB had already lent Russian companies in order to banks with government strategically important accordance with the support liquidity in the Russian more than US$11 billion to support the stock market. The guarantees in respect of companies (including banks and requirements and procedures banking sector, decreased companies and banks to Russian Government has mortgages of individuals who Russian military industrial established by Russian interest rates on loans from the refinance foreign debt. through various agencies lent lose their employment as a enterprises) in the amount of legislation, is payable by the CBR secured by the pledge of RUB985 billion to various result of the financial crisis. RUB300 billion. On August 13, CBR to an individual depositor promissory notes, receivables or The scheme will allocate an companies including Alrosa Consequently, the Russian 2009, the head of VTB Andrey having a claim against an suretyships provided by credit additional RUB100 billion to be (US$1.6 billion ). It also Government approved a Kostin announced that VTB was insolvent Russian bank, from organisations as follows: from given in subordinated loans to announced its intention to programme of government going to provide approximately RUB400,000 to RUB700,000. 8% to 7.5% per annum for private banks. This will, provide up to RUB200 billion to support for mortgage borrowers. RUB100 billion of state rouble loans with a term of up to however, come with the AHML to buy out mortgages As part of the programme, in guarantees in September 2009 On December 2, 2008, 90 calendar days; and from 9% condition that shareholders of from Russian private banks in December 2008 the DIA and on August 25, 2009, the Kommersant released a to 8.5% per annum for rouble those banks match the state order to reduce banks' risk approved "Rules for head of Sberbank German Gref statement by the Deposit loans with a term of 91 to 180 support on an equal rouble exposure (the threat of wide- Restructuring of Mortgage announced that Sberbank was Insurance Agency ("DIA") calendar days. basis. scale mortgage defaults). Residential Loans for Certain going to provide RUB150-200 stating that it may raise the However, as of September 30, Categories of Borrowers in billion of state guarantees in guarantee limit to RUB1 million. At the same time, the CBR The funds were aimed at 2009, AHML has not received 2009" and published "Standards September 2009. Beneficiaries As of September 30, 2009, raised the adjustment coefficient increasing lending in the any of these funds. for Restructuring of Mortgage of the state guarantees include however, the guarantee limit to calculate the value of security banking sector, and the Russian Loans for Certain Categories of car manufacturing companies remained unchanged at on the loans provided by the Government instructed On May 26, 2009, the CBR Borrowers" which provide for the "Kamaz", "Sollers" and "Sollers- RUB700,000. CBR, which is calculated based recipients of the funds to approved the rehabilitation plan following restructuring schemes: Naberezhnye Chelny", which on potential fluctuations or increase the amount they lend of "KIT Finance". RUB66 billion benefitted from VTB guarantees In 2009, the DIA invested in changes in price of securities, by 2% per month. will be provided to buy back (i) the mortgage lender and the in the amount of RUB2 billion. sovereign debt, regional and which is intended to 40.2% of "Rostelecom" shares DIA will provide funds to the VTB announced on September government bonds, corporate decrease the CBR's risks related Russian Prime Minister Vladimir (RUB50 billion will be provided mortgage borrower; or 8, 2009, that it would provide paper and Russian stocks. The to the potential depreciation of Putin on April 22, 2009, outlined by the DIA and RUB16 billion by RUB31 billion of state DIA put its losses for the year at the security. aggressive new measures for VEB). An additional RUB47 (ii) the DIA will provide a guarantees to the holding RUB11.5 billion (US$342.8 recapitalizing the banking sector billion will be provided by the "stabilization loan" to the company "Metalloinvest". million) or one-eight of the fund, With effect from September 30, and spurring lending to cash- DIA to buy back the mortgage mortgage borrower. which as of September 21 2009, 2009, the CBR decreased the strapped enterprises. Speaking portfolio, which is pledged in Overall, as of September 30, stood at RUB 86.4billion. The interest rate on collateral loans at the Russian Government Gazprombank. Russian According to the DIA, option (i) 2009, the Russian Government fund's yield, taking into account with a term of one day from meeting discussing economic Railways will receive RUB22 above is likely to be the main had approved providing RUB150 the write-downs, stood at - 9.5% to 9%. issues, Putin said any banks billion on the financial scenario for the time being. billion of state guarantees and 14.8%, the report said. As of receiving the Russian rehabilitation of "KIT-Finance". provided RUB56 billion of state April 8, 2009, the DIA reduced Other CBR measures include: Government assistance would There have been significant guarantees directly through VTB its losses to RUB9.5 billion. be required to lend out as much VEB plans to merge problem changes to the Russian and Sberbank. (i) with effect from August 1, as they were receiving and to banks Svyaz Bank and Globex - insolvency framework with the 2009, the CBR increased its keep interest rates relatively low. whose bailout cost the state introduction of two new laws on reserve requirements as follows: "It's very important that interest some US$ 5 billion - and then December 30, 2009, namely

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SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES on liabilities to individuals (in rates aren't more than three sell the new company to a dealing with insolvency and roubles) from 2% to 2.5%; on percentage points higher that strategic investor, a senior VEB pledge enforcement. credit institutions' liabilities to the CBR's refinancing. However, official said on June 16, 2009. non-resident banks (in roubles some commentators say that Midsized Globex and Svyaz The pledge enforcement law and foreign currency) from 2% banks receiving the Russian banks, ranked among Russia's provides for new methods of to 2.5%; and on credit Government assistance do not top 50 banks, were effectively enforcing pledges over assets institutions' other liabilities (in keep interest rates as low as nationalized in the autumn when (in addition to enforcement roubles and foreign currency) they should to give effect to state bank VEB bought them for through auction which was the from 2.0 % to 2.5%. The Putin's wishes. As of September 5,000 rubles each. only option until the introduction reserve requirements were 30, 2009, that means 10.5% of this new law). increased to maintain liquidity of plus 3% or 13.5%. "And this On September 2, 2009, VEB banks and to urge banks to must be the final price for announced that it in respect of On March 4, 2009, the Ministry increase required reserves, borrowers, including all Svyaz-Bank and Globex, both in of Economic Development which had been lowered in commission," Putin said. the state of reorganization under finalised a draft law on the earlier anti-crisis measures. VEB's guidance, that VEB's establishment of a new non- Putin also ordered the Russian greatest efforts would be profit government body, the (ii) the interest rate on loans Finance Ministry and the CBR to directed, over the next five Russian Finance Agency from the CBR secured by the change the mechanism by which years, to make the two banks ("RFA"). It is proposed that the pledge of promissory notes, the Russian Government stable financially and capable of RFA will oversee the National receivables or suretyships guarantees certain loans, winning the loyalty of a larger Reserve Fund that is currently provided by credit organisations allowing the bank to receive number of customers. under the control of the CBR, as was decreased by 0.25% to government funds immediately well as other financial activities 8.25% per annum for rouble after a borrower becomes as seen fit by the Russian loans having terms of between insolvent rather than having to Government. These could be 91 and 180 calendar days; sell off the collateral first. The the reserve fund (RUB 4 billion), Russian Government has set pension savings (RUB350 (iii) the term for secured loans aside RUB300 billion (US$8.84 million) as well as the national was raised from 30 to 90 billion) to provide guarantees on and foreign debt of the Russian calendar days; and loans to strategic enterprises, Federation. The RFA will be run but banks currently have to go by a supervisory board. It is (iv) the CBR was granted the through a long process that expected that initially, the RFA right to provide rouble loans to involves selling the deposit will not control the money itself, Russian banks with no collateral before they can cash in on the but will appoint Russian and for a term of up to six months. guarantee. As of September 30, foreign experts to provide advice 2009, the Russian Government prior to investing the funds. On October 3, 2008, the CBR had provided RUB56 billion of expanded the list of the assets, state guarantees. On August 14, 2009, Deputy which can be provided as Minister of Finance Dmitry security on the loans granted by Putin also expanded on the Pankin announced that a draft the CBR. In addition to the Russian Government's plans for law on the establishment of RFA assets accepted by the CBR providing additional capital to may be introduced to the

138

RUSSIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES previously as security (such as the financial sector. A total of Russian Government for promissory notes or RUB550 billion is set aside in consideration in the nearest receivables), the CBR allowed 2009 to recapitalize the banks. future. It is expected that RFA issues of bonds to be provided That is in addition to the will start to function from the as security on its loans as well, RUB757 billion put to that beginning of 2010. provided that such bonds meet purpose in 2008. The Russian the following criteria established Government aid to the banking by the CBR: system currently matches shareholder equity at a one-to- (i) the relevant issue of bonds is one ratio. That aid should be included into a list of issues of increased so that "for every bonds (published in "Vestnik of rouble of shareholder equity, the the CBR"), which can be Russian Government adds three accepted by the CBR as security roubles in the form of subsidized in accordance with the decision loans," Putin said. of the CBR's board of directors; As of September 30, 2009, VEB (ii) the bonds are registered on (state bank) has already given the securities (depo) account RUB276.3 billion via opened with a depository; subordinated loans to 16 banks, with the biggest, in the amount (iii) the bonds are owned by the of RUB200 billion, received by borrowing bank, these are not VTB. VEB may need to provide charged by any other obligations additional RUB60 billion of the bank and there are no insubordinated loans to six disputes and/or submitted banks seeking government claims in respect of the bonds; support because of shortage of current funds. (iv) the bonds have to be repaid not earlier than six days after the On July 28, 2009, VEB provided repayment date under the CBR RUB75 billion (US$2.41 billion) loan; and to Gazprombank, the second- biggest subordinated loan from (v) the borrowing bank is not the VEB since the recession began. issuer of the bonds to be provided as security. Banks may need an additional RUB500 billion (US$16 billion) in On October 23, 2008, the capital in 2009 to weather an Federal Law "On Additional increase in bad loans, a CBR Measures Aimed to Strengthen official said on May 20, 2009. Stability of the Banking System Standard & Poor's announced

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RUSSIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES for the Period until December that problem loans could reach 31, 2011" was adopted, with 35% to 50% in 2009, and one effect from October 28, 2008, banking analyst said on May 20, giving VEB RUB1.3 trillion 2009, that the figure could go (US$50 billion) to pay off or higher. The Russian service Russian legal entities' Government has already foreign loans obtained before pledged more than US$200 September 25, 2008. It came billion in loans, guarantees and after President Dmitry lowered reserve requirements Medvedev announced RUB950 since the crisis hit last fall. billion (US$36.4 billion) of long- term help for banks at an Small niche banks are expected emergency Kremlin meeting on to be among the hardest hit as October 7, 2008. more fall victim to bad loans and saw minimum capital Further, this legislation provides requirements raised to RUB180 that in order to strengthen million in March 2009. Regional stability of the Russian banking bankers, however, said at the system and to protect creditors' conference that their institutions interests, if a Russian bank must survive to support small shows any signs of financial business - a key sector in the instability threatening the legal Russian Government's anti- interests of its depositors and crisis plan. Standard & Poor's creditors, the CBR and the DIA, said on May 19, 2009, that are allowed to take measures to problem loans could reach 35% prevent such bank's insolvency. to 50% of the overall total in In particular, the DIA and the Russia, Ukraine and Kazakhstan CBR can, amongst other things, and that 15% to 20% of provide loans; acquire shares or Russia's loans were already participatory interests in such under stress. Although the rating bank's charter capital in such agency's figures are staggering amounts as to allow them to at first glance, one could actually make decisions within the say that 100% of loans are competence of the bank's under some sort of stress, shareholders or participants; Hainsworth said, calling S&P's perform functions of temporary numbers an "underestimate." administration on the basis of the relevant CBR decision; and Banks will be able to start using arrange auctions for the bank's 30-year subordinated loans as assets representing collateral in part of their capital requirements, the CBR said on

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RUSSIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES respect of the bank's obligations. May 19, 2009, and Aksakov said he did not see a large number of For the purposes of the above- banks failing in 2009. The mentioned law, on November 1, Russian Government has said 2008, the CBR approved the Russia has far too many banks. model form of the agreement Aksakov told The Moscow between the CBR and credit Times that 10 to 30 of the organizations, which provides country's 1,000 banks could lose for compensation by the CBR of their licenses by the end of 2009 part of the losses or expenses because of either the "new incurred by the credit capital requirement measures or organization as a result of its because of difficulties tied to the transaction(s) made with other crisis." Alexander Trubanov, credit organizations (if their head of the DIA, estimated that banking licences have been a similar number would fail. But revoked) on or after October 14, their predictions stand in sharp 2008 until December 31, 2008 contrast with bankers such as (inclusive). These measures are Pyotr Aven, president of Alfa aimed at stabilizing the situation Bank, the country's largest in the Russian interbank market. private bank, who told reporters As of September 30, 2009, the on May 20, 2009, that hundreds CBR had concluded such of Russian banks could fail agreements with 18 Russian because of a sharp increase in banks, including MDM Bank, overdue loans. Crucial to banks' Raiffeisenbank, VTB and survival is a bank for toxic loans, Sberbank. Aksakov said, a proposal that seems to have gained more As of September 30, 2009, the traction in recent months. "The CBR reported that it had creation of a fund for problem withdrawn 36 banking licences assets will free up banks' starting from January 1, 2009, balances, boost their liquidity including "Vimpel" Bank( August and then they could lend to 27, 2009), "Mezhbusinessbank" small and medium businesses," (September 2, 2009) and he said. "Pervomaiskiy" Bank (September 23, 2009). On May 25, 2009, the DIA proposed to allocate RUB119 On November 27, 2008, the billion (US$3.8 billion) to bail out CBR urged banks not to brokerage KIT Finance, Interfax increase their foreign currency reported. longs in December 2008. The

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RUSSIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES CBR advised organizations with The Russian Government's first a net short position in foreign anti-crisis plan contained 55 currency not to build longs in the points. Its second, signed by final month of 2008, stating that Prime Minister Vladimir Putin on the monthly average net long June 19, 2009, has seven. balance positions in each Declaring the first anti-crisis plan currency should not be higher nearly fulfilled, the Russian than for the October 25, 2008 to Government on June 19, 2009, November 25, 2008 period. In switched to a second package of December 2008, the CBR measures to prepare for the extended the application of "post crisis" period by removing these recommendations to the barriers to business, creating a first quarter of the year 2009. powerful financial system and fulfilling the state's social On July 2, 2009, the CBR responsibilities. "The crisis is a announced that it would not chance to free the economy extend the application of these from ineffective industries. To recommendations to the third solve problems brought by poor quarter of the year 2009 due to management, strategic mistakes stability on the internal and inadequate attention of the exchange market. owners to the effectiveness of their assets, the bankruptcy On December 1, 2008, the CBR mechanism will be used," says reduced the rating requirements the 30-page plan. The document for banks eligible to be says the first package of anti- compensated for their inter-bank crisis measures, made up of 55 lending losses to BB-/Ba3. points that the Russian Government began to On December 5, 2008, the implement in November 2008, Russian Government were undertaken to "defend the announced that it would provide people and the economy from RUB200 billion (US$7.2 billion) crisis shock," and "the to support the mortgage market. realization of this plan is almost This would be distributed among complete." The program is a banks that issue mortgages, combination of anti-crisis while any mortgage-backed measures and long-term bonds issued by banks would be projects meant to construct a guaranteed by AHML and newer, more efficient economy. refinanced by the CBR. The measures are reflected in However, on March 23, 2009, the 2009 budget, which was AHML announced that in 2009 it passed last November 2008 and

142

RUSSIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES will not support banks on the predicted that budget revenues mortgage market, because would fall from RUB10.9 trillion RUB200 billion (US$7.2 billion) (US$350 billion) to RUB6.7 for the support of mortgage trillion. Total expenditures are lending programme was not set at RUB9.7 trillion. included in the 2009 budget as had been hoped. The plan outlines seven state priorities: fulfilling the state's Of RUB60 billion provided to social responsibilities; raising AHML in 2008, RUB8.4 billion industrial and technological has been disbursed as at potential for future growth; September 30, 2009. increasing domestic demand for Russian products; restructuring On December 16, 2008, the and innovating the economy; CBR announced that it would removing barriers to business; increase the term of unsecured creating a powerful financial loans to banks to one year. system; and stabilizing Russian Prime Minister Vladimir macroeconomic indicators. Putin said legislation regulating the CBR must be amended to Another priority is "forming a extend the term. The CBR also powerful financial system," cut limits on collateral-free loans which will have access to for 34 out of the 136 banks RUB495 billion in government eligible to take part in CBR funds in 2009. To make sure money auctions. This measure that some of the money reaches comes after repeated warnings the real economy, the Finance from the CBR and the Russian Ministry will be able to decide Government that banks that use which organizations require state aid to buy foreign currency state guarantees on loans "up to will be punished. RUB10 billion each."

The CBR holds regular repo VEB will require borrowers to auctions, lending to commercial put up Russian assets rather banks at low rates. than foreign ones as collateral, making it easier for the CBR to On July 20, 2009, the CBR seize them if necessary, sources auctioned RUB25 billion in five- close to the bank said on June week collateral-free loans to 22, 2009. The requirement was Russian banks. The cut-off rate not enforced at the beginning of at the auction was 12.30%. the crisis because companies needed cash urgently, a

143

RUSSIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES On July 28, 2009, the CBR government official and a debtor auctioned RUB150 billion in five- of the bank said. week collateral-free loans to Russian banks. The cut-off rate VTB will receive RUB200 billion at the auction was 11.76%. in Tier 1 capital from the Russian Government in the third On August 3, 2009, the CBR quarter 2009. However, as of auctioned RUB25 billion in five- September 30, 2009, VTB had week collateral-free loans to not received any of these funds. Russian banks. The cut-off rate at the auction was 11.50%. Sberbank announced on June 23, 2009, that its profit dropped On August 11, 2009, the CBR by 93 percent in the first five auctioned RUB44.303 billion in months of 2009 after setting five-week collateral-free loans to aside more money for bad Russian banks. The cut-off rate loans. Net income in the period at the auction was 11.50%. through May 2009 fell to RUB4 billion (US$128 million) from On August 17, 2009, the CBR RUB56.4 billion in the year- auctioned RUB15 billion in five- earlier period, the bank said in a week collateral-free loans to statement. Money set aside for Russian banks. The cut-off rate delinquent debt jumped 58% to at the auction was 11.26%. RUB365 billion, or 6.6% of outstanding loans. On August 31, 2009, the CBR auctioned RUB71.395 billion in On July 14, 2009, Sberbank five-week collateral-free loans to reported a 98% fall in first- Russian banks. The cut-off rate quarter net profit, hammered by at the auction was 11.26%. a sharp rise in loan loss provisions as an increasing On September 7, 2009, the CBR number of its customers fall auctioned RUB15.033 billion in victim to the recession. five-week collateral-free loans to Russian banks. The cut-off rate Sberbank said it had increased at the auction was 11.26%. its loan loss provisions 12-fold to RUB90.7 billion (US$2.7 billion) On September 21, 2009, the from the same period a year CBR auctioned RUB19.141 earlier, driving net profit down to billion in five-week collateral-free RUB600 million in the first loans to Russian banks. The quarter. Net income fell to cut-off rate at the auction was RUB583 million from RUB31.1

144

RUSSIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES 11.26%. billion in the year-earlier period, Sberbank announced. On April 23, 2009, the CBR fixed the interest rate on collateral On June 29, 2009, VEB loans with a term of one day, received RUB 100 billion to seven days and thirty days at support Russian banking 11.5% per annum; and the system. interest rates on loans from the CBR secured by the pledge of On July 9, 2009, the general promissory notes, receivables or director of the DIA, Alexander suretyships provided by credit Turbanov, reported that the DIA organisations as follows: 11.5% reserved RUB300 billion for the per annum for loans with a term rehabilitation of Russian banks. of up to 90 calendar days; 12% per annum for loans with a term As of September 30, 2009 the of 91 to 180 calendar days; and DIA announced that starting 12.5% per annum for loans with from the beginning of the a term of 181 to 365 days. economic crisis, it had provided RUB250 billion to the Following a number of rehabilitation of Russian banks. reductions between June 4, 2009, and September 2009 the As of August 5, 2009, CBR continued to reduce its Rosselkhozbank has loaned refinancing rate. With effect from RUB 210 billion to the "real September 30, 2009, the CBR sector of the economy". reported that it decreased its refinancing rate from 10.5% to On September 18, 2009, 10%. This decrease is intended Russian President Dmitry to overcome the deficit of Medvedev's top economic aide liquidity. Arkadiy Dvorkovich announced that the economic stability The CBR will introduce reporting reached so far was purely based requirements that are closer to on the Russian Government's international rules in a bid to stimulus measures and there clarify the extent of defaults was no reason to discontinue among lenders, Alexei the measures. Simanovsky, the CBR's head of banking regulation and On September 23, 2009, the supervision, said on May 27, Russian Government 2009. New requirements announced that funding for anti- obliging banks to submit data crisis measures such as federal

145

RUSSIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES that count the full amount of a subsidies to companies will loan as overdue rather than the shrink significantly, including missed payment alone will go setting aside RUB 70 billion for into effect by the end of the potential support to industries year, Simanovsky said. and RUB 250 billion for issuing federal bonds, if needed. On May 28, 2009, RIA-Novosti Instead of this, banks would reported that the CBR allowed exchange their preferred shares banks to use subordinated loans for the government bonds to use with "additional conditions" to them as collateral to take out help bolster their capital. The loans from the CBR. As of loans would have terms of "at September 30, 2009, the least" 30 years. Russian Government had earmarked RUB 985 billion in As of September 30, 2009, the anti-crisis funds in 2009. CBR is still in the process of preparing the relevant documentation, which will allow banks to use subordinated loans to bolster their capital.

146

SLOVAKIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Aid to Individuals Unable to The Slovak legislative body has The Government of the Slovak In order to facilitate accessibility Repay Mortgage Loans due to decided to implement the Republic announced that it of SME's to working capital from Impact of the Financial Crisis Economic and Financial Affairs intends to adopt measures to commercial banks through Council of the Council of the increase the equity capital in loans, the Ministry of Finance of After the agreement with the European Union ("ECOFIN") state bank institutions being the Slovak Republic, commercial Slovak Banking Association, the recommendation on the Eximbank (focusing on support banks and state banks Slovak Government adopted a increase of deposit guarantees of export/import) and Guarantee Eximbank and Guarantee and program that creates the through the adoption of the and Development Bank Development Bank concluded framework for provision of state amendment of the Act (dedicated mainly to support the Memorandum for aid to individuals who are unable No. 118/1996 Coll. on Protection business activities of SMEs and cooperation, concerning to repay mortgage loans due to of Deposits, as amended. This their accessibility to capital), provision of so-called loss of employment as a result legal instrument is effective as of allowing them to increase their accelerated guarantees. of the global financial crises. November 1, 2008, and liquidity and thus the ability to The implementation of the increases the guarantee of compensate for the expected According to presently available program will require deposits in the commercial worsening conditions for loan public information, selected amendments to the Act on banks provided by the Fund on availability provided by loans of up to €340,000 (in each budgetary rules of public Protection of Deposits to a commercial banks to business individual case) to be drawn by administration, the Banking Act 100% of the value of depositions enterprises. SME's from commercial banks and the Cadastral Act. without a limit of a maximum will be able to utilize guarantees However, they have note yet amount of the guarantee (from The increase of registered provided by the state banks up been proposed by the the previous level of 90% capital will be effectuated in the to the level of 55% of the loan. Government. compensation and maximum beginning of 2009 and will This will allow SME's to draw the guarantee amount of €20,000). present approximately bank loans even under currently A recipient of the aid must be a €30 million (Slovak Guarantee more strict policy of banks Slovak citizen who is unable to and Development Bank) and regarding provision of securities. repay a mortgage loan (up to €11 million (Eximbank) According to representatives of €83.000) due to loss of respectively, with the commercial banks, this project employment as a result of the Government's planned will be employed mainly to crises after January 1, 2009, assessment for any potential finance working capital (not having permanent residence in further increases in loan investments). On the basis of the mortgaged real property, capacities of the mentioned the Memorandum, separate provided he/she has no other banks by €45-55 million (through agreements stipulating details of financial resources to repay its a loan from the European state guarantees will be signed debt. Investment Bank and subsidy with respective commercial from the state to the insurance banks participating on the The first phase of the program is funds of Eximbank). project in a short period of time. the rescheduling of the debt by the bank. After six months of Stabilizing Aid to the Banks The project of the Ministry of due payment of the rescheduled Finance of the Slovak Republic debt by a debtor, a specialised The Parliament adopted the new is a response by the State in governmental agency will Act No. 276/2009 Coll. on relation to published information

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SLOVAKIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES continue to pay 70% of the debt measures to reduce the impact on lower availability of loan for the debtor for the following of the global financial crises on capital from commercial banks six months. This period can be banking sector. This Act creates in the recent period due to the extended for additional six the framework for potential state global capital crises. months. The aid from the aid to banks, whose poor Agency is provided to the debtor financial situation is caused by in the form of a loan, which must the global financial crises. This be repaid and bears interests. Stabilizing Aid will be provided in two forms:

a) financial contribution to the equity capital of the bank, or

b) provision of special warranty for the bank's obligations with a maturity date from three months to three years, or for short-term loans, from three months to one year.

The Stabilizing Aid is provided upon request of the bank, submitted to the Ministry of Finance. The Government will decide on the provision of aid after a statement from the National Bank of Slovakia. The decision will be made in a very short term, ideally within four days. After the decision, the Ministry of Finance will enter into a Stabilizing Aid Agreement with the bank. Upon provision of the aid, the bank will be subject to extensive control from the Ministry and the National Bank.

148

SLOVENIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES As of November 20, 2008, Slovenia has implemented the The amendment of the Public The amendment of the Public Granting Loans Slovenia may guarantee loans amendment of the Banking Act Finance Act (OG of the RS Finance Act provides the granted to credit institutions with (OG of the RS no. 131/06 as no. 79/99 as amended) provides Government with power to The amendment of the Public a registered seat in Slovenia up amended) pursuant to which the the Government with the power purchase troubled financial Finance Act provides the to a maximum nominal amount amount of the guaranteed to recapitalize credit institutions, assets of credit institutions with Government with power to grant of €12 billion. Only loans with deposit is not limited anymore.4 insurance companies, a registered seat in Slovenia. loans to credit institutions, maturities from three months to The measure is valid from reinsurance companies and insurance companies, five years are eligible. The November 20, 2008 to pensions companies with a Credit institutions may also be reinsurance companies and guarantee does not extend to December 31, 2010. registered seat in Slovenia. required to meet certain pensions companies with a structured financial instruments, Detailed provisions have not yet requirements on corporate registered seat in Slovenia. subordinated debt and loans to been adopted. governance. related entities. The maturity of the loans is one Participating institutions may to five years. The interest rate is Participating institutions may also be required to meet certain determined in each specific case also be required to meet certain additional requirements on by the Government. The interest additional requirements on corporate governance with rate is calculated by adding (i) corporate governance with respect to bonuses, dividend the cost of a loan (including respect to bonuses, dividends payments and other interests) with similar maturity payments and other requirements. which is secured with the state requirements. guarantee and (ii) a credit risk margin. The credit risk margin is The Government Regulation determined by taking into valid from December 6, 20081 account the beneficiary's rating, sets the amount of state as follows: guarantee fees. The annual fee is generally dependent from the AAA rating: 25 bps + 50 bps beneficiaries' rating and loan maturity. The fees for AA (all) rating: 40 bps + 50 bps guarantees with maturities over one year are as follows: A (all) rating: 45 bps + 50 bps

AAA rating: 25 bps + 50 bps BBB (all) rating: 50 bps + 50 bps AA (all) rating: 40 bps + 50 bps BB (all), lower rating, no rating: A (all) rating: 45 bps + 50 bps 55 bps + 50 bps.5

BBB (all) rating: 50 bps + If granted a loan, the beneficiary 50 bps must undertake to provide Slovenia with the right to BB (all), lower rating, no rating: subscribe the beneficiary's

149

SLOVENIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES 55 bps + 50 bps. shares by way of contribution in kind (the object of which is For state guarantees up to one Slovenia's claim towards the year, the fee is 50 basis points beneficiary – debt-to-equity (bps) irrespective of the rating. swap). The beneficiaries may also be required to meet certain Liquidity Guarantee Program requirements on corporate governance. The Republic of Slovenia Guarantee Scheme Act, effective from May 1, 2009, gives effect to the Liquidity Guarantee Program (the "Program"). The Program provides €1.2 billion of state guarantees for the banks with intention to finance the real sector economy. The Program is effective until December 31, 2010.

The Slovenian Government will guarantee a maximum of 80% of each loan granted to a company under the Program. Program conditions are: by granting a loan, each bank undertakes a minimum of 20% of the credit risk; loan maturity ranges from one to ten years; loan is properly secured; only new loans are eligible, a debtor has A, B or C ranking according to the rules of the Central Bank of Slovenia.

The annual fees range from 0.4% up to 0.8% (dependent from debtor's ranking) of the principal amount of a loan granted. There have been some further amendments to the fees

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SLOVENIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES which also take into account collateral provided for the loans. The fees are reduced for the first two years by 25% for SMEs and by 15% for large companies. An additional fee of 0.05% of the principal amount of a loan granted is due quarterly.2

The banks are not allowed to finance or refinance management buy-outs, if procedures for breaching takeover legislation or competition legislation have been started against the lenders.

Provisions on procedure, terms and conditions with respect to the guarantees are provided in more detail in the Regulation.

State Guarantees Scheme Act for Natural Persons

The Program provides € 350 million of state guarantees for banks and savings banks with intention to provide loans to natural persons. The Program is effective until December 31, 2010.

The Slovenian Government will guarantee from 50% to 100% of each loan granted to a natural person under the Program. Program conditions are: loan maturity is limited to 25 years (in some cases to 10 years), loans have to be secured by mortgage

151

SLOVENIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES or by land charge, principal amount is max. € 100,000, only Slovenian citizens with permanent residency in Slovenia and foreigners with permanent residency permit for Slovenia are eligible; one of the following conditions has to be fulfilled: (i) debtor is employed for a fixed period of time and his/hers annual income does not reach certain threshold or (ii) debtor is in need for loan for reasons of purchasing his/hers first residence and his/hers income does not reach certain threshold or (iii) debtor is a member of so called young family or (iv) debtor has lost his/hers employment due to employer's business reasons and his/hers family's income does not reach certain threshold.

The annual fee, payable by the bank, amounts to 0,2% of the outstanding guaranteed principal amount. 3

State guarantee to SID banka d.d.

State guarantee to SID banka d.d. is planned to be granted in an amount of € 500 million, of which € 300 million is envisaged to be financed by the EIB.

State guarantee to NLB banka d.d.

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SLOVENIA

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES NLB has been granted a state guarantee in the amount of € 2.5 billion.

State guarantee to ABANKA VIPA d.d.

ABANKA VIPA has been granted a state guarantee in the amount of € 750 million.

1 The Regulation on the Measures and Conditions for Guarantee Issue Pursuant to the Article 86.a of the Public Finance Act (OG of the RS no. 115/08). 2 The Republic of Slovenia Guarantee Scheme Act (OG of the RS no.33/09, 42/09). Regulation on implementing the Republic of Slovenia Guarantee Scheme Act (OG of the RS no. 35/09). 3 The Republic of Slovenia Guarantee Scheme Act for Natural Persons (OG of the RS no. 59/09). Regulation on implementing Republic of Slovenia Guarantee Scheme Act for Natural Persons (OG of the RS no. 65/09, 70/09). 4 Before the respective amendment, the amount of the guaranteed deposit was limited to €22,000. 5 The Regulation on the Measures and Conditions for Granting Loans Pursuant to the Article 81.a of the Public Finance Act (OG of the RS no. 119/08).

153

SPAIN

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES The Spanish Minister of The Spanish Government has On March 29, 2009, the Spanish The Government has also In a move to drive liquidity, the On March 27, 2009, the Spanish Economy and Finance has been implemented the Economic and Government approved by Royal authorized the Minister of Financial Assets Acquisition Government approved a Royal authorized by Royal Decree to Financial Affairs Council of the Decree 4/2009 the intervention Economy and Finance until Fund (the "FAAF") has been Decree Law partially reforming guarantee new funding Council of the European Union of the savings bank Caja Castilla December 31, 2009, to acquire, established (on a temporary the insolvency legislation by operations of Spanish credit ("ECOFIN") resolution regarding La Mancha (CCM), the first upon request of the relevant basis) to invest in the financial introducing the following entities. raising the depositor guarantee Spanish financial institution that entity, securities, preferred assets of credit entities or measures: levels by increasing the is on the brink of collapse since capital securities or other similar securitization funds backed by In 2008, €100 billion were maximum amount guaranteed the beginning of the credit capital instruments issued by loans granted to individuals, (i) Providing a safe harbour for available for the Spanish by the Deposit Guarantee Fund crunch. Spanish credit entities. companies and non-financial certain pre-insolvency Government to guarantee and the Investment Guarantee entities. Assets backed by new refinancing and restructuring issuances of debt instruments Fund from €20,000 to €100,000 The measures adopted so far The securities that the credit transactions originated on plans that meet stipulated traded on official Spanish per account holder and entity. involve: Government acquire will not be or after October 7, 2008, will requirements. secondary markets, of which subject to the limitations have priority for the purpose of €90 billion had been allocated to This measure is applicable to (i) The substitution of the established by the legislation for its acquisition by the FAAF. (ii) Providing for a swifter and 53 eligible entities upon their deposits of cash or securities in savings bank Board of regulatory capital purposes. cheaper insolvency proceeding. request by December 31, 2008. credit entities and investment Directors by the three The FAAF will be financed In 2009, a further €100 billion services firms authorized to administrators appointed by Purchase agreements will be through the issuance of (iii) Facilitating the will be available for this operate in Spain, including those the Bank of Spain that will finalized following the issuance Government bonds. €30 billion implementation of pre-packaged facility.The guarantees are that are subsidiaries of foreign manage the institution of a report by the Bank of Spain. is available and may be plans. available until December 31, credit entities or foreign going forward. increased to €50 billion if 2009. The expiry date of the investment services firms, as On April 29, 2009, CCM required. (iv) Clarifying the existing doubts guaranteed transaction must not well as the branches of such (ii) Making available to CCM announced that it had reached concerning credit classification exceed five years. entities that have adhered to facilities up to €9,000 an agreement with the Deposit Unlike the U.S. TARP, the FAAF and subordination in specific these funds. million from the Bank of Guarantee Fund ("DGF") targets high quality assets of the scenarios. On November 21, 2008, through Spain. Indebtedness arising whereby it will issue €1,300 financial institutions rather than a Ministerial Order, the Spanish from the amounts drawn million in preferred capital troubled assets. Minister of Economy and down under these facilities securities to the DGF to raise its Finance has established: will be guaranteed by the capital levels. With this On October 31, 2008, the Kingdom of Spain. transaction CCM's capital ratio Minister of Economy and (i) The main features of the will increase to 11 percent, and Finance issued the guarantees include among On June 26, 2009, the Spanish its Tier 1 ratio will reach 7.2 corresponding developing them, the irrevocable and Government approved, by Royal percent. regulations governing its unconditional nature of the Decree-Law 9/2009, the creation operation, and the General guarantees and the waiver of of the Fund for Orderly Bank Preferred capital securities Directorate of the Treasury and the benefit of prior exhaustion of Restructuring (the FROB). The issued by CCM on November Financial Policy, as secretary of the guaranteed entity's assets. FROB will be in charge of 21, 2001 and March 22, 2005 the Governing Council of the managing the restructuring will be redeemed at par between FAAF, published the (ii) The entities eligible to adhere process of credit entities, July 15 and August 31, 2009. composition of the Executive to the guarantee scheme: including banks, savings banks Committee (the body that Spanish credit entities and and credit cooperatives, and it manages the FAAF) and the consolidated groups of Spanish will contribute to improving the criteria for the selection of

154

SPAIN

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES credit entities provided that (a) financial resources of those assets eligible for purchase. they have a share of at least entities that choose to merge 0.1% of the aggregate with each other. The selection of assets to be outstanding amount of loans and purchased by the FAAF is made credits to Spanish residents, and The restructuring process of by auctions, where the bids (b) have issued in the previous troubled entities is divided into submitted may be competitive or five years securities of like three stages: firstly, the search not-competitive. The assets in nature to those for which the for private solutions (in which which the FAAF may invest by State guarantee is sought. the FROB would not participate), way of firm and definitive secondly, the use of the Deposit purchases include mortgage- (iii) The financing transactions Guarantee Funds and, finally, backed bonds and asset-backed that may be guaranteed, which the use of the FROB. securitization bonds, and by way comprise issuances of of sale and repurchase (repo) unsecured and unsubordinated The main features of the FROB transactions the FAAF may commercial paper, bonds and are: invest in mortgage-backed notes in Spain with a maturity of bonds, asset-backed between three months and three (i) The FROB will initially be securitization bonds and years (securities with a longer endowed with €9 billion, mortgage-backed securitization maturity, up to five years, are €2.25 billion of which will be bonds (backed by loans granted eligible for guarantee subject to provided by the Deposit to individuals, companies and a report by the Bank of Spain) Guarantee Funds, and the non-financial entities) provided and which meet other remainder will constitute a they meet certain requirements conditions, including the credit available under the regarding: (i) the date of requirement of a minimum Kingdom of Spain's issuance, (ii) admission to issuance amount of €10 million.2 General Budget. trading on a regulated market, (iii) credit rating, and (iv) (iv) The basis for calculation of (ii) The FROB may eventually maturity date or estimated the fees to be charged by the borrow debt up to 10 times average maturity. State for the granting of the its initial funding, i.e., €90 guarantee. billion. The results of the auctions are published on the website of the (v) The maximum amount of (iii) The FROB may support the FAAF within a maximum period guarantees to be granted to integration process of credit of three business days, including each individual entity and the entities which are not facing the following details: (i) the procedures to be followed for difficulties, but which aim to aggregate amount of the bids the granting of the guarantees. improve their medium term received, (ii) the amount efficiency, by temporarily effectively allocated to the bids, The State will guarantee only contributing the necessary (iii) the total number of bids, (iv) the principal of the loan and the financing that cannot be the number of allocated bids, (v) ordinary interests. In the event raised due to the difficult the marginal rate of the auction, that the issuances are current market conditions. and (vi) the weighted average

155

SPAIN

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES denominated in foreign The FROB (following the rate of the auction. currencies, the guarantee will opinion of the Bank of also cover the exchange risk.3 Spain) may subscribe to Four auctions were held the securities (perpetual between November 20, 2008 Moreover, in the event of capital securities and January 30, 2009, in which enforcement of the guarantee, convertible into shares or the FAAF acquired assets worth the State will pay interest at equity securities - cuotas €19,341 million. Two of them market rates from the maturity participativas - in the were made by way of repo date of the secured and savings banks) issued by transactions while the other two defaulted obligations until the the credit entities in the were made by way of firm and payment date, provided certain process of integration. The definitive purchases. requirements are met. credit entities undertake to buy back the securities held The Spanish Government has In consideration the issuer must by the FROB under the decided to use the unspent provide collateral in the form of plan. If, within five years, amount available under the Spanish debt securities to the they have not done so, the FAAF to complete the FROB General Directorate of the FROB may convert the endowment mentioned before. Treasury and Financial Policy. securities into shares. The amount of collateral will be reassessed monthly. The (iv) The FROB will be managed General Directorate of the by a board comprised of Treasury and Financial Policy eight members and chaired will be entitled to enforce such by the central bank's collateral on the date of the deputy governor. The Bank enforcement of the guarantee to of Spain will propose five recover the damages resulting members and the Deposit from exchange rate fluctuations, Guarantee Fund will if any. propose three of them.

Finally, in the event of On July 16, 2009, the Bank of enforcement of the guarantee, Spain relaxed governing the Government shall notify the allowances rules for credit Bank of Spain so that it can entities in respect of non- analyze if the requirements for performing mortgage loans, in a intervention of the guaranteed move that could help some entity are met. banks to avoid losses in the forthcoming financial period and So far medium terms notes in allow others to strengthen their the amount of approximately capital ratios. €39,000 million with the guarantee of the Kingdom of Banks will no longer have to set

156

SPAIN

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Spain and with maturity on 2012 aside the full value of mortgage have been issued by several loans after two years of arrears. entities. Instead, they will only have to make provision for the difference It is worth noting that 18 savings between the value of the loan banks awarded with a small and 70% of the mortgage amount of State guarantees property, assuming that the pursuant to the guarantee "residual value" of mortgage scheme described herein, joined properties is 70%. In the case of forces and recently successfully a mortgage for the total cost of a completed the first issue of new home, for example, banks notes issued by a fund which, in would make provision for 30% of turn, invested the proceeds in the property's value. the purchase of State guaranteed notes issued by such savings banks.

1 The Spanish Minister of Economy and Finance has finally decided not to guarantee inter-bank debt. 2 The form to apply for the state guarantees on the issuance of debt securities by banks was published on November 25, 2008. 3 On December 23, 2008, through a new Ministerial Order, the Spanish Minister of Economy and Finance amended some of the requirements provided in the previous Ministerial Order which, given the critical situation of the market, could be an obstacle to the effectiveness of the guarantees. 4 On February 6, 2009, the Minister of Economy and Finance delayed the period of computation of the payments subject to the moratorium, deferred the repayment (from January 1, 2011 to March 1, 2012) and extended the maximum repayment term (from 10 to 15 years).

157

SWEDEN1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES A guarantee scheme was Effective as of October 6, 2008, On July 1, 2009 the Riksbank The Swedish Government will Swedbank On October 30, 2008, the Act introduced the last days of Sweden has amended the Act cut the repo rate to 0.25 per provide a fund to recapitalize (2008:814) on State Support to October 2008 in order to secure (1995:1571) on Deposit cent. The prevailing rate in banks if required as well as On November 4, 2008, Credit Institutions came into the medium term financing Guarantees such that the September 2008 was 4,75 per providing banks with liquidity (a Swedbank (the country's largest force. needs of Swedish banks. The government guarantee for cent. The repo rate is expected capital injection will likely be in savings bank) became the first total amount which may be deposits was increased from to remain at a low level until the the form of preference shares). Swedish bank to seek state help Pursuant to the provisions of the guaranteed under the program SEK250,000 up to a maximum beginning of 2011. to lower its funding costs by Act, state support in the form of is SEK1,500 billion; hereof 500 amount of SEK500,000. The The Swedish Financial signing up for the Government's guarantees, capital contributions billion may be allocated to Government has initiated At its July meeting the Riksbank Supervisory Authority has, as of SEK1,500 billion guarantee or otherwise may be provided to covered bonds with terms of legislative work to amend the also decided to cut its deposit December 12, 2008, amended program. Swedish banks had Swedish banks and credit three to five years. This Act in order to ensure that rate to negative, viz. - 0,25%. its Regulations (FFFS 2008:27) suffered little direct impact to the institutions (credit market possibility is now being depositors covered by the pertaining to Capital Adequacy credit crisis because they had companies) if deemed broadened to include debt guarantee will receive The repo rate was kept to the effect that Tier 1 capital little subprime exposure, but are necessary to prevent serious securities without special compensation faster than under unchanged by the Riksbank at contributions may now represent now suffering from short-term disruption to the Swedish collateral. No more than a third the present regime. its meeting in September. a maximum of 30% a firm's liquidity pressures and longer- financial system. If the support of the total limit, or SEK 500 original own funds, whereas term concerns over the takes the form of a capital billion, may concern guarantees The Riksbank has introduced a previously the limit was 15%. slowdown in the Nordic and contribution to the affected for debt securities with borrowing programme under The purpose of this change is to Baltic economies. institution this will be against maturities of between three and which banks can lend funds at a increase the Swedish banks' preference shares with higher five years. The program was fixed rate of 0,4% up to twelve lending capacity. On December voting rights than existing initially open until April 30, 2009 months. 18, 2008, the responsible shares. The State can also and has been extended and Minister stated that the Swedish provide support by underwriting made available until October 31, state may make Tier 1 capital (and guaranteeing) a new share 2009. It may be extended until contributions to Swedish banks issue. December 31, 2009. in order to help increase their lending capacity. On February The Act provides that any state Eligible under the guarantee 3, 2009 the Government support must be commercially scheme are Swedish banks, announced that the National sound and not distort savings banks and credit market Debt Office may provide capital competition. Moreover, the companies that have a to solvent banks, either within terms and conditions of any considerable share of their the context of new share issues state support must be drafted lending secured by real estate or by making Tier 1 capital such that the existing pledges. Moreover, it is contributions. The National Debt shareholders of the institution required that an applying bank Office has been authorised to bear any losses incurred by the or credit market company provide capital as aforesaid up institution. satisfies certain requirements to a total amount of SEK 50 regarding capital adequacy, i.e., billion (SFS 2009:46). One The Act also gives the State the in respect of the Tier 1 capital condition for Tier 1 capital right to redeem the shares of a ratio and the capital base, and if contributions is that the credit institution under certain considered sufficiently receiving bank accepts circumstances – i.e., if the restrictions as to compensation institution or its shareholders

158

SWEDEN1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES capitalized it will be eligible. schemes for the top five have refused to accept the executives. terms for state support; provided Guarantee undertakings which that the Settlement Board (for are issued to an individual bank (See other columns.) settlement of disputes may not from time to time concerning support provided exceed the higher of (i) the under the Act) has declared the aggregate of maturing debt terms of the proposed support instruments issued by the bank not to be unreasonable. and (ii) 20% of bank's deposits on account from the public as at The Act provides for the September 1, 2008. establishment of a stabilization fund. The fund will be financed The National Debt Office (the through fees collected from the "Debt Office") will request banks and credit institutions. It applying banks to enter into a is expected that the fund will Guarantee Agreement with the reach SEK150 billion within a Debt Office. Under the terms of period of 15 years. The fund will the Guarantee Agreement, the be administered by the National banks have to restrict Debt Office. compensation levels to the top five executives, such that their Iceland salaries must not be increased and bonuses or stock options On November 5, 2008, officials not granted as long as the from the central banks and Guarantee Agreement is in finance ministries of Norway, force. There is also a Sweden, Finland and Denmark commitment not to increase the held a meeting in Stockholm to remuneration to Board directors. discuss their contributions to a Moreover, the terms of the $6 billion rescue package for Guarantee Agreement further Iceland. The four Nordic nations provide that the relevant bank have said that they are willing to may not refer to the government support Iceland, but only after it guarantee when marketing agreed to design and implement credit and the bank will also an economic stabilization plan in have to undertake not to association with the IMF. The significantly expand its activities, loans would also require if the expansion would not have approval from the respective taken place in the absence of countries' parliaments. the government guarantee.

The government guarantee may

159

SWEDEN1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES be issued in respect of bonds and other instruments subject to trading on the capital market. The relevant bank's debt instrument must have a term of more than 90 days but less than 3 years, except for covered bonds which may have a term of up to 5 years.

A guarantee issued by the Swedish State (the Kingdom of Sweden) through the Debt Office, will be irrevocable and unconditional (subject to the terms of the guarantee). There is no requirement to exhaust any remedies against the bank issuer prior to making a demand under the guarantee.

Banks availing themselves of the state guarantee will have to pay a fee, based on the Recommendations on Government Guarantees on bank debt issued by the European Central Bank October 20, 2008. The fee payable is based on market benchmarks and will take into account institution-specific risk (median spread for credit default swaps or credit rating) plus a mark-up of typically 50 basis points.

The Swedish Government guarantee scheme has been notified and approved by the European Commission (State

160

SWEDEN1

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Aid No. 533/2008).

At this point in time major Swedish commercial banks and an automotive financing company have joined the scheme, whereas other major Swedish banks have indicated a reluctance to join. It is believed that the banks have issues with: (i) the fee and (ii) the restriction imposed on any expansion by the banks. In view hereof, the National Debt office has waived the restriction on expansion and has lowered the fees slightly in order to make the scheme more attractive to the banks.

1 In summary, the Swedish stabilization measures include the implementation of a general framework for giving state support to ailing credit institutions, the creation of a stabilization fund and a temporary guarantee program. The guarantee program is governed by the Ordinance (2008:819) on State Guarantees for Banks and the National Debt Office Regulation (2008:1) concerning State Guarantees for Banks.

161

SWITZERLAND

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES1 MEASURES FINANCIAL ASSETS OTHER MEASURES The Government did not take Under a temporary act of the The Swiss National Bank Credit Suisse Group AG See recapitalization measures. Assistance to Other Financial any ad hoc measures to Swiss Federal Assembly, the ("SNB") and the Swiss Central Institutions guarantee inter-bank debt. maximum amount under the Bank, took several special On October 16, 2008, Credit In October 2008, UBS AG However, in connection with the deposit guarantee scheme was measures to overcome the Swiss raised CHF10 billion announced that it would transfer The Federal Council, the Swiss bill seeking the approval of the raised to CHF 100,000 (or financial crisis using open Tier 1 capital through a up to US$60 billion in illiquid executive, has announced in UBS AG recapitalization roughly €66,666). The system market transactions: combination of a sale of treasury securities of its balance sheet to connection with the bill seeking measure, it expressly mentioned will continue to be based on shares, the issuance of a SNB StabFund, a fund set up by the approval of the UBS AG that it would act should the both a preferential treatment in USD Auctions mandatory convertible bond and the Swiss National Bank. 90% recapitalization that it would prevailing conditions require insolvency proceeding and an the issuance of a non-dilutive of this sale is financed by a loan provide on a case-by-case basis such action. insurance system but with an Since December 2007, in hybrid instrument through a from the Swiss National Bank at similar assistance to other banks increase capped at CHF 6 billion conjunction with the Federal private placement with a group LIBOR plus 250 basis points, of systemic relevance. (approx. €4 billion). In addition to Reserve, the Bank of England, of investors, including a wholly which shall not exceed US$54 this insurance system, however, the Bank of Japan and the owned subsidiary of the Qatar billion. Since then, the size of institutions with guaranteed European Central Bank (ECB), Investment Authority.3 the portfolio of illiquid assets deposits exceeding CHF 6 the SNB repeatedly injected was reduced and the transaction billion will have to cover these liquidity through several US$ UBS AG closed with assets amounting to deposits by holding approved auctions which are scheduled a total of US$38.7 billion. The securities in an amount equal to until the end of January 2010. In December 2007, UBS AG Swiss National Bank controls 125% of the guaranteed raised CHF 15 billion in Tier 1 the SPV and is entitled to an deposits, subject to a possible CHF Liquidity Facilities capital through the sale of equity kicker of CHF1 billion plus exemption from FINMA, the treasury shares and the private 50% of any remaining equity Swiss Financial Market Acting with the ECB to improve placement of a CHF13 billion after repayment of the loan in Authority. the liquidity of the Swiss Franc, mandatory convertible note with principal and interest. Narodowy Bank Polski ("NBP"), the Government of Singapore Whereas until now, individual the Polish central bank, and Investment Corporation Pte. retirement accounts (so-called Magyar Nemzeti Bank ("MNB"), Ltd., the sovereign state fund of 3a accounts) were added to an the Hungarian central bank, the the Government of Singapore individual's ordinary savings for SNB agreed to enter into 7 day and a private investor.4 the purposes of the deposit EUR/CHF swaps until the end of guarantee system. Under the January 2010. This measure In June 2008, UBS AG carried revised act they will be treated seeks to offer Swiss Francs to out a CHF15.97 billion rights as separate claimants. Thus, a financial institutions that do not offering.5 given person may receive up to have access to the normal open CHF200,000 (or €133,333) in market operations of the Swiss On October 16, 2008, the guaranteed deposits: half of National Bank. Federal Council and the Swiss them through its individual National Bank announced a savings and the other half To neutralize the monetary concerted effort to recapitalize through the investment effect of this added liquidity, it UBS AG. 6 retirement account. However, issued CHF-denominated SNB the individual retirement Bills with a seven-day term. The measure was divided into accounts will not be covered

162

SWITZERLAND

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES1 MEASURES FINANCIAL ASSETS OTHER MEASURES under the deposit insurance Promoting Interbank Liquidity two legs: scheme. 2 To overcome difficulties in the First, the Federal Council, acting Certain financial institutions, domestic interbank lending on the basis of its emergency e.g., some cantonal banks and market, which normally operates powers, subscribed a Post Finance, benefit from a through unsecured money CHF6 billion mandatory statutory guarantee from their market operations, the Swiss convertible note with canton or, in the case of Post National Bank intermediated a two-and-half-year term and Finance, the Federal work around involving the big paying 12.5% p.a. The Swiss Government. banks (Credit Suisse and UBS Federal Assembly (the Swiss AG) pledging top-rated Swiss parliament) has approved the mortgage bonds to the principle of the CHF6 billion Pfandbriefbank der mandatory convertible bond schweizerischen subscribed by the Swiss Hypothekarinstitute (Pfandbrief Government. institution acting for all other Swiss mortgage lenders) in On August 19, 2009, the Federal return for liquidity in the form of Government exercised its a Pfandbrief loan. The conversion right and placed the Pfandbrief institution then newly issued UBS AG shares on refinances itself by issuing the market thus entirely Pfandbriefe, which were bought divesting from UBS AG. by banks with surplus liquidity. Second, UBS AG agreed to transfer up to US$ 60 billion in illiquid securities and other assets of its balance sheet to a special purpose vehicle SNB StabFund. On December 19, 2008, SNB StabFund acquired the first tranche of assets from UBS AG in an amount equivalent to US$ 16.4 billion.7 Another US$22.2 billion was transferred in the course of the first quarter of 2009 so that the transaction closed with a total size of US$38.7 billion.

UBS AG financed 10% of the transaction in equity up to a

163

SWITZERLAND

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES1 MEASURES FINANCIAL ASSETS OTHER MEASURES maximum of US$ 6 billion. The remainder was funded by a non- recourse from the Swiss National Bank, up to a maximum of US$54 billion. The term of the loans range from eight to 12 years and bears interest equal to LIBOR plus 250 basis points.

The entity is controlled by the Swiss National Bank, which upon repayment of the loan in principal and interest, is entitled to an equity kicker amounting to US$1 billion and 50% of any remaining equity.7

Glarner Kantonalbank

More anecdotally, on October 29, 2008, the Parliament of the Canton of Glarus announced that it would provide an additional CHF20 million capital to the Glarner Kantonalbank, a bank controlled by the canton. In any case, deposits with the Glarner Kantonalbank are subject to an unlimited guarantee by the Canton of Glarus.

1 See generally http://www.snb.ch/en/ifor/media/id/media_releases. 2 http://www.efd.admin.ch/00468/index.html?lang=fr&msg-id=22499. 3 See http://www.credit-suisse.com/news/en/media_release.jsp?ns=40924. 4 See http://www.ubs.com/1/e/about/news/archive/archive10?newsId=133686. 5 See http://www.ubs.com/1/e/about/news/archive/archive10?newsId=143689. 6 See http://www.snb.ch/en/mmr/reference/pre_20081016_1/source/pre_20081016_1.en.pdf;

164

See also http://www.efd.admin.ch/aktuell/medieninformation/00462/index.html?lang=en&msg-id=22019; and See also http://www.ubs.com/1/e/about/news.html?newsId=154213. 7 Swiss National Bank, Accountability report for the Federal Assembly 2008, http://www.snb.ch/en/mmr/reference/annrep_2008_rechenschaft/source p. 77 et seq.; http://www.snb.ch/en/mmr/reference/pre_20090403/source/pre_20090403.en.pdf.

165

UKRAINE

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Law no.639-VI dated Since October 31, 2008, The National Bank of Ukraine Law no.639-VI introduces Law no.639-VI allows the The IMF announced on October 31, 2008, on immediate deposits are guaranteed for has issued a regulation No. 413 special procedures to accelerate Ministry of Finance to purchase October 26, 2008, that it has measures to prevent negative UHR150,000 (approx. which concerns bank liquidity banks' capitalization. shares of Ukrainian banks. reached a tentative agreement consequences of the financial US$26,000). maintenance. with Ukraine for a crisis and amending certain laws The Government adopted The Government of Ukraine US$16.5 billion loan. of Ukraine, allows the Ukrainian At least UHR 1 billion will be Due to the foreign currency special procedures for state increased the capital of state Government to issue state transferred annually to the deficit on the internal market, the participation in the bank owned Ukreximbank, five times The loan is contingent on the guarantees of an amount up to Guarantee Fund of Physical National Bank of Ukraine capitalization on November 4, by its regulations (No. 1031 Ukrainian Government passing UHR10 billion in 2008. Persons Deposits. mandated that local banks with 2008 (No. 960). dated. November 26, 2008, specific legislation to address credits in foreign currency must No.1116 dated. December 17, financial sector liquidity and put special reserves in the same Law no.1617-VI heavily 2008, No. 375 dated. April 15, solvency. currency in the National Bank of amended the procedures of 2009, No. 866 dated. August 12, Ukraine (December 22, 2008, bank reorganization and 2009). The President of Ukraine (under No. 442; December 29, 2008, procedures as to introduction of Decree N 1046/2008 dated No. 473). temporary management to The Government of Ukraine November 17, 2008) will transfer restore bank financial capability. increased the capital of Saving UHR50 billion (approx. The National Bank of Ukraine Bank to UHR2 billion (No. 1031 US$8 billion) to the Stabilization has issued some regulations dd. November 26, 2008, No. Fund in 2009, including directed to stabilization of the 1119 dated December 17, UHR10 billion in the first quarter credit market in Ukraine (No. 2008.) of 2009. 442 dated December 22, 2008; No. 33 dated January 30, 2009). The Government of Ukraine has The Stabilization Fund may be purchased: used among others to cover, The National Bank of Ukraine refinance a service of credits has adopted new limits of ▪ 99.94% of shares in Kyiv obtained before September 15, minimum regulatory capital for Bank by its regulation No. 2008 by Ukrainian banks and commercial banks (Regulation 566 dated June 10, 2009; companies. No. 116 dated March 4, 2009). ▪ 99.97% of shares in Rodovid To decrease the deficit Bank by its regulation No. amendments to the State budget 580 dated June 10, 2009; and have been introduced on December 26, 2008 and ▪ 81.58% of shares in UkrGaz February 3, 2009. Bank by its regulation No. 567 dated June 10, 2009.

166

UNITED ARAB EMIRATES ("UAE")

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES The Government has stated that The Government has declared On September 22, 2008, the No publicly announced Amlak Finance PJSC and The UAE Central Bank is it would guarantee inter-bank that it would guarantee deposits UAE Central Bank launched an measures at this stage. Tamweel PJSC, two leading discussing plans to launch new lending in local institutions. and interbank lending in local emergency funding facility for its UAE real estate finance facilities to support property institutions and on October 13, banks, pumping as much as providers in Dubai, previously lending in the UAE. On October 14, 2008, the Prime 2008, the UAE extended its AED50 billion (€9.3 billion, announced a proposed merger Minister ordered the transfer of three-year guarantee on £7.4 billion, $13.6 billion) into with the Real Estate Bank, an The Dubai Government has AED70 billion to the UAE deposits to foreign banks with the banking sector in order to entity wholly-owned by the (through the Investment Ministry of Finance and Industry substantial operations in the help the local interbank market. Federal UAE Ministry of Finance Corporation of Dubai) deposited to inject further liquidity to UAE after concerns grew that and Industry. These mergers are US$1.3 billion with certain Dubai banks. the previous day's decision to The UAE Ministry of Finance now not expected to proceed. state-owned banks for the guarantee such monies in local and Industry offered a further The Real Estate Bank itself purposes of those banks The UAE has previously injected institutions could trigger runs on AED70 billion ($19 billion) merged with the Emirates refinancing existing loans of AED50 billion of liquidity to the 28 foreign banks operating liquidity injection to domestic Industrial Bank under the name Borse Dubai. banks to encourage inter-bank in the UAE. The legislative banks, on top of the Emirates Development Bank. lending. framework for these guarantees AED50 billion ($13.6 billion) on The Dubai Government has has yet to be finalized. offer by the UAE Central Bank. issued bonds to the value of In June 2009, the Federal US$20 billion, of which US$10 Government announced that it is On October 8, 2008, the UAE billion were subscribed for by planning to introduce legislation Central Bank cut its base rate by the UAE Central Bank. The to guarantee bonds issued by 0.5% in a move timed to proceeds are expected to be UAE banks for a maximum of coincide with other central used to support a number of five years. banks. It again cut its base rate Dubai owned companies. by a further 0.5% to 1% on January 18, 2009. The Federal Government is in the process of issuing laws Under Central Bank notice which will allow it to issue bonds 4312/2008, the UAE Central (previously bonds have been Bank agreed to allow banks to issued only by individual obtain funding from the UAE Emirates) for amounts in Central Bank through: aggregate of up to 45% of the total GDP of the UAE. The new (i) the use of the Central Bank laws will allow each of the seven CD balances; and Emirates to borrow as much as 15% of their own GDP. (ii) liquidity support facility at 300bps over the prevailing UAE Central Bank rate (provided no new lending to foreign borrowers).

On December 24, 2008, the

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UNITED ARAB EMIRATES ("UAE")

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES UAE Central Bank introduced UAE Dirham/US Dollar swap facilities with tenors between one week and 12 months to all banks operating within the UAE.

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UNITED KINGDOM

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Credit Guarantee Scheme The UK Government has Operational Standing Bank Recapitalization Scheme Northern Rock Guarantee Scheme for Asset- increased the protection given to Facilities backed Securities On October 8, 2008, the UK savings from £35,000 to The UK Government announced Northern Rock was nationalized Government announced that in £50,000. The Bank of England ("BoE") that it is establishing a new on February 21, 2008. The bank On January 19, 2009, the return for an appropriate fee the has set up these new facilities to facility of £25 billion which will had approached the BoE for Government announced its UK Government will guarantee However, Chancellor Alistair replace the existing standing make Tier 1 capital in the form emergency funding in decision to set up a new newly issued (initially up to April Darling announced that the UK facilities. The rate charged on of equity (underwritten by the September 2007. As the guarantee scheme for asset- 9, 2009 but now extended to would guarantee all the UK retail the Operational Standing Government) as well as Government subsequently failed backed securities ("ABS"). The December 31, 2009) short- and deposits of Icesave and Lending Facility is 25 basis preference shares (placed with to attract private buyers to take scheme launched on April 22, medium-term unsecured debt Heritable (both branches of points above Bank Rate, and the the Government) available at the over the bank, it decided to 2009 and the Government will (including certificates of deposit, Icelandic Bank, Landsbanki, rate paid on the Operational request of eligible institutions. nationalize it. issue guarantees up to October commercial paper and senior which has been nationalized by Standing Deposit Facility is 23, 2009 (subject to any unsecured bonds and notes) of the Icelandic Government). 25 basis points below Bank Eligible institutions are Bradford & Bingley extensions). The guarantees will participating institutions with Rate. UK-incorporated banks which have a maximum term of up to maturities of up to three years in have a substantial business in Bradford & Bingley was either three years or five years. GBP, EUR, and US$, and to be The eligible collateral for the the UK and building societies. nationalized on September 29, used for refinancing maturing Operational Standing Lending Applications to be included as 2008. The Company's mortgage The Government will provide obligations. The aggregate Facility will comprise high-quality an eligible institution will be book was assumed by the UK guarantees to be attached to notional amount of the debt to debt securities. Transactions will reviewed. Government and the Company's eligible triple-A rated ABS. be guaranteed by HM Treasury be for overnight maturity. BoE retail deposit book was These are securities backed by is estimated to reach £250 will cease to publish a list of A further £25 billion will be transferred to Abbey National residential mortgages over billion. banks and building societies available as assistance for plc. On March 27, 2009 the property in the UK which are signed up for access to the eligible institutions for ordinary Treasury sought approval from able to attract an AAA rating (or On December 15, 2008, HM Operational Standing Facilities equity fund-raising. The the European Commission for equivalent) at the time of issue Treasury announced changes to and the reserves-averaging UK Government would not be the continuation of the from at least two international the Scheme. The Government scheme. subject to bank supervision if it guarantee arrangements in credit rating agencies. The now proposes to extend the acquired control of a bank relation to certain wholesale instruments must be single guarantee in the future to Asset Purchase Facility through stock ownership. borrowings, and derivative currency and denominated in instruments in a wider range of ("APF") However, in the past the transactions of, and wholesale GBP, EUR, US$, Yen, currencies: Yen, Australian U.S. Federal Reserve has deposits with, Bradford & Australian dollars, Canadian dollars, Canadian dollars and Private Sector Assets frowned on allowing institutions Bingley. These arrangements dollars or Swiss francs. UK Swiss francs. The term of the with capital from the will remain in place while the banks and building societies instruments guaranteed will On January 19, 2009, the Government to make European Commission eligible to participate in the remain no longer than three Government authorized the BoE expansionary acquisitions in the considers the Treasury's request Credit Guarantee Scheme (see years. to purchase high quality private United States. It is not clear and, if approved, will continue column on far left of this page) sector assets, including whether the U.S. Federal until the wind-down of Bradford will also be able to access this On January 19, 2009, the commercial paper, corporate Reserve might make an & Bingley is completed. scheme. Eligible guarantees can Government extended the bonds, paper issued under the exception in the current only have the benefit of one of drawdown window of the Credit Guarantee Scheme circumstances. Dunfermline Building Society the two types of guarantee Scheme from April 9, 2009, to ("CGS"), syndicated loans and offered under the scheme: December 31, 2009, subject to asset-backed securities created In a release on October 13, It was announced on March 30,

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UNITED KINGDOM

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES state aid approval. During the in viable securitization 2008, the HM Treasury stated 2009 that about £3.4 billion of (i) Credit guarantee – this is an drawdown window, eligible structures. that institutions requesting deposits, mortgages and other unconditional and irrevocable institutions can issue new government recapitalization will, quality assets would be guarantee of the timely payment guaranteed debt. After the Under the Commercial Paper inter alia, need to: (i) limit purchased from the failing of all amounts contractually due closure of the drawdown Facility (which began on remuneration of senior Dunfermline Building Society by in respect of the eligible window, those institutions can February 6, 2009), the BoE can executives both for 2008 (no Nationwide Building Society, instruments; or continue rolling over any purchase investment grade cash bonus for board), and, for with the Government paying an outstanding guaranteed debt (all sterling commercial paper remuneration policy going additional £1.6 billion to the (ii) Liquidity guarantee – this of it until April 13, 2012, and up issued by UK corporates, both at forward, limit bonuses to reduce acquirer to make up the applies if the issuer of the to one-third of the total until April issuance and in the secondary "moral hazard" activities; (ii) difference between assets and eligible instrument fails to 9, 2014). market, subject to a minimum agree to modify dividend liabilities. About £500 million of exercise a call right in respect of spread. Purchases are made policies; and (iii) maintain, over other healthy assets would be the eligible instrument in The fee for the guarantee will be during a defined period each the next three years, the transferred to a "bridge bank" accordance with its terms or fails based on 100% of the day. Eligible issuers are availability and active marketing wholly owned by the BoE (DBS to purchase the eligible institution's median five-year companies, including their of competitive credit to Bridge Bank Limited). The instrument at the option of the CDS spread during July 2007 to finance subsidiaries, that make homeowners and small remainder of the business holder of the instrument in July 2008, as determined by HM a material contribution to businesses at 2007 levels. (riskier assets worth more than accordance with its terms. Treasury, plus 50 basis points. economic activity in the UK. UK £900 million) were to be placed Participating institutions will be Prior to December 15, 2008, the incorporated companies, RBS under the management of required to undertake to fund the fee was based on the median including those with foreign- administrators. On June 17, issuer of eligible instruments so five-year CDS spread for the incorporated parents, of On October 13, 2008, RBS 2009, following a competitive that it can meet the call or preceding 12 months to October sufficient size to sustain a announced the UK Treasury auction process conducted by purchase obligation on the due 7, 2008. It is expected that this commercial paper program and would underwrite £15 billion of the BoE, Nationwide Building date. In each case, the change will result in a lower fee with a genuine business in the ordinary shares (common stock) Society was selected as the Government will irrevocably being payable by institutions for UK, are normally regarded as and purchase £5 billion of preferred bidder for the social undertake that, if the issuer fails the guarantee. meeting this requirement. Paper preference shares (preferred housing loans and related to pay the relevant price to the issued by non-bank financial stock). The UK Government deposits from housing holder of such eligible As the changes announced on companies is in principle would have representatives on associations held by the bridge instrument on the due date, the December 15, 2008 and eligible, subject to the BoE being the bank's board. The bank has bank. On July 1, 2009 the BoE Government will purchase such January 19, 2009, vary the satisfied that the issuer makes a announced that it has agreed to announced the completion of the eligible instrument from the Scheme, the Government is significant contribution to maintain the availability of SME sale and transfer of (i) the social holder at the relevant price. The seeking the approval of the corporate financing in the UK. and mortgage lending at 2007 housing loans (and related relevant price will be the European Commission to the Paper issued by leveraged levels. deposits from housing principal amount outstanding of revised Scheme (the investment vehicles is ineligible. associations) held by the bridge the eligible instrument at the due Commission had approved the Only sterling-denominated On January 19, 2009, the bank and (ii) the other loans date, adjusted for accrued previous version of the Scheme commercial paper is eligible. Government decided to convert remaining in Dunfermline interest and reduced to take into on October 13, 2008). There are many other its preference shares in RBS Building Society that form part of account any losses which may requirements (relating to into ordinary shares. It also the social housing book to have been incurred on the The scheme is open to maturity and credit rating) that agreed a number of lending Nationwide Building Society. portfolio of mortgage loans UK-incorporated banks apply in determining whether commitments with RBS, These steps were taken using backing the eligible instrument (including UK subsidiaries of paper is eligible. The names of including a new commitment to powers – for the first time – prior to the due date and which

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UNITED KINGDOM

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES foreign institutions) that have a issuers and securities that are increase lending by £6 billion in under the Banking Act 2009 are allocable to the eligible substantial business in the UK purchased or eligible are not the next 12 months. (see "Other Measures"). instrument. and UK building societies. Any disclosed publicly. other UK-incorporated bank RBS announced on February The fees will be based on a per (including UK subsidiaries of Under the Corporate Bond 26, 2009, that it will seek £13 annum rate of 25 basis points foreign institutions) can apply for Secondary Market Scheme billion of additional capital from plus 100% of the participating inclusion. Within a banking (which began on March 25, the Government in the form of institution's median 5-year CDS group, only a single entity can 2009), the BoE gives market non-voting 'B' Shares, together spread during the period from participate in the scheme (and participants a back-stop offer to with a further Treasury July 2, 2007 to July 1, 2008, as this entity will normally be the purchase modest amounts of a commitment to subscribe to an determined by the Treasury. primary UK deposit-taker). wide range of investment-grade additional £6 billion of B Shares Participating institutions and the sterling UK corporate bonds with at RBS' option. issuers of the eligible The Financial Services Authority the aim of improving secondary instruments will also be required has deemed that, under the market liquidity, initially by HBOS & Lloyds TSB to grant counter-indemnities to Standardized Approach for facilitating market-making by the Government. calculating capital requirements, banks and dealers. The BoE Similarly, the UK Government securities guaranteed under the purchases bonds issued by will underwrite £8.5 billion of Asset Protection Scheme scheme will qualify for zero risk companies, including their HBOS ordinary shares and weighting. finance subsidiaries, that make purchase £3 billion of preference The Government has now a material contribution to shares. The UK Government published details of the Asset Furthermore, guaranteed economic activity in the UK. UK- will underwrite £4.5 billion of Protection Scheme, including a instruments are eligible as incorporated companies, Lloyds TSB ordinary shares and Term Sheet setting out the collateral in the BoE's extended- including those with foreign- purchase £1 billion of preference terms and conditions on which collateral open market incorporated parents, capable of shares. The two banks merged institutions can participate in the operations. issuing a bond into the capital in February 2009. Scheme. The basic features of markets and with a genuine the Scheme are: The description of the guarantee business in the UK, are normally Management of the and the guarantor in any offering regarded as meeting this Government's investments (i) In return for a fee, HM document (including listing requirement. Bonds issued by Treasury will provide to each particulars, information non-bank financial companies The Government's investments participating institution memorandum or offering are in principle eligible, subject will be managed on a protection against credit losses circular) or in any other to satisfying the BoE that the commercial basis by a new incurred on one or more document or announcement issuer makes a material "arm's-length" company called portfolios of defined assets to issued by or on behalf of the contribution to corporate UK Financial Investments the extent that credit losses issuer must be substantially in a financing in the UK. Paper Limited ("UKFI"), wholly owned exceed a "first loss" amount to form set out in the Rules of the issued by leveraged investment by the UK Government. UKFI be borne by the institution. The Credit Guarantee Scheme. vehicles is not eligible. Only will manage the investments Treasury protection will cover Subject to this, no institution that listed sterling-denominated arising from the Government's 90% of the credit losses which obtains a guarantee is permitted bonds are eligible. There are recapitalization of RBS, Lloyds exceed this "first loss" amount, explicitly to promote itself on the many other requirements TSB and HBOS, and, in due with each participating institution (relating to maturity and credit course, those arising from the retaining a further residual

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UNITED KINGDOM

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES basis of the guarantee. rating) that apply in determining nationalization of Northern Rock exposure of 10% of any credit whether a bond is eligible. and Bradford & Bingley. losses exceeding this amount. Convertible or exchangeable bonds are not eligible. UKFI will work to ensure that (ii) Eligible Institutions are: UK management incentives for incorporated authorized deposit- The BoE has also announced Government assisted or takers (including UK subsidiaries that it is ready to implement a acquired banks are based on of foreign institutions) with more CGS Bond Secondary Market "maximizing long-term value and than £25 billion of eligible Scheme (to purchase CGS- restricting the potential for assets. HM Treasury will backed paper) on terms broadly rewarding failure". However, the consider extending the Scheme similar to those above, should assisted or acquired companies to other authorized deposit market conditions deteriorate. will continue to have their own takers in the future. Eligible independent boards and institutions may request to The BoE is currently consulting management teams, participate in the Scheme until with market participants on the determining their own March 31, 2009. details of any purchases of commercial strategies. syndicated loans and asset- (iii) Participants will be required backed securities to be made to enter into legally binding under the APF. The BoE may commitments to increase also decide to extend the APF to lending to creditworthy non-sterling denominated borrowers, comply with instruments. remuneration policy consistent with the FSA's Code of Practice Government Assets on remuneration policy (see below) and meet the highest The range of assets that could international standards of public be purchased under the APF disclosure in relation to their was expanded on March 3, assets. 2009, to include UK Government debt. (iv) Eligible Assets are:

Funding of Purchases • Corporate and leveraged loans

Under the APF, assets are • Commercial and residential purchased by a wholly owned property loans subsidiary of the BoE, called "Bank of England Asset • Structured credit assets, Purchase Facility Fund Limited". including RMBS, CMBS, CLOs The purchases were originally and CDOS financed by the issuance of Treasury Bills by the UK • Participations in respect of the

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UNITED KINGDOM

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES Government, and about £984 above, million in assets were purchased this way. in each case, held by the participating institution or an However, the issuance of affiliate as at December 31, Treasury Bills was suspended 2008. The Treasury will assess after March 5, 2009 in favor of each asset category for using newly-created reserves inclusion in the Scheme on a (i.e., quantitative easing). The case-by-case basis. BoE is authorized to create up to £150 billion in new reserves, Assets included in the Scheme and initiated a £75 billion will continue to be managed by program of asset purchases on the institution and will remain on March 5, 2009. On May 7, 2009 its balance sheet but will be the BoE announced that it would required to be "ring-fenced" by increase the size of this program the institution so that actions in by £50 billion to £125 billion. On relation to them, including August 6, 2009 this was enforcement and disposal, will increased to £175 billion. On be subject to appropriate September 10, 2009, the BoE Treasury controls. The Scheme voted to continue with the also provides for the Treasury to program and indicated that it take over ownership and/or would take another two months management of the assets in to complete. Since quantitative certain defined circumstances. easing began, almost £150 billion has been spent on RBS announced on February Government debt, corporate 26, 2009 that it would seek bonds and commercial paper. protection under the Scheme for £325 billion par value of assets. Discount Window Facility The fee for the Government's ("DWF") protection under the Scheme will be £6.5 billion, funded through The DWF is intended to provide the issuance of non-voting B liquidity insurance, not to tide shares. over firms facing fundamental solvency problems. Under the The Lloyds Banking Group DWF, BoE will swap the announced on March 7, 2009 Government securities on its that it would, similarly, seek balance sheet for high quality protection under the Scheme for eligible collateral from banks up to £260 billion par value of and building societies. In assets, with a participation fee of

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UNITED KINGDOM

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES exceptional circumstances, BoE £15.6 billion being paid to the may lend cash, rather than gilts, Government, funded through the against eligible collateral under issuance of non-voting B shares. the DWF. The transactions will As part of the deal, £4 billion of normally be for 30-day Government-held preference maturities. Gilts borrowed may shares will be converted into not be used as collateral for ordinary shares, to be offered to Operational Standing Lending existing shareholders on a pre- Facility borrowings but may be emptive basis and fully used as collateral in open underwritten by the market operations. Since Government. February 2, 2009 the BoE has permitted drawings from the In both cases the Scheme has DWF with a term of 364 days, in yet to be agreed or finalised. addition to the standard option to draw for 30 days. There In conjunction with the would be an additional 25 basis Government's announcement of points fee for any drawings with the details of the Asset initial maturity beyond 30 days. Protection Scheme, the FSA has The BoE has now published a issued two new statements Market Notice on the DWF. This related to this Scheme, one on sets out details of how the remuneration policy and the facility will operate, securities other on capital treatment of eligible for exchange, institutions assets protected by the eligible to join the facility and the Scheme: fees charged. Instruments eligible as collateral will be (i) A new Code of Practice for classified into four levels, each remuneration policy. The attracting different fees upon principles in this Code are exchange: relevant to all FSA-regulated firms. The aim of the Code is to (i) Level A: high-quality debt ensure that firms have securities that are routinely remuneration policies which are eligible as collateral in the BoE's consistent with sound risk short-term repo open market management, and which do not operations; expose them to excessive risk. It is not concerned with levels or (ii) Level B: third party debt quantum of remuneration. The securities trading in liquid principles embodied in the Code markets; include:

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UNITED KINGDOM

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES (iii) Level C: other third party • The bonus pool calculation debt securities including those should include an that are not trading in liquid adjustment for current and markets; future risk, and take into account the cost of capital (iv) Level D: own-name employed and liquidity securitizations and own-name required. covered bonds. • Firms should not assess Instruments may be deemed performance solely on the ineligible for the DWF if the BoE results of the current judges that they were created financial year. for the express purpose of obtaining funding from the BoE. • Non-financial performance metrics, including adherence Term Auctions to effective risk management and compliance with In September 2007, BoE regulations, should form a announced that it would conduct significant part of the four auctions to provide funds at performance assessment three months maturity against a process. wider range of collateral (including UK residential • The measurement of mortgages) than that used in its performance for long term weekly open market operations. incentive plans, including Banks and building societies those based on the with reserve accounts with BoE performance of shares, or with access to the BoE's should also be risk-adjusted. standing facilities were eligible to participate. On October 8, • The major part of any 2008, the UK government bonus which is a significant announced that the BoE would proportion of the fixed continue to conduct auctions component should be against extended collateral, deferred, with a minimum reviewing the size and vesting period. frequency of the operations as necessary. (ii) A statement of capital treatment of assets insured Special Liquidity Scheme under the Asset Protection Scheme. The FSA expects the The Scheme, launched in April Scheme to protect against credit

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UNITED KINGDOM

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES 2008, enabled banks and losses experienced in respect of building societies with access to assets in the Banking Book, the BoE's standing facilities to although participants can temporarily exchange their high request HM Treasury to provide quality mortgage-backed and cover for assets in the Trading other securities for UK Book. The Scheme will be Government securities. The considered the equivalent of drawdown period of the Scheme eligible unfunded credit was initially six months, due to protection under the Prudential end on October 21, 2008 but Sourcebook for Banks, Building was extended. The period for Societies and Investment Firms swapping illiquid assets for (BIPRU). The "first loss amount" Treasury Bills in the Special of an asset will not qualify for Liquidity Scheme was closed on any special capital treatment. January 30, 2009. Use of the The FSA expects firms to deduct Scheme has been considerable, the First Loss tranche from totalling £185 billion of Treasury capital resources (although Bills. impairments already taken at the commencement of the Scheme On January 19, 2009, the will reduce the extent of Government announced that the deduction). The Senior Tranche window for swapping illiquid (i.e., where losses are assets for Treasury Bills in the reimbursed by the Treasury) is Special Liquidity Scheme would subject to the risk weight of the close on January 30, 2009. The protection provided, which would scheme will continue to provide typically be 0% and would liquidity support for a further therefore attract no capital three years from that point. charge.

Extension of Eligible Capital Regulation Collateral On January 19, 2009, the FSA On October 3, 2008, the BoE issued a statement clarifying its extended the collateral eligible approach to regulatory capital, for use in its weekly sterling following the recapitalization of three-month repo operations to the UK banking sector include AAA rated asset-backed announced on October 8, 2008. securities based on some The FSA stated that the purpose corporate and consumer loans, of the recapitalization scheme and approved highly-rated, was to ensure that bank capital asset-backed commercial paper ratios were sufficiently high to

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UNITED KINGDOM

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES programs, where the underlying provide a buffer to allow the assets would be eligible if banks both to withstand the securitized. The collateral is challenging economic conditions subject to haircuts as set out in and to continue lending on the market notice of October 13, normal commercial criteria. It 2008. was not intended to create new statutory capital requirements. On November 14, 2008, the BoE announced that it would The FSA also endorsed the view continue to hold extended- expressed by the Basel collateral three-month repo open Committee in a statement of market operations twice-monthly January 16, 2009, that the up to and including the capital regime should scheduled long-term repo incorporate counter-cyclical operation on January 20, 2009. measures which ensure that banks build up capital buffers in good years which they can draw down during economic downturns.

The FSA confirmed that each of the participating banks are expected to have a minimum core tier 1 of 4%. At the time of the recapitalization in October 2008, the FSA used a tier 1 ratio of 8%. The FSA estimates 6 – 7% to be a comparable post- stress tier 1 number to the core tier 1 number of 4%. This approach is intended to be a supervisory framework, and not a new set of rules.

The FSA also intends to ensure that the application of the Basel Accord (implemented through the Capital Requirements Directive) does not create any unnecessary or unintended procyclical effects. In particular, the

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UNITED KINGDOM

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES FSA is amending the variable scalar method of converting internal credit risk models from point in time to through the cycle. These changes will significantly reduce the requirement for additional capital resulting from the procyclical effect.

Banking Act 2009

The Banking Act was passed on February 12, 2009. The Act is designed to strengthen the existing UK framework for financial stability and depositor protection. Most of the provisions of the Act came into force on February 21, 2009.

Part 1 of the Act introduces a permanent special resolution regime ("SRR") for dealing with banks that get into financial difficulties. HM Treasury, the Financial Services Authority and the Bank of England (the "BoE") all play a role. The BoE will have the power to transfer a failing bank's business or its shares to a "bridge bank" (i.e., a company wholly owned by the BoE), with a view to restructuring it for onward sale to the private sector. It can also carry out a direct transfer to a private sector purchaser. The UK Treasury is given the power to nationalize a failing bank.

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UNITED KINGDOM

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES The BoE has the power to make partial transfers, i.e., to transfer healthy assets out of a failing bank and into a bridge bank. This may result in prejudice to those creditors whose claims are not transferred to the bridge bank. One of the objectives of the special resolution regime is to "protect depositors".

Part 2 establishes a new bank insolvency procedure ("BIP"), based largely on existing liquidation provisions of the Insolvency Act 1986 as amended by the Enterprise Act 2002. The BIP provides for the orderly winding up of a failed bank, including prompt payments from the Financial Services Compensation Scheme ("FSCS") to eligible depositors. There are powers to extend the BIP to building societies and credit unions.

Part 3 establishes a new bank administration procedure, based largely on existing administration provisions of the Insolvency Act 1986, as amended by the Enterprise Act 2002. This procedure is to be used where there has been a transfer of part of a failing bank's business, assets or liabilities to a bridge bank or a private sector purchaser under the SRR, leaving an insolvent residual entity. It is designed to ensure

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UNITED KINGDOM

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES that essential services and facilities that cannot be immediately transferred to the bridge bank or private purchaser continue to be provided for a period of time.

The Government has also enacted regulations that provide safeguards in the event of a "partial property transfer". These include safeguards for set-off and netting arrangements where partial transfers are made so that contracts covered by set-off or netting agreements are protected from disruption in a partial transfer subject to express carve-outs. Furthermore, security-holders will also be given explicit protection (including holders of floating charges). There are also third-party compensation safeguards to ensure creditors remaining in the residual bank may not be left worse off than they would have been had the bank been subjected to ordinary insolvency procedures.

EC Competition Laws

The UK Government has advised the European Commission of its planned support of the UK financial sector in relation to the Government scheme for consideration under EC

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UNITED KINGDOM

SPECIAL CENTRAL BANK RECAPITALIZATION PURCHASES OF TROUBLED GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES FINANCIAL ASSETS OTHER MEASURES competition laws.

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UNITED STATES OF AMERICA

OTHER ASSISTANCE TO THE SPECIAL CENTRAL BANK RECAPITALIZATION INTER-BANK MARKET OR TO ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES OTHER MONEY MARKETS INSTITUTIONS Temporary Liquidity FDIC Transaction Account Financial Stability Plan On October 14, 2008, the U.S. Mortgage-Backed Securities American International Group Guarantee Program ("TLGP") Guarantee Program ("TAGP") Congress announced the Purchase Program ("AIG") On February 10, 2009, the Troubled Assets Relief Program On October 14, 2008 the FDIC The TAGP is the second Treasury, Federal Reserve, ("TARP") Capital Purchase The U.S. Treasury Department The Federal Reserve Bank of announced the TLGP1 in which component of the FDIC's TLGP. FDIC, Comptroller of the Program providing for direct will be authorized to purchase New York intervened after AIG there are two components: Currency and Office of Thrift equity investments in certain up to US$700 billion of was unable to secure a private- The TAGP provides a temporary Supervision announced a new financial institutions under the distressed mortgage-backed sector loan, and granted a (1) A temporary guarantee of full guarantee for funds held at Capital Assistance Program to Economic Emergency securities and other assets and two-year revolving credit facility newly issued senior unsecured FDIC-insured depository help ensure that U.S. banking Stabilization Act ("EESA"). then resell the mortgages to of US$85 billion in return for an debt of certain banks, thrifts and institutions in non-interest- institutions have sufficient capital investors under the EESA.15 option to acquire an 80% stake holding companies. bearing transaction accounts to withstand any new challenges, The EESA authorized the U.S. in the insurance giant. above the existing deposit paired with a supervisory Treasury to use US$ 250 billion On November 12, 2008 the (2) A temporary unlimited insurance limit for participating process to produce a more without further action. Another Treasury Secretary, Henry On October 8, the Federal guarantee of funds in non- entities that did not opt-out. consistent and forward-looking US$100 billion can be obtained Paulson, stated "Over these Reserve Board authorized the interest bearing transaction assessment of the risks on upon the President notifying past weeks we have continued Federal Reserve Bank of New accounts at FDIC-insured Assessments under the program banks' balance sheets and their Congress. Finally, the to examine the relative benefits York to lend up to institutions (discussed in the will be based upon reports of potential capital needs.27 remaining US$350 billion of the of purchasing illiquid mortgage- US$ 37.8 billion by purchasing next column). condition and income and will be total US$700 billion can be related assets. Our assessment investment-grade, fixed-income collected as part of the quarterly Capital Assistance Program obtained by giving notice to at this time is that this is not the securities from certain regulated Under the first component, the collection process for deposit ("CAP") Congress, who then have most effective way to use TARP U.S. insurance subsidiaries of Debt Guarantee Program insurance assessments 30 days to deny funding if they funds, but we will continue to AIG. ("DGP"), the FDIC will fully generally. Banking supervisory agencies wish. examine whether targeted forms guarantee all senior unsecured will "stress test" each major U.S. of asset purchase can play a On March 2, 2009, the Treasury debt issued by FDIC-insured In addition to this assessment, banking institution to determine The EESA has two definitions of useful role, relative to other and the Federal Reserve institutions, subject to the an institution that did not opt out whether the institution could "troubled assets", one being potential uses of TARP announced a new AIG limitations discussed below, and of the deposit guarantee portion withstand economic conditions mortgage-related assets and the resources, in helping to restructuring plan.30 The plan their parent companies until of the TAGP will pay 10 basis even more adverse than those other being assets on which the strengthen our financial system includes: October 31, 2009, with any points on non-interest-bearing anticipated. If additional capital Treasury believes it should and support lending. But other guarantee ceasing on December transaction account balances in is needed, the Treasury will spend money. It is the second strategies I will outline will help Preferred Equity 31, 2012. excess of US$250,000. make available a new capital definition that Treasury is using to alleviate the pressure of facility. The expectation is that to buy stock in banks, and it has illiquid assets."16 The Treasury will exchange its Assessment rates under the Every institution, regardless of the capital will be in the form of chosen to spend US$250 billion existing US$40 billion DGP are as follows: risk category, is charged its convertible preferred shares, on bank securities; the first cumulative perpetual preferred normal quarterly risk-based with a dividend rate to be US$125 billion of which went to shares for new preferred shares - for debt with a maturity of deposit insurance assessment. specified and a conversion price nine banks.13 with revised terms that more 180 days or less (excluding That assessment is equal to its set at a modest discount from closely resemble common equity overnight debt), 50 basis points; assessment rate times its the institution's stock price up to As of September 15, 2009, over and thus improve the quality of assessment base (which is February 9, 2009. This security 500 banks have received funds AIG's equity and its financial - for debt of 181-364 days, almost equal to total domestic would serve as a source of for a total of leverage. The new terms will "contingent" common equity, provide for non-cumulative

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UNITED STATES OF AMERICA

OTHER ASSISTANCE TO THE SPECIAL CENTRAL BANK RECAPITALIZATION INTER-BANK MARKET OR TO ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES OTHER MONEY MARKETS INSTITUTIONS 75 basis points; and deposits). convertible solely at the option US$204,553,232,00014 dividends and limit AIG's ability of the issuer for an extended to redeem the preferred stock - for debt of 365 days or greater, Several banks have opted out of period of time. In addition, with The recapitalization scheme is in except with the proceeds from 100 basis points. the general guarantee program supervisory approval, banks will the form of non-voting preferred the issuance of equity capital. and the transaction-account be allowed to exchange existing shares that are redeemable by The rates set forth above will be program.21 Capital Purchase Program the issuing bank after three Equity Capital Commitment increased by 10 basis points for preferred stock (that of the first years. The preferred shares senior unsecured debt issued by The FDIC temporarily increased TARP tranche) for the new CAP pay an annual dividend of 5% The Treasury will create a new a holding company or another the standard maximum deposit instrument. Participation in the during the first five years and equity capital facility, which non-insured depository insurance amount (''SMDIA'') stress test was mandatory for step-up to 9%. allows AIG to draw down up to institution affiliate that becomes from $100,000 to $250,000, U.S. banking institutions with US$30 billion as needed over an eligible and participating effective October 3, 2008, and over US$100 billion of assets on Warrants were issued to the time in exchange for non- entity, where, as of ending December 31, 2013 for a consolidated basis, but banks Government based on 15% of cumulative preferred stock to the September 30, 2008, or as of all depository institutions.3 After not meeting that threshold were the face value of preferred Treasury. This facility will further the date of eligibility, the assets that date, the SMDIA will return permitted to apply for CAP shares on issue with this halved strengthen AIG's capital levels of the holding company's to $100,000. capital. if the preference shares are and improve its leverage. combined insured depository redeemed prior to the December institution subsidiaries constitute Beginning October 1, 2009, the Public-Private Investment 31, 2009. Federal Reserve Revolving less than 50% of consolidated FDIC will extend the TAGP for Program ("PPIP") Credit Facility holding company assets. six months until June 30, 2010. On February 27, 2009, the Each insured depository On March 23, 2009, the American Recovery and The Federal Reserve will take Under the Final Rule, institution (IDI) that participates Treasury announced a two- Reinvestment Act ("ARRA") several actions relating to the assessment fees accrue on all in the extended TAGP will be pronged program that is was signed into law. Under the US$60 billion Revolving Credit senior unsecured debt with a subject to increased fees of an intended to deal with troubled ARRA, banks with CPP money Facility for AIG established by maturity of greater than 30 days annualized rate of 25 basis assets on financial institution are now permitted to buy the the FRBNY in September 2008. issued by it on or after points during the extension balance sheets. Treasury, in preferred shares and warrants December 6, 2008.2 Also under period for the FDIC's guarantee conjunction with the FDIC and back with retained.31 Fannie Mae and Freddie Mac the Final Rule, negotiable order of qualifying noninterest-bearing the Federal Reserve, has of withdrawal accounts with transaction accounts. However, established the PPIP, the As of September 15, 2009, The U.S. government seized interest rates of 0.5% or less each IDI that is currently purpose of which is to purchase several banks have repaid the control of Fannie Mae and and IOLTAs (lawyer trust participating in the TAGP will the troubled assets owned by CPP funds from retained Freddie Mac and made a accounts) are included in the have an opportunity to opt out of financial institutions through a earnings received from the U.S. commitment to provide up to transaction account program. the extended TAGP. Each IDI combination of private and government. The banks have US$100 billion to each company The program includes certain that is currently participating in public capital, utilizing private- returned a total of to ensure they would not fall into issuances of mandatory the TAGP must review and sector expertise and the US$70,562,452,000.32 bankruptcy. Together, the two convertible debt under DGP.34 update its disclosure postings resources of the U.S. companies own or guarantee and notices to accurately reflect Government.28 On March 23, 2009, the Federal nearly half the US$12 trillion All insured depository whether it is participating in the Reserve announced the delay of mortgage market, and by institutions and those additional extended TAGP. The PPIP has two parts, the March 31, 2009, July 2008 operated at leverage participants, such as holding addressing both the legacy implementation date for ratios of approximately 50 to 1.

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UNITED STATES OF AMERICA

OTHER ASSISTANCE TO THE SPECIAL CENTRAL BANK RECAPITALIZATION INTER-BANK MARKET OR TO ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES OTHER MONEY MARKETS INSTITUTIONS companies, that have actively loans ("Legacy Loans Program") amendments to the Federal The seizure involved both participated in the DGP (by and legacy securities ("Legacy Reserve's capital adequacy companies being placed in a issuing guaranteed debt before Securities Program") clogging guidelines for bank holding government conservatorship April 1, 2009) may continue to the balance sheets of financial companies on trust preferred (analogous to a bankruptcy issue guaranteed debt through firms. securities and the definition of reorganization) and also October 31, 2009, without capital published by the Federal replaced senior management. application. The guarantee on The Legacy Securities Program Reserve in the Federal Register Dividends were eliminated and debt issued before April 1, 2009, consists of two related parts: (1) on March 10, 2005.33 Due to the the U.S. Government took an will expire no later than June 30, debt financing from the Federal continuing stressed conditions in option to acquire 80% of each 2012. The guarantee on debt Reserve under the TALF and (2) the financial markets and in company's common stock. issued on or after April 1, 2009, matching private capital raised order to promote stability in the However, the U.S. Government will expire no later than for dedicated funds targeting financial markets and the did not guarantee the December 31, 2012. legacy securities. It is intended banking industry as a whole, the subordinated debt or preferred to facilitate the creation of Federal Reserve has decided to stock issued by these Participants that are not insured Public-Private Investment Funds delay until March 31, 2011, the companies, which is held on the depository institutions and that ("PPIFs"), which are investment implementation date of new balance sheets of many banks. have not issued FDIC- funds that will invest in legacy requirements. The U.S. Federal Reserve will guaranteed debt before April 1, securities. They will be managed also begin purchasing short- 2009 must apply by June 30, by qualifying private sector asset term debt obligations issued by 2009, if they wish to issue managers ("Fund Managers"). Fannie Mae, Freddie Mac and guaranteed debt after that date. the Federal Home Loan Banks The Legacy Loans Program is in the secondary market. The FDIC will impose intended to facilitate the creation surcharges on guaranteed debt of PPIFs that will purchase pools Fannie Mae, Freddie Mac and that has a maturity of one year of legacy loans. Unlike Legacy Ginnie Mae or more and is issued on or after Securities PPIFs, Legacy Loan April 1, 2009. For guaranteed PPIFs will be formed at the time On November 24, 2008, the debt that is issued by June 30, that a selling institution Federal Reserve Board 2009, and matures by June 30, successfully sells a pool of loans announced that it will initiate a 2012, the surcharge will be 10 to bidders. Treasury intends to program to purchase the direct basis points (on an annualized provide approximately 50% of obligations of Fannie Mae, basis) for an insured depository the equity capital in each loan Freddie Mac, and the Federal institution and 20 basis points PPIF, with the other 50% Home Loan Banks—and (on an annualized basis) for all coming from private investors. mortgage-backed securities others. For all other guaranteed Private investors will manage (MBS) backed by Fannie Mae, debt that utilizes the extension the pools of assets, with Freddie Mac, and Ginnie Mae.18 (either through a maturity after oversight from the FDIC. The June 30, 2012, or through loan PPIF will be financed Purchases of up to issuance after June 30, 2009), through the issuance of second US$ 100 billion in GSE direct the surcharge will be 25 basis non-recourse debt guaranteed obligations under the program

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UNITED STATES OF AMERICA

OTHER ASSISTANCE TO THE SPECIAL CENTRAL BANK RECAPITALIZATION INTER-BANK MARKET OR TO ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES OTHER MONEY MARKETS INSTITUTIONS points (annualized) for an by the FDIC and collateralized will be conducted with the insured depository institution by the assets purchased by the Federal Reserve's primary and 50 basis points (annualized) PPIF. dealers through a series of for all others. competitive auctions and will On September 16, 2009, the begin next week. Purchases of Surcharges will be in addition to FDIC announced a winning up to US$ 500 billion in MBS will current fees for guaranteed debt bidder in its first sale under the be conducted by asset and deposited into the deposit Legacy Loans Program. A total managers selected via a insurance fund instead of being of 12 consortiums bid to competitive process with a goal set aside to cover potential purchase an ownership interest of beginning these purchases TLGP losses. in a limited liability company before year-end17. Purchases of ("LLC"), to which the FDIC will both direct obligations and MBS Effective April 27, 2009, the convey a portfolio of residential are expected to take place over Federal Reserve increased the mortgage loans with an unpaid several quarters. lendable values for group principal balance of deposited loans pledged to the approximately $1.3 billion owned Government Sponsored Federal Reserve Banks for by the FDIC as Receiver of Enterprise Credit Facility discount window or PSR Franklin Bank, SSB, Houston, ("GSECF") collateral purposes, to reflect Texas. The FDIC signed a bid recent trends in the values of confirmation with Residential The lender of last resort for some types of loans. The Credit Solution ("RCS"). RCS GSEs (Fannie Mae, Freddie Federal Reserve also announce will pay a total of $64,215,000 in Mac and FHLB) will ensure the acceptance of senior cash for a 50 percent equity continued access to funding and unsecured debt issued under stake in the LLC, and the LLC ensure market stability.19 the FDIC's TLGP. The new will issue a note of collateral margins for TLGP $727,770,000 to the FDIC as Citigroup have been added to the discount Receiver. The note will be window and PSR collateral guaranteed by FDIC in its On November 23, 2008, the margins table.35 corporate capacity. After the U.S. Treasury Department and closing, which is expected to the Federal Deposit Insurance occur later this month, RCS will Corporation announced that it manage the portfolio and service will provide protection against the loans under the Home the possibility of unusually large Affordable Modification Program losses on an asset pool of (HAMP) guidelines. approximately US$306 billion of loans and securities backed by Commercial Paper Funding residential and commercial real Facility ("CPFF") estate and other such assets, which will remain on Citigroup's The CPFF (announced balance sheet. As a fee for this

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UNITED STATES OF AMERICA

OTHER ASSISTANCE TO THE SPECIAL CENTRAL BANK RECAPITALIZATION INTER-BANK MARKET OR TO ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES OTHER MONEY MARKETS INSTITUTIONS October 7, 2008) will purchase arrangement, Citigroup will issue through a Special Purpose preferred shares to the Treasury Vehicle three-month unsecured and FDIC. Treasury will invest and asset-backed commercial US$20 billion in Citigroup from paper ("ABCP") from eligible the Troubled Asset Relief issuers.4 Program in exchange for preferred stock with an 8% All U.S. issuers of commercial dividend to the Treasury.20 paper are eligible. The maximum amount of a single Targeted Investment Program issuer's commercial paper (TIP) covered at any time will be the greatest amount of U.S. dollar- TIP is designed to prevent a loss denominated commercial paper of confidence in financial the issuer had outstanding on institutions that could result in any day between January 1 and significant market disruptions, February 1, 2010. threatening the financial strength of similarly situated financial The CPFF will not purchase institutions, impairing broader ABCP from issuers that were financial markets, and inactive prior to the creation of undermining the overall the CPFF. An issuer will be economy. Institutions will be considered inactive if it did not considered for this program on a issue ABCP to institutions other case-by-case basis.23 than the sponsoring institution for any consecutive period of On December 31, 2008, three months or longer between Citigroup received US$20 billion January 1 and February 1, 2010. under this program.

Liquidity Fund Bank of America

The Liquidity Fund, which began On January 16, 2009, the U.S. on September 19, 2008 and Treasury Department and the ends on February 1, 2010, will Federal Deposit Insurance lend funds to depository Corporation announced that institutions and bank holding they will provide protection companies in order for them to against the possibility of purchase eligible ABCPs from unusually large losses on an money market mutual funds asset pool of approximately ("MMMF") under certain US$118 billion of loans,

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UNITED STATES OF AMERICA

OTHER ASSISTANCE TO THE SPECIAL CENTRAL BANK RECAPITALIZATION INTER-BANK MARKET OR TO ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES OTHER MONEY MARKETS INSTITUTIONS conditions.5 securities backed by residential and commercial real estate Money Market Investor loans, and other such assets, all Funding Facility ("MMIFF") of which have been marked to current market value. The large A special purpose vehicle majority of these assets were established by the private sector assumed by Bank of America as ("PSPV") will cease purchasing a result of its acquisition of assets and will enter the wind- Merrill Lynch. The assets will down process on February 1, remain on Bank of America's 2010, unless the Board extends balance sheet. In addition and if the MMIFF.6 Eligible assets necessary, the Federal Reserve include U.S. dollar-denominated stands ready to backstop certificates of deposit, bank residual risk in the asset pool notes and commercial paper through a non-recourse loan.24 issued by highly rated financial institutions and having The U.S. Treasury will invest remaining maturities of 90 days US$20 billion in Bank of or less. America from the Troubled Assets Relief Program in Primary Dealer Credit Facility exchange for preferred stock ("PDCF") with an 8% dividend to the Treasury. Bank of America will The PDCF, effective comply with enhanced executive September 15, 2008, is an compensation restrictions and overnight loan facility that will implement a mortgage loan provide funding to primary modification program.25 dealers, who will participate through their clearing banks, in exchange for tri-party eligible collateral. It is scheduled to expire February 1, 2010.7

Term Securities Lending Facility ("TSLF")

The TSLF is a 28-day facility that offers general Treasury collateral, such as Treasury bills, notes, bonds and inflation-

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UNITED STATES OF AMERICA

OTHER ASSISTANCE TO THE SPECIAL CENTRAL BANK RECAPITALIZATION INTER-BANK MARKET OR TO ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES OTHER MONEY MARKETS INSTITUTIONS indexed securities, to primary dealers of the New York Federal Reserve Bank in exchange for other eligible collateral. On September 24, 2009, the Federal Reserve announced its plan to scale back the program.8

Term Auction Facility ("TAF")

The TAF, established in December 2007, is a temporary credit facility that allows a depositary institution to place a bid for an advance from its local Federal Reserve Bank at an interest rate determined as a result of the auction. The first auction took place on December 17, 2007.9 The Federal Reserve intends to conduct bi-weekly TAF auctions as long as necessary. On September 24, 2009, the Federal Reserve announced that it will assess over the next several months whether to maintain the TAF on a permanent basis.

Foreign Exchange Swap Lines

On October 13, 2008, the U.S. Federal Reserve announced the expansion of swap lines with, among others, the BoE, the ECB10 and the Swiss National Bank. These three European central banks will conduct tenders of U.S. dollar funding at

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UNITED STATES OF AMERICA

OTHER ASSISTANCE TO THE SPECIAL CENTRAL BANK RECAPITALIZATION INTER-BANK MARKET OR TO ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES OTHER MONEY MARKETS INSTITUTIONS 7-day, 28-day and 84-day maturities.11 Swap lines with the U.S. Federal Reserve will be increased to accommodate whatever quantity of U.S. dollar funding is demanded.

Term Asset-Backed Securities Loan Facility ("TALF")

Under TALF announced on November 25, 2008 the Federal Reserve Bank of New York ("FRBNY") will lend up to US$ 200 billion on a non- recourse basis to holders of certain AAA-rated Asset-Backed Securities ("ABS") backed by newly and recently originated consumer and small business loans. The FRBNY will lend an amount equal to the market value of the ABS less a haircut and will be secured at all times by the ABS. The U.S. Treasury Department—under the Troubled Assets Relief Program ("TARP") of the Emergency Economic Stabilization Act of 2008—will provide US$20 billion of credit protection to the FRBNY in connection with the TALF.12

Under TALF, the definition of "eligible borrower" has been modified to permit participation by the following entities regardless of whether they are "controlled by a foreign

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UNITED STATES OF AMERICA

OTHER ASSISTANCE TO THE SPECIAL CENTRAL BANK RECAPITALIZATION INTER-BANK MARKET OR TO ASSISTANCE TO INDIVIDUAL GUARANTEES OF BANK DEBT DEPOSIT GUARANTEES ASSISTANCE MEASURES MEASURES OTHER MONEY MARKETS INSTITUTIONS government": (i) U.S. branches and agencies of international banks that maintain reserves with the Federal Reserve and (ii) U.S. FDIC-insured depository institutions.26

Under TALF, the FRBNY will lend up to US$200 billion to eligible owners of certain AAA- rated ABS backed by newly and recently originated auto loans, credit card loans, student loans, and SBA-guaranteed small business loans. Issuers and investors in the private sector are expected to begin arranging and marketing new securitizations of recently generated loans, and subscriptions for funding will occur on the first Tuesday of every month through December 2009 or longer if the Federal Reserve chooses to extend the facility. Each following week, the new securitizations will be funded by TALF, creating new lending capacity for additional future loans.29

1 Invoked through the systemic risk exception provisions of the FDIC Improvement Act of 1991. See the FAQ's at http://www.fdic.gov/regulations/resources/TLGP/faq.html. 2 The FDIC's TLGP final rules were issued on November 21, 2008. See http://www.fdic.gov/news/board/08BODtlgp.pdf. 3 The FDIC Insurance Program is effective from October 3, 2008 until December 31, 2013. See http://www.fdic.gov/deposit/deposits/insuringdeposits/. 4 Expires February 1, 2010. See http://www.newyorkfed.org/markets/cpff_terms_conditions.html.

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5 Expires February 1, 2010. See http://www.frbdiscountwindow.org/mmmf.cfm?hdrID=14. 6 Expires February 1, 2010. See http://www.newyorkfed.org/markets/mmiff_terms.html. 7 Expires February 1, 2010. See http://www.newyorkfed.org/markets/pdcf.html. 8 The Federal Reserve's full press release can be viewed at http://www.federalreserve.gov/newsevents/press/monetary/20090924a.htm.. 9 In September 2008 the U.S. Federal Reserve announced (1) an increase in the size of the 84-day maturity TAF auctions from US$ 25 billion to US$ 75 billion per auction beginning on October 6, 2008; (2) two forward TAF auctions amounting to US$ 150 billion and (3) an increase in swap authorization limits with foreign central banks. See http://www.federalreserve.gov/monetarypolicy/taffaq.htm. 10 The swap line amount with the ECB was increased from US$120 billion to US$240 billion. Other foreign country swap lines include: Australia, Canada, Denmark, England, Japan, New Zealand, Norway, Sweden, and Switzerland. See http://www.federalreserve.gov/newsevents/press/monetary/20081013a.htm, http://www.federalreserve.gov/newsevents/press/monetary/20080924a.htm, http://www.federalreserve.gov/newsevents/press/monetary/20081028a.htm, and http://www.federalreserve.gov/newsevents/press/monetary/20090406a.htm. 11 In August 2008 the ECB, in conjunction with the U.S. Federal Reserve, began operating 84-day operations in addition to its operations with a 28-day maturity. 12 Expires December 31, 2009. See http://www.federalreserve.gov/newsevents/press/monetary/monetary20081125a1.pdf. 13 The rescue package involves a plan to buy stakes of circa: US$ 25 billion each in Citigroup, JPMorgan and Wells Fargo; US$ 25 billion between Bank of America and Merrill, which agreed last month to be acquired by Bank of America; US$ 10 billion each in Goldman Sachs and Morgan Stanley; US$ 3 billion for Bank of New York Mellon; and US$ 2 billion for State Street. 14 The Treasury has listed all completed transactions on its website. See http://www.financialstability.gov/docs/transaction-reports/transaction_report_042809.pdf. 15 Expires December 31, 2009. See http://www.ustreas.gov/press/releases/reports/mbs_factsheet_090708hp1128.pdf. 16 Secretary Paulson's full statement can be viewed at http://www.ustreas.gov/press/releases/hp1265.htm. 17 Expires December 31, 2009. See http://fpc.state.gov/documents/organization/110096.pdf. 18 The Federal Reserve's full press release can be viewed at http://www.federalreserve.gov/newsevents/press/monetary/20081125b.htm. 19 The Treasury Department's full statement on the program can be viewed at http://www.ustreas.gov/press/releases/reports/gsecf_factsheet_090708.pdf. 20 The joint press release among the Treasury Department, FDIC and Federal Reserve on Citigroup can be viewed at http://www.federalreserve.gov/newsevents/press/bcreg/20081123a.htm. 21 The lists of the banks are available at http://www.fdic.gov/regulations/resources/TLGP/optout.html. 22 Guidelines for the AIFP are published on Treasury's website. See http://www.treasury.gov/initiatives/eesa/program-descriptions/aifp.shtml. 23 Program guidelines for the TIP were published on Treasury's web site on January 2, 2009 as required by section 101(d) of the EESA. See http://www.treasury.gov/press/releases/hp1338.htm. 24 The term sheet for this deal can be viewed at http://www.fdic.gov/news/news/press/2009/pr09004a.pdf. 25 The press release can be viewed at http://www.fdic.gov/news/news/press/2009/pr09004.html. 26 The Federal Reserve's full press release can be viewed at http://www.federalreserve.gov/newsevents/press/monetary/20090210b.htm. 27 The Federal Reserve's full press release can be viewed at http://www.ustreas.gov/press/releases/tg21.htm. See also http://financialstability.gov/. 28 The Federal Reserve's full press release can be viewed at http://www.treas.gov/press/releases/tg65.htm. 29 The Federal Reserve's full press release can be viewed at http://ustreas.gov/press/releases/tg45.htm. 30 The Federal Reserve's full press release can be viewed at http://federalreserve.gov/newsevents/press/other/20090302a.htm. 31 The complete ARRA is available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h1enr.pdf. 32 The full Treasury transaction report is available at http://www.financialstability.gov/docs/transaction-reports/transaction_report_071709.pdf. 33 The Federal Reserve's full press release can be viewed at http://www.federalreserve.gov/newsevents/press/bcreg/20090317a.htm. 34 The FDIC releases can be viewed at http://edocket.access.gpo.gov/2009/pdf/E9-4586.pdf, http://www.fdic.gov/news/news/financial/2009/fil09011.html. 35 The Federal Reserve's full press release can be viewed at http://www.frbdiscountwindow.org/announcement090330.cfm?hdrID=21.

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This publication is intended only as a general discussion of the issues covered in it. It should not be regarded as legal advice. The description of state action given is not intended to be a comprehensive summary or discussion of states' activities and may be subject to further changes.

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The following law firms contributed the sections dealing with their respective countries:

ARGENTINA AUSTRALIA

Bruchou, Fernández Madero & Lombardi Mallesons Stephen Jaques Ing Enrique Butty 275 Level 61, Governor Phillip Tower Psio 12 C1001AFA 1 Farrer Place Buenos Aires, Argentina Sydney, Australia T: +5411 5288 2300 T: +61 2 9296 2000 www.bfmyl.com http://www.mallesons.com/

Hugo Nicolas Bruzone, Partner Philip Harvey, Partner [email protected] T: +61 2 9296 2484 [email protected]

Martin James, Senior Associate T: + 61 2 9296 2198 [email protected]

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AUSTRIA BELGIUM

BINDER GRÖSSWANG Rechtsanwälte OG CMS DeBacker A-1010 Wien, Sterngasse 13 Avocats – Advocaten Austria Ch. de La Hulpe 178 T: +43 1 534 80 B-1170 Brussels, Belgium www.bindergroesswang.at T: +32 (0) 2 743 69 00 www.cms-db.com Dr. Florian Khol, Partner [email protected] Carl Dotremont, Partner T: +32 2 647 85 24 Mag. Emanuel Welten, Partner [email protected] [email protected] Razvan Emanoil, Senior Associate T: +32 2 674 85 23 [email protected]

BELGIUM BRAZIL

Lydian Veirano Advogados Av. Das Nações Unidas, 12.995 - 18o andar Tour & Taxis Brooklin Havenlaan - Avenue du Port 86c b113 São Paulo - S.P, Brasil 1000 Brussels T: 04578-000 Belgium http://www.veirano.com T: +32 2 787 90 00 www.lydian.be Roberto Rudzit, Partner [email protected] Peter De Ryck, Partner T : +32 2 787 90 20 Guilherme Peres Potenza, Associate [email protected] [email protected]

Tom Geudens, Counsel T : +32 2 787 90 08 [email protected]

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BULGARIA CANADA

Dinova & Rusev Law Office Stikeman Elliott LLP 15 Shipka Street, Floor 2 5300 Commerce Court West 1504 Sofia, Bulgaria 199 Bay Street T: +359 2 943 4350 Toronto, ON M5L 1B9 +359 2 946 3418 T: + 1 416 869 5500 F: +359 2 944 1508 www.stikeman.com Anelia Dinova, Partner [email protected] Lewis Smith, Partner T: + 1 416 869 5210 [email protected]

Justin Parappally, Associate T: + 1 416 869 5591 [email protected]

DENMARK ESTONIA

Accura Advokataktieselskab Raidla Lejins & Norcous Tuborg Boulevard 1 Roosikrantsi 2 DK-2900 Hellerup 10119 Tallinn Copenhagen, Denmark Estonia T: +45 3945 2800 T: +372 640 7170 www.accura.dk http://www.rln.ee

Claus Bennetsen, Partner Sven Papp, Partner T: +45 3945 2828 [email protected] [email protected]

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FINLAND GREECE

Krogerus Attorneys Ltd PotamitisVekris Law Partnership P.O. Box 533 (Jaakonkatu 3 A) 9 Neofytou Vamva Str. FI-00101 Helsinki, Finland 10674 Athens, Greece T: +358 29 000 6200 T: +30210 3380000 http://www.krogerus.com http://www.potamitisvekris.com

Mikko Mali, Partner George Bersis, Partner T: +358 29 000 6219 [email protected] [email protected]

Päivi Toivari, Specialist Counsel T: +358 29 000 6237 [email protected]

HONG KONG HUNGARY

Richards Butler in association with Reed Smith LLP Szabó Kelemen & Partners Attorneys 20F Alexandra House Váci út 20 16-20 Chater Road 1132 Budapest, Hungary Central, Hong Kong T: + 36 1 288 8200 T:+ 852 2810 8008 http://www.sz-k-t.hu http://www.reedsmith.com/ Domonkos Kiss, Partner C.J. Williams, Partner [email protected] T: +852 2507 9738 [email protected] Tamás Kárpáthegyi, Associate [email protected]

ICELAND INDIA

Logos Legal Services Amarchand & Mangaldas & Suresh A. Shroff & Co. Efstaleiti 5 Peninsula Chambers 103 Reykjavík, Iceland Peninsula Corporate Park T: 00 354 5 400 300 Ganpatrao Kadam Marg, Lower Parel (W) http://www.logos.is/ Mumbai – 400 013 T: +91(0)11 2692 0500 Gunnar Sturluson, Partner [email protected] Vandana Shroff, Partner T: +91 22 2496 4455/ 6660 4455 [email protected]

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IRELAND KOREA

Arthur Cox Kim & Chang Earlsfort Centre 5th Floor, Seyang Bldg. Earlsfort Terrace 223 Naeja-dong, Jongno-gu Dublin 2, Ireland Seoul 110-720, Korea T: 00 353 1 618 0000 T: 822 3703 1114 www.arthurcox.com http://www.kimchang.com/

Robert Cain, Senior Associate Sang-Hwan Lee T: + 353 1 618 1146 T: (822)-3703-1074 [email protected] [email protected]

Sang-Jin Ahn T: (822) 3703-1180 [email protected]

LUXEMBOURG THE NETHERLANDS

Arendt & Medernach NautaDutilh N.V. 14, rue Erasme P.O. Box 7113 B.P. 39 1007 JC L-2010 Luxembourg Amsterdam, The Netherlands T: (352) 40 78 78 1 T: +31 20 717 1000 http://www.arendt-medernach.com http://www.nautadutilh.com

Philippe Dupont, Partner Pim Rank, Partner T: +352 40 78 78 205 T: +31 20 71 71 864 [email protected] [email protected]

NEW ZEALAND NORWAY

Bell Gully Advokatfirmaet Haavind Vislie AS Vero Centre Bygdøy Allé 2 48 Shortland Street P.B. 359 Sentrum Auckland, New Zealand NO-0101 Oslo T: +64 9 916 8800 T: +47 22 43 30 00 http://www.bellgully.com/ www.haavind.no

Murray King, Partner Peter L. Brechan, Partner T: +64 9 916 8971 [email protected] [email protected]

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PORTUGAL RUSSIA

PLMJ - A. M. Pereira, Sáragga Leal, Lovells CIS Oliveira Martins, Júdice e Associados 5th Floor Usadba Centre Av. da Liberdade, 224 22 Voznesensky Pereulok Edifício Eurolex 125009 Moscow, Russia 1250-148 Lisbon, Portugal T: +7 495933 3000 T: + 351 21 319 73 00 http://www.lovells.com http://www.plmj.pt/en/index.php Michael Pugh, Partner Maria Castelos [email protected] T: +351213197409 [email protected]

Sónia Teixeira da Mota T: +351213197564 [email protected]

SLOVAKIA SLOVENIA

Čechová & Partners Jadek & Pensa Bratislava Head Office Tavčarjeva 6 Štúrova 4 1000 Ljubljana 811 02 Bratislava, Slovakia Slovenija T: +421-2 54 41 44 41 T: +386 1 234 25 20 http://www.cechova.sk http://www.jadek-pensa.si

Tomas Maretta Pavle Pensa [email protected] [email protected]

Tina Zvanut Mioc [email protected]

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SPAIN SWEDEN

Uría Menéndez Advokatfirman Lindahl Príncipe de Vergara, 187 P.O. Box 1065 28002 Madrid, Spain SE-101 39 Stockholm, Sweden T: +34 915 860 400 T: +46 8 527 70 800 http://www.uria.com/eng/index.asp www.lindahl.se

Luis de Carlos, Partner Erik Lind, Partner T: +34 91 586 0374 T: 46 8 527 70 908 [email protected] [email protected]

Javier Redonet, Partner T: +34 91 586 0154 [email protected]

SWITZERLAND UKRAINE

Bäer & Karrer AG Jurvneshservice Law Firm Brandschenkestrasse 90 57/3 Krasnoarmeyskaya Str., Suite 229, CH-8027 Zurich, Switzerland Kyiv 03150, Ukraine T: +41 58 261 50 00 T: +380 44 239 23 90 http://www.baerkarrer.ch www.jvs.com.ua

Eric Stupp, Managing Partner Dr. Anna Tsirat, Partner [email protected] [email protected]

UNITED ARAB EMIRATES UNITED ARAB EMIRATES

Trowers & Hamlins LLP Afridi & Angell BurJuman Business Tower Emirates Towers - Level 35 Sheikh Khalifa bin Zayed Road Sheikh Zayed Road (Trade Centre Road) Dubai, United Arab Emirates PO Box 23092 T: +971 4 330 3900 Dubai, United Arab Emirates http://www.afridi-angell.com T: +971 (0)4 3519201 F: +971 (0)4 3519205 Charles Laubach, Partner www.trowers.com [email protected]

Jennifer Bibbings, Partner [email protected]

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