Commission, June 29, 2011, No M.6168

Dear Sir/Madam,

Subject : Case No COMP/ M.6168 - RBI/EFG EUROBANK/JV

Notification of 20 May 2011 pursuant to Article 4 of Council Regulation No 139/20041

(1)   On 20/5/2011, the European Commission received the notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which the undertakings Raiffeisen Bank International AG (‘RBI’, Austria) and EFG Eurobank Ergasias S.A. (‘EFG Eurobank’, Greece) acquire within the meaning of Article 3(1)(b) of the Merger Regulation joint control of, and merge, RBI's subsidiaries Raiffeisenbank Polska S.A. (‘RBPL’, Poland) and Raiffeisen-Leasing Polska S.A. ("RLP" Poland) and EFG's subsidiary Polbank EFG, (‘Polbank’, Poland) by way of purchase of shares2. RBI and EFG are designated hereinafter as the "notifying parties" or the "parties to the proposed transaction.

I.    THE PARTIES

(2)   RBI is a fully-consolidated subsidiary of Raiffeisen Zentralbank Österreich AG (Austria, “RZB”), the Austria based steering company of the RBI Group, which through a network of subsidiary banks, leasing companies and other financial service providers offers a comprehensive range of banking and financial services. RBI’s international activities focus on the emerging markets in Central and Eastern Europe. RBI is present in Poland through its subsidiaries RBPL and RLP.

(3)   RBPL's activities focus on banking services to corporate customers and small and medium enterprises ("SMEs"). RLP is active in the field of leasing. Currently 50% of its shares are held by RBPL and 50% by RBI.

(4)   EFG Eurobank is a listed credit institution and a member of the EFG Group. The EFG Group consists of credit institutions, financial services and financial holding companies. The operational parent company of the EFG Group is European Financial Group EFG S.A., whilst its ultimate parent company is Private Financial Holdings Limited, which is wholly owned and controlled indirectly by members of the Latsis family. The Latsis family's activities in banking sevices are exclusively provided through the EFG Group. EFG Eurobank offers all types of banking and financial services in Greece and South- Eastern, Central and Eastern Europe. In Poland, EFG Eurobank is active via its branch Polbank.

(5)   Polbank's activities focus on banking services to retail customers and SMEs.

II.  THE OPERATION

(6)   The proposed transaction aims at combining the Polish activities of RBI and EFG Eurobank and ultimately consists in the merger between RBPL3 and Polbank.4 To this end the operation is structured in a series of transactional steps, set out in the Investment Agreement executed on 3.2.2011, including: a) the acquisition of a 70%-stake by RBI in Polbank, and b) the concurrent contribution of the respective shareholdings of RBI and EFG Eurobank in Polbank (EFG Eurobank: 30% and RBI: 70%) to RBPL in exchange for new shares in RBPL. As a result EFG Eurobank will become a 13%-shareholder in RBPL next to RBI which will hold the remainder of the shares (i.e. 87%). Following the implementation of these steps Polbank will merge into RBPL. Eurobank will hold 13% of this entity, next to RBI's 87%, but will retain joint control by virtue of the signed agreements.

(7)   Under the terms of the Shareholder Agreement ("SHA"), which will be signed after the implementation of the two transactional steps mentioned above, EFG Eurobank will appoint […] out of […] members of the Supervisory Board of the combined entity and it should be consulted by RBI for the appointment of the chairman of this Board and of the CEO (President of the management board, whose members are appointed by the Supervisory Board). In addition, EFG Eurobank will have veto rights over strategic matters5 and in particular in relation to the approval, replacement or modifications of the joint business plan (which includes a budget). EFG Eurobank will be able to exercise decisive influence and therefore joint control over the combined entity

(8)   The combined entity will perform on a lasting basis all the functions of an autonomous economic entity. It will have its own presence on the banking market in Poland and will perform the    functions  normally carried out by undertakings operating on this market. Moreover, the combined entity will enjoy full autonomy from the operational point of view, since it will have a management dedicated to its day-to-day operations and will enjoy access to resources, including finance, staff and assets, sufficient to conduct its activities.

(9)   It can therefore be concluded that the notified operation is a concentration within the meaning of Article 3(1) and 3(4) of the Merger Regulation, since it amounts to a full- function joint venture between RBI and EFG Eurobank.

III.   EU DIMENSION

(10)  The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million6 (RBI: EUR 8 500 million, EFG Eurobank: EUR 6 100 million). Each of them has an EU-wide turnover in excess of EUR 250 million (RBI: EUR […] million, EFG Eurobank: EUR […] million), but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. The notified operation therefore has an EU dimension.

IV.   COMPETITIVE ASSESSMENT Relevant Markets

(11)  Both Parties provide banking services. Within this field the following main segments have been identified by the Commission in previous cases: (i) retail banking, (ii) corporate banking, (iii) investment banking and (iv) financial market services7.

(12)  Retail banking comprises all banking services to private individuals, such as: deposits and account services; payment services including payment card issuing; lending (personal loans, consumer credit, mortgages etc.); and investment products such as mutual funds, pension funds and securities brokerage and custody services. In many cases banks are also active in distributing certain insurance products to their customers. The Commission has in previous decisions considered some of these products such as deposits, lending, mortgage loans, payment transactions, credit card issuing, custody accounts and distribution of mutual funds as separate product markets8.

(13)  Corporate banking comprises a broad range of banking services offered to corporate clients. In previous decisions the Commission has found that, given their specific characteristics and use, products such as deposits, lending (with a potential sub-segment for real-estate financing), payment transactions, documentary credits and international payments may constitute distinct product markets9. In a more recent decision the European Commission has further distinguished between banking services to large corporate  customers  ("LCCs")  and  smaller  commercial  clients  such  as SMEs10. Moreover, the Commission has held that – due to the differences in the market participants and competitive environment – interbanking and the financing of local authorities have to be considered to form distinct markets from corporate banking11.

(14)  Investment banking includes products such as merger and acquisitions advice, initial public offering advice and arranging new issues of stocks and bonds12.

(15)  Financial market services comprise services such as trading in securities, bonds and derivatives as well as foreign exchange and money market instruments13. These services are provided to institutional investors, corporate clients and professional traders who lack direct access to financial markets or otherwise value the intermediary services provided by a bank.

(16)  In past decisions the Commission has considered other financial services such as factoring and leasing to form separate markets14.

(17)  As regards the geographic scope of the market, the Commission has stated in previous cases that the geographic scope of the market for retail banking is national due to the competitive conditions within individual Member States and the importance of having a network of branches. With regard to corporate banking, and in particular services to SMEs, the Commission has generally taken the view that these services are supplied at national level. The same applies to the other financial services. However, some elements of corporate banking may have a more international dimension, in particular services and products offered to LCCs. As regards financial market services and investment banking, the markets may be wider than national, possibly EU-wide or worldwide depending on the product in question.

(18)  In this case the exact product and geographic market definitions can be left open, where not yet closed, as the transaction does not raise competition concerns under any alternative possible market definition.

Competitive assessment

(19)  RBPL and Polbank, are active exclusively in Poland with businesses which are largely complementary, the former being primarily a corporate bank and the latter focusing on retail banking.

(20)  The following horizontal overlaps have been identified: (i) retail banking overall (and in the following possible sub-segments: household loans overall, housing loans, consumer loans, credit card loans, car installment loans and other instalment loans; consumer debit and charge card issuing; credit card issuing; custody accounts; retail distribution of mutual funds); (ii) retail distribution of insurance products; (iii) corporate banking overall (and in the following possible sub-segments: corporate banking with SMEs; corporate deposits overall and corporate deposits with SMEs; corporate loans overall, corporate loans with SMEs, operational corporate loans, investment corporate loans and real estate corporate loans); iv) corporate banking with LCCs; (v) interbanking; (vi) financial market services (i.e. foreign exchange, trading in securities, derivatives and money market instruments) and (vii) leasing.

(21)  As regards retail banking overall (this means without segmentations into the different services), and on the basis of 2010 data submitted by the notifying parties, the market share of the combined entity resulting from this transaction would amount post- transaction to [5-10]% (RBPL [0-5]%, Polbank [0-5]%). The situation is the same when looking further at the different sub-segments of retail banking where RBPL and Polbank are active, since their combined market shares are above 5% only in household loans overall ([5-10]%, RBPL [0-5]%, Polbank [0-5]%), and within household loans in housing loans ([5-10]%, RBPL [0-5]%, Polbank [5-10]%)15. Therefore, competition concerns can be excluded in retail banking.

(22)  RBPL and Polbank are also both active in retail distribution of insurance products, with a combined market share below 5%.

(23)  Concerning corporate banking, at the narrowest possible geographic scope of the market, namely national, the market shares of the combined entity would be between [0- 5]% and [5-10]% under any possible market definition. More precisely RBPL and Polbank's combined market share is above 5% in overall corporate banking (RBPL [5- 10]%, Polbank [0-5]%) and in the following possible sub-segments: corporate banking with SMEs (RBPL [5-10]%, Polbank [0-5]%), corporate deposits overall (RBPL [5- 10]%, Polbank [0-5]%) and within it corporate deposits with SMEs (RBPL [5-10]%, Polbank [0-5]%), corporate loans overall (RBPL [5-10]%, Polbank [0-5]%) and within  it corporate loans with SMEs (RBPL [5-10]%, Polbank [0-5]%), operational corporate loans (RBPL [5-10]%, Polbank [0-5]%), investment corporate loans (RBPL [5-10]%, Polbank [0-5]%). Hence for corporate banking competition concerns can also be excluded.

(24)  Competition concerns also do not arise in interbanking16, financial market services (i.e. foreign exchange (combined market share: [5-10] %), trading in securities (combined market share not significant), derivatives (combined market share not significant) and money market instruments (combined market share not significant)) and other financial services (leasing market share: RBPL [10-20] %, Polbank [0-5]%), where the market shares of the combined entity at national level will be under any possible market not materially above 10%.

(25)  Should, for some product market segmentations the geographic market definition be considered to be EEA wide, the resulting combined market shares of the JV would be even lower than those obtained for Poland.

(26)  The notifying parties will not retain activities in Poland in the same markets as the JV. However, the RBI/RZB Group is active in Poland in life and non-life insurance17 with market shares in both segments below 4%. Therefore, a possible vertical relationship might be considered to exist between these activities and the distribution of insurance products in Poland where the JV will be active. However, given the low market shares of the JV (below 5%) and its parent company (below 4%) competition concerns can be excluded.

(27)  In Bulgaria, RBI is operating through Raiffeisenbank (Bulgaria) EAD (“RBBG”) and EFG Eurobank through Eurobank EFG Bulgaria AD (“Postbank”). The activities of the notifying parties in Bulgaria result in overlaps in the following possible markets: retail banking in household deposits, household loans overall (and within it, housing loans, consumer loans and other loans), consumer debit and charge card issuing, consumer credit card issuing; retail distribution of mutual funds and retail distribution of  insurance products; corporate banking, corporate deposits, corporate loans overall (and within it, corporate loans from 1 to 5 years and for more than 5 years); financial market services, arranging of bonds' issuing, foreign exchange; and, other financial services, leasing18 and factoring19. Full information has been submitted in respect of all these markets. Under the narrowest geographic market definition, the combined market shares of the notifying parties would exceed [20-30]% only in credit card issuing ([30-40]%, RBBG [10-20]%, Postbank [20-30]%), arranging of bonds' issuing ([30-40]%, RBBG [30-40]%, Postbank [0-5]%) and factoring ([20-30]%, RBBG [0-5]%, Postbank [20- 30]%).

(28)  In Romania, RBI operates through Raiffeisen Bank S.A (“RBRO”), while EFG Eurobank is active via S.C. Bancpost S.A. (“Bancpost”). Their activities overlap in corporate banking (only in corporate deposits), and retail banking, in distribution of mutual funds, custody accounts, consumer debit and charge card issuing, consumer credit card issuing and household loans (and within it, other loans than housing and consumer loans). Full information has been submitted in respect of all these markets. The Parties' combined market shares would exceed [20-30]% only in consumer credit card issuing ([30-40]% RBRO [10-20]%, Bancpost [20-30]%), OTC custody accounts ([20-30]%, RBRO [20-30]%, Bancpost [5-10]%) and distribution of mutual funds ([30- 40]%, RBRO [30-40]%, Bancpost [0-5]%).

(29)  Should, for some of the above product market segmentations the geographic market definition be considered to be EEA wide, the resulting combined market shares of the activities of the notifying parties would be well below 15%.

(30)  The Parties argue that their national Bulgarian and Romanian activities will remain unaffected by the transaction, since there is no nexus to the markets in Poland which may lead to spill-over effects on the Bulgarian or Romanian markets. In addition, the Parties position on the Bulgarian and Romanian markets is below a level that would raise spill-over concerns. Therefore, according to the Parties it is not conceivable that  the transaction will negatively affect competition in Bulgaria and/or Romania. 

(31)  Indeed, it does not seem conceivable that this joint venture in Poland will have an impact on the notifying parties' respective incentives to cooperate in Bulgaria and Romania. As for the risk of cooperation in those markets that might have an EEA dimension and where the activities of the JV and/or those of its parent companies overlap (i.e. financial market services, corporate banking with LCCs), as indicated above, the market shares of the JV would not be significant and those of its parent companies would be well below 15%. Therefore, the transaction is unlikely to facilitate the coordination of market behaviour of the parent companies also in these hypothetical EEA-wide markets.

V.  CONCLUSION

(32)  For the above reasons, the European Commission has decided not to oppose the notified operation and to declare it compatible with the internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation.

1            OJ L 24, 29.1.2004, p. 1 ("the Merger Regulation"). With effect from 1 December 2009, the Treaty on the Functioning of the European Union ("TFEU") has introduced certain changes, such as the replacement of "Community" by "Union" and "common market" by "internal market". The terminology of the TFEU will be used throughout this decision.

2                Publication in the Official Journal of the European Union No C 159, 28.05.2011, p.26.

3                RLP will be merged with RBPL.

4                As the first part of the proposed transaction Polbank shall be transformed into a separate corporate legal entity and obtain a Polish banking license. Once incorporated, EFG Eurobank will contribute to Polbank the shares of certain Polish subsidiaries, including a company active in leasing, which will also form part of the proposed transaction.

5                All decisions relating to the so called "Reserved Matters" shall require the prior written consent of at least one of the members of the Supervisory Board appointed by EFG Eurobank. In case of deadlock situations the issue will be referred to the respective CEO of EFG Eurobank and RBI for resolution.

6                Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Consolidated Jurisdictional Notice (OJ C95, 16.04.2008, p1).

7                See cases COMP/M.1910 - Meritanordbanken/Unidanmark, para. 7; COMP/M.117 - Fortis AG/Generale Bank, para 11-12; COMP/M.3894 - Unicredito/HVB, para. 8; COMP/M.850 - Fortis/MeesPierson, para. 8; and COMP/M.2225 - Fortis/ ASR, para.8.

8                See case COMP/M.2567 - Nordbanken/Postgirot.

9                See case COMP/M.2567 - Nordbanken/Postgirot.

10            See case COMP/M.4844 – Fortis/ABN AMRO Assets, para 13ff.

11            See cases M.873 – Bank Austria/Creditanstalt; COMP/M.5861 – Republik Österreich/Hypo Group Alpe Adria.

12            See case COMP/M. 3894 - Unicredito/HVB.

13            See case COMP/M.873 – Bank Austria/Creditanstalt.

14            See case COMP/M.873 – Bank Austria/Creditanstalt.

15            The Parties' combined market shares would be below 5% in household deposits; consumer loans overall, credit card loans, car instalment loans and other instalment loans; consumer debit and charge card issuing, consumer credit card issuing, custody accounts, retail distribution of mutual funds and retail distribution  of insurance products.

16            The Parties are not aware of any publicly available sources from which the total market volume of the Polish interbank market could be deduced, so that the Parties do not possess a reliable source to estimate the market position of RBPL and Polbank in the interbank market. However, since the interbank activities are interrelated with the banking activities with non-banks (interbanking activities are amongst others carried out for refinancing) the Parties have no reason to assume that the share of RBPL and Polbank in the interbank market would significantly deviate from their position in the banking activities with non- banks.

17            These   markets   have   been   defined   as   national   by   the   Commission:   see case  COMP/M.4284  -

AXA/Winterthur.

18            In this market RBZ is active through its subsidiaries Raiffeisen Leasing Bulgaria OOD and Raiffeisen Auto Leasing Bulgaria EOOD, and EFG Eurobank through its subsidiaries EFG Leasing EAD and EFG Auto Leasing EOOD.

19            In this market EFG Eurobank is active through the branch of Eurobank EFG Factors S.A.