
Article 1 
The State aid which Germany implemented and is planning to implement in favour of Hypo Real Estate Group, consisting of:

— capital injection of EUR 60 million, notified on 17 April 2009,
— capital injection of EUR 2,96 billion, notified on 3 June 2009,
— capital injection of EUR 3 billion, notified on 26 October 2009,
— capital injection of EUR 1,85 billion, notified on 30 April 2010, of which EUR 450 million is contingent on the existence of certain circumstances,
— capital injection of EUR 2,08 billion, notified on 10 September 2010,
— guarantees of EUR 35 billion, notified on 30 September 2008,
— guarantees of EUR 52 billion, notified on 17 April 2009,
— guarantee of EUR 8 billion, notified on 26 October 2009,
— guarantee of EUR 10 billion, notified on 26 October 2009,
— liquidity guarantee of EUR 20 billion, notified on 2 September 2010,
— settlement guarantee of EUR 20 billion, notified on 10 September 2010 and
— assets transfer to the winding-up institution FMS Wertmanagement AöR, notified on 10 September 2010,
is compatible with the internal market on the basis of Article 107(3)(b) of the Treaty on the Functioning of the European Union in the light of the commitments set out in the Annex to this Decision.
Article 2 
Germany shall ensure that, from the notification of this Decision, detailed quarterly reports are submitted to the Commission on the measures taken to comply with it, in line with the time schedule set out in the Annex to the commitments.
Article 3 
This Decision is addressed to the Federal Republic of Germany.
Done at Brussels, 18 July 2011.
For the Commission
Joaquín ALMUNIA
Vice-President
ANNEX
1.  (i) The Federal Republic of Germany (‘Germany’) will ensure that the restructuring plan submitted on 1 April 2009 and updated on 14 June 2011 (‘restructuring plan’) for Hypo Real Estate Konzernverbund (‘HRE’) including the commitments set out below (‘commitments’) is implemented in full within the periods specified (‘periods’) in each case.
 (ii) The purpose of this Commitments Document is to enable the European Commission to take a decision under procedure SA.28264 (C 15/09) which approves the State aid notified by Germany, in particular the implementation of recapitalisation measures and guarantees and all measures associated with the establishment, staffing and servicing of the winding-up institution ‘FMS-Wertmanagement’ (‘winding-up institution’) by HRE companies.
 (iii) On reprivatisation of Deutsche Pfandbriefbank AG (‘PBB’), DEPFA BANK plc (‘DEPFA plc’) and of the participations held by DEPFA plc in Hypo Public Finance Bank plc (‘HPFB’), Hypo Pfandbrief Bank International SA (‘HPBI’) and DEPFA ACS Bank plc (‘ACS’), all obligations arising from this Commitments Document will cease to apply to the reprivatised company. For the PBB sub-group only, this will apply from 31 December 2013 at the earliest. Reprivatisation will be considered to have been successful if Germany cannot directly or indirectly exercise sole or joint control within the meaning of Article 3 of the Merger Regulation (EC) No 139/2004 over the company in question (‘reprivatisation’).

2. 
Germany will ensure that, as of notification of the final Commission decision on the compatibility of the State aid implemented for HRE with the common market (‘decision’) at the latest, HRE restricts its new business to the PBB sub-group. Germany will ensure that all other HRE companies conduct no new business but allow their existing business to run down. The PBB sub-group will become active as a specialised commercial bank for Pfandbrief-eligible real estate finance and Pfandbrief-eligible public investment finance in the countries referred to in paragraph 8.4:


((i)) In the business line of real estate finance all activities of the PBB sub-group in commercial real estate finance will be associated with professional real estate clients.
((ii)) The business line of public investment finance will comprise exclusively medium- or long-term financing of public projects which are either in the public interest or serve to safeguard the productivity potential, including services which are closely linked with such financing.

((a)) The product catalogue of the PBB sub-group will therefore be limited to investment financing of the following activities:

((I)) public sector facilities (administrative and special-purpose facilities, educational and cultural establishments, and sports facilities);
((II)) construction of local authority housing (social housing, housing associations, student housing);
((III)) utility supply and waste disposal (energy generation, water collection and supply, waste water disposal and processing, refuse disposal and recycling);
((IV)) essential infrastructure (networks and facilities for road, waterway, rail and air transport, transport and equipment fleets for local and long-distance transport, and systems and facilities for intelligence and defence);
((V)) health and age care (medical health and care facilities and administrative and insurance facilities).
((b)) With regard to customers within the public sector, the PBB sub-group will restrict itself to:

((I)) financing which is concluded directly with a public-sector borrower that is recognised as eligible for cover under the German Pfandbrief Act on the basis of a specific restricted use commitment, in accordance with the above product catalogue;
((II)) financing for companies with a public or private legal status and financial basis which are secured by a public guarantee within the meaning of the Pfandbrief Act (transport and utility companies, public utility companies, special-purpose associations, management companies, non-profit businesses, associations);
((III)) financing for special-purpose companies secured by a public guarantee within the meaning of the Pfandbrief Act (special-purpose companies for PPP/PFI projects, investment companies for buildings and facilities, capital goods covered by an export credit guarantee/ECA).
((c)) With regard to the financing structures, these activities will take account of the cash flows generated by the project/object and/or a public guarantee or other public safeguard within the meaning of the Pfandbrief Act. A report on expenditure of funds will be obtained for all new public investment financing. Public investment financing by the PBB sub-group will not include financing of purely budgetary resources, liquidity bridging, short-term lending and advances on current accounts for day-to-day operation.
((iii)) The PBB sub-group can undertake restructuring and prolongation of existing assets in so far as this is necessary in order to maintain value and for efficient management of the cover pools.
((iv)) In so far as is necessary for regulatory or other legal reasons (e.g. requirements under Basel III, MaRisk, EBA/CEBS or the Pfandbrief Act which can only be guaranteed by government bonds which are fungible or required by the regulator), the PBB sub-group may, notwithstanding the suspension of the budget financing business, continue to acquire, hold and sell approved securities for management of the cover pools of the PBB sub-group and for liquidity management. This does not include any budget finance business as a strategic business activity.

3.  (i) Germany will ensure that reprivatisation of the PBB sub-group in accordance with the terms and conditions of sale set out in paragraph 11 takes place without delay, but by 31 December 2014 at the latest, under economically sustainable conditions, namely by sale to one or more purchasers which are independent of Germany and the HRE, if necessary by means of flotation. A purchaser is independent of Germany if, at the time of reprivatisation, Germany cannot directly or indirectly exercise sole or joint control within the meaning of Article 3 of the Merger Regulation (EC) No 139/2004 over the purchaser. A purchaser is independent of HRE if, at the time of reprivatisation, HRE holds no direct or indirect shares in the purchaser and also has no other links with the purchaser under company law. The purchaser must be approved by the Commission.
 (ii) 

((a)) up to 31 December 2013, not less than [80–100] %; or
((b)) up to 31 December 2014, not less than [80–100] %

of the sum of all payments, amounting to a maximum of EUR 10,23 billion, which the Sonderfonds Finanzmarktstabilisierung (‘SoFFin’) has paid or has yet to pay in accordance with the decision of the European Commission:


((a)) to third parties for the purchase of shares in HRE; and
((b)) to HRE in the context of carrying out recapitalisation measures.

If reprivatisation has not taken place by 31 December 2014, it will be effected by 31 December 2015 irrespective of the proceeds achievable. If reprivatisation has not taken place by 31 December 2015, a Divestiture Trustee will be appointed with the remit of completing reprivatisation irrespective of the proceeds achievable. The appointment, duties, responsibilities and discharge of the Divestiture Trustee must follow the procedures set out in the ‘Trustees’ annex.

4.  (i) 

((a)) Real estate finance business line EUR [20–40] billion up to 31 December 2011, EUR [20–40] billion up to 31 December 2012, EUR [20–40] billion up to 31 December 2013, EUR [30–50] billion up to 31 December 2014 and EUR [30–50] billion up to 31 December 2015.
((b)) Public investment finance business line EUR [10–25] billion up to 31 December 2011, EUR [10–25] billion up to 31 December 2012, EUR [10–25] billion up to 31 December 2013, EUR [10–25] billion up to 31 December 2014 and EUR [10–25] billion up to 31 December 2015.
 (ii) 

((a)) In the real estate finance business line the annual new business is limited to EUR [9–15] billion in 2011, EUR [9–15] billion in 2012, EUR [7-16] billion in 2013, EUR [5–16] billion in 2014 and EUR [5-16] billion in 2015.
((b)) In the public investment finance business line the annual new business is limited to EUR [1–5] billion in 2011, EUR [1–5] billion in 2012, EUR [1-6] billion in 2013, EUR [1–7] billion in 2014 and EUR [1–7] billion in 2015.

If the upper limits for the volume of new business as set out in 4(ii)a) and 4(ii)b) are not reached, this new business can be made up in the following years.
 (iii) 

((a)) Within the limits for the total amount of interest-bearing assets for both of the PBB sub-group's strategic business lines as set out in paragraph 4(i) and for new business as set out in paragraph 4(ii), PBB may offset growth that has not been achieved in one business line with additional growth in the other business line. The precondition for utilisation of this option is that, in the public investment finance business line, annual new business amounting to a minimum of EUR [1–4] billion and a maximum of EUR [1–4] billion must have been concluded in the years 2011 to 2013 and a minimum of EUR [1–4] billion and a maximum of EUR [1–4] billion in the years 2014 and 2015.
((b)) If the asset portfolios in one of the business lines are run down to a greater extent than was originally planned, the difference may be compensated for by new business of that magnitude, provided that the cumulative book values for interest-bearing assets in the relevant business line, as set out in paragraph 4(i), continue to be maintained and provided that the values for new business as set out in paragraph 4(ii) are exceeded by not more than a maximum of [7–11] % per year.
 (iv) Germany will ensure that the PBB sub-group's corrected IFRS group balance sheet (‘corrected IFRS group balance sheet’), which amounted to EUR 112,6 billion at 31 December 2010, does not exceed EUR 107,0 billion at 31 December 2011, EUR 105,0 billion at 31 December 2012, EUR 105,0 billion at 31 December 2013, EUR 103,0 billion at 31 December 2014 and EUR 107,0 billion at 31 December 2015.
 (v) Germany will ensure that the PBB sub-group's corrected strategic IFRS balance sheet (‘corrected strategic IFRS group balance sheet’), which amounted to EUR 64,7 billion at 31 December 2010, does not exceed EUR 67,0 billion at 31 December 2011, EUR 71,0 billion at 31 December 2012, EUR 75,0 billion at 31 December 2013, EUR 79,0 billion at 31 December 2014 and EUR 86,0 billion at 31 December 2015.
 (vi) The new business of the PBB sub-group will encompass all newly concluded nominal volumes (without prolongation or restructuring) in interest-bearing assets in the strategic business lines of real estate finance and public investment finance. Syndications, which must normally be effected/transferred within six months, can only be initiated with the part which remains the property of PBB.
 (vii) 

((a)) the interest-bearing assets of the strategically relevant portfolio (real estate finance, public investment finance) (paragraph 4(i));
((b)) the interest-bearing assets of the non-strategic budget finance portfolio which runs off onto the balance sheet; and
((c)) the assets which were transferred to the winding-up institution synthetically, but without transfer of beneficial ownership and therefore without derecognition from the PBB balance sheet, which are entered in PBB's mortgage cover pool.
 (viii) 

((a)) the interest-bearing assets of the non-strategic budget finance portfolio which runs off onto PBB's balance sheet (paragraph 4(vii)(b)); and
((b)) the assets which were transferred to the winding-up institution synthetically but without transfer of beneficial ownership and therefore without derecognition from the PBB balance sheet, which are entered in PBB's mortgage cover pool (paragraph 4(vii)(c)).
 (ix) Germany will ensure that the PBB sub-group has suitable accounting or financial reporting structures to enable compliance with these commitments to be monitored.
 (x) The figures in paragraphs 4(i), 4(iv) and 4(v) may be corrected for non-taxable effects such as changes to the valuation standards. The balance sheet figures may also be adjusted for foreign currency effects and the trend in the market values of derivatives, if this trend is different from the trend described in the restructuring plan and the difference is not attributable to an increase in the notional values of the derivatives.

5.  5.1. 
Germany will ensure that HRE separates itself completely from the business activities of the DEPFA plc sub-group,


((i)) by foregoing new business in the DEPFA plc sub-group (balance sheet of EUR 248 billion at 31 December 2008) as of the date of notification of the decision at the latest. The following are not ‘new business’ within the meaning of this Commitment Document:

((a)) restructuring of existing loans in order to maintain value, provided that those loans fall under the management of problem loans;
((b)) transactions which are necessary in the context of liquidity management of the DEPFA plc sub-group or the winding-up institution, e.g. central bank transactions;
((c)) management of the cover pools of HPBI and ACS;
((d)) prolongations which are necessary in order to avoid losses, provided that a prolongation offers significantly better prospects of final realisation;
((e)) derivative transactions which are necessary in order to manage interest rate, currency and credit risks in the existing portfolio, e.g. asset swaps, provided that they have the effect of reducing the overall market risk position of the DEPFA plc sub-group;
((f)) business which was fully consolidated in the group financial statement of DEPFA plc or business for which the commercial opportunities and risks already lay predominantly with the DEPFA sub-group;
((g)) all business which is necessary for regulatory or other legal reasons, including the acquisition, holding and sale of approved securities for management of the cover pools of the DEPFA plc sub-group and for liquidity management of the DEPFA plc sub-group (cf. paragraph 2(iv)); this does not include any budget finance business as a strategic business activity;
((h)) all business that DEPFA plc and its subsidiary companies conclude for the purpose of refinancing, including new issues and buying back of debt;
if ‘necessity’ is a requirement of paragraphs 5.1(i)(b), 5.1(i)(d), 5.1(i)(e) and 5.1(i)(g), this means that the measure in question must be capable of achieving the objective that it serves under economically viable and sustainable conditions;
((ii)) and by

((a)) the reprivatisation of DEPFA plc and the participations held by DEPFA plc (HPFB, HPBI and ACS) in accordance with paragraph 5.2; or
((b)) the sale of other credit portfolios and other assets in accordance with paragraph 5.3; or
((c)) use of a winding-up institution, as has already taken place, in accordance with paragraph 6.
 5.2.  (i) If and in so far as the sale of individual assets of HPFB, HPBI, ACS or DEPFA plc does not represent the more cost-effective form of active run-down (paragraph 5.3), Germany will ensure that HRE effects the reprivatisation of HPFB, HPBI, ACS or DEPFA plc as a sub-group without delay, but by 31 December 2014 at the latest, in accordance with the terms and conditions of sale as set out in paragraph 11. At the same time, Germany will ensure that the necessary sales procedures are introduced sufficiently promptly so as to enable reprivatisation of HPFB, HPBI, ACS or DEPFA plc as a sub-group to be effected by 31 December 2014.
 (ii) 

((a)) taking into account all contractual obligations and assuming that the underlying financial and balance-sheet-relevant legal conditions are essentially unchanged, the minimum sale proceeds realised are […]; and
((b)) the purchaser in each case undertakes to redeem all of HPFB, HPBI, ACS or DEPFA plc's refinancing liabilities with respect to HRE, its subsidiaries and the winding-up institution so that refinancing which is independent of HRE and the winding-up institution can be put in place.
 (iii) If the DEPFA plc sub-group is being wound up and therefore withdraws from the market, no problems which are related to State aid will arise as long as the DEPFA plc sub-group does not contract any new business. Germany undertakes to notify the European Commission promptly in advance of any sale of DEPFA plc or subsidiaries of DEPFA plc to third parties, and a sale will not take place before 31 December 2013 unless it has been approved by the Commission in advance. The Commission will make every effort to complete the relevant investigation as quickly as possible. This commitment does not apply to asset-only sales from DEPFA and/or its subsidiaries.
 5.3.  (i) Germany will ensure that other credit portfolios held by DEPFA plc, in so far as they are not covered by paragraph 5.2, are sold to one or more suitable, independent purchasers by 31 December 2014.
 (ii) A sale must take place only if and in so far as, taking into account all contractual obligations and assuming that the underlying financial and balance-sheet-relevant legal conditions are essentially unchanged, the minimum sale proceeds realised are […].

6.  (i) Germany commits that, after 30 September 2013, the PBB sub-group will no longer provide services associated with servicing of the winding-up institution FMS-WM. Short-term follow-up work and supervision of the handover process to a new service provider which is independent of the HRE group will remain unaffected.
 (ii) Germany commits that, after 30 September 2013, HRE will no longer provide refinancing services to the winding-up institution.
 (iii) Germany commits that — subject to paragraph 6(i) — there will be a clear organisational separation between the winding-up institution and HRE/PBB.

7.  (i) Germany will ensure that HRE actively reduces the business lines of infrastructure finance and capital markets/asset management. Therefore Germany will ensure in particular that, as of the date of notification of the decision at the latest, HRE does not conclude any more new business in the business lines of infrastructure finance and capital markets/asset management. Paragraph 5.1(i) will apply mutatis mutandis.
 (ii) Germany will ensure that the PBB sub-group allows the budget finance business line on its balance sheet to run down and, as of the date of notification of the decision at the latest, does not conclude any more new business in the budget finance business line. The budget finance business line includes budgetary lending to State authorities such as central and federal governments, local authorities and regional governments which is used for general, uncommitted financing of the budget and is therefore not tied to a specific purpose with the character of an asset and/or investment.

8.  8.1. 
At 31 December 2010 HRE had closed the 15 sites listed below in the public investment finance and budget finance business lines:


((i)) Amsterdam;
((ii)) Athens;
((iii)) Bucharest;
((iv)) Chicago;
((v)) Frankfurt am Main;
((vi)) Hong Kong;
((vii)) Istanbul;
((viii)) Copenhagen;
((ix)) Milan (sales section of the site);
((x)) Mexico City;
((xi)) Mumbai;
((xii)) Nicosia;
((xiii)) São Paulo;
((xiv)) Sacramento; and
((xv)) Warsaw.
 8.2. 
At 31 December 2010 HRE had closed the 12 sites listed below in the real estate finance business line:


((i)) Berlin (sales section of the site);
((ii)) Dortmund;
((iii)) Hamburg;
((iv)) Hong Kong;
((v)) Copenhagen;
((vi)) Lisbon;
((vii)) Milan (sales section of the site);
((viii)) Manchester;
((ix)) Mumbai;
((x)) Singapore;
((xi)) Stockholm; and
((xii)) Tel Aviv.
 8.3. 
The PBB sub-group is at liberty to re-open three branches or sales offices in Germany (Berlin, Hamburg, Rhine-Ruhr area) and one branch in Stockholm. Germany will ensure that HRE/PBB does not open any further branches, sales offices or sites.
 8.4. 
Germany will ensure that the PBB sub-group only concludes new business in the following countries:


((i)) Real estate finance:

((a)) Core markets: Germany, United Kingdom, France, Spain.
((b)) Further markets: Sweden, Poland, Czech Republic, Belgium, Netherlands, Luxembourg, Austria, Switzerland, Denmark, Finland, Norway, Slovakia, Hungary.
((ii)) Public investment finance:

((a)) Core markets: Germany, France, Spain, Italy.
((b)) Further markets: Switzerland, Austria, Poland, Hungary, Czech Republic, Slovakia, Sweden, Norway, Denmark, Finland, Belgium, Netherlands, Luxembourg, United Kingdom.

9.  9.1.  (i) Germany will ensure that HRE, within the limits of its abilities, pays remuneration in return for using the winding-up institution FMS-WM. Thus Germany will ensure that the Federal Agency for Financial Market Stabilisation (‘FMSA’) sets the payment obligations pursuant to § 8a(4)(8) of the Financial Market Stabilisation Fund Act (FMStFG) amounting to EUR 1,59 billion (‘payment obligation’) at the full level and that the HRE subsidiaries, to which the payment obligation is addressed, pay the payment obligation in full in accordance with the contractual conditions specified therein, if necessary on a phased basis. The payment will be made to FMS-WM, with the result that the capital of FMS-WM will increase accordingly on payment. In accordance with the payment obligation, those HRE subsidiaries which have transferred assets to the winding-up institution are liable to pay, provided that they have a core capital quota exceeding 15 % and also comply with certain regulatory and other requirements. On the basis of the data collected at 31 March 2011, this would apply solely to subsidiaries of the DEPFA sub-group; depending on future developments, a payment could also be required from subsidiaries of the PBB sub-group.
 (ii) 

((a)) the full amount of the relevant annual net profit after tax will be offset against the net loss;
((b)) until reprivatisation of PBB, no decision will be taken which offsets the net loss against the uncommitted reserves, with the aim of establishing profit distribution capability;
((c)) this profit distribution capability will be restored only in the context of reprivatisation, with the result that profits will be retained by appropriation to Germany's silent participation and subsequent repayment of the silent participation;
((d)) until full repayment of the silent participation, no dividend payments and no coupon payments which are not required by law will be made.
 (iii) As of the time when the payment obligation outlined in paragraph 9.1(i) is paid in full, Germany will ensure that the DEPFA plc sub-group (i.e. parent company and all subsidiary companies), within the limits of its abilities, pays appropriate remuneration to Germany in return for the State support measures. This remuneration represents an expenditure on the profit and loss account and its annual level corresponds to the amount that the sub-group can pay without recording losses and without being legally obliged to pay interest to the providers of hybrid capital. The remuneration will be contractually structured between the Federal Republic of Germany or SoFFin, for the one part, and DEPFA plc, for the other part, such that it is not a profit-related remuneration but a consideration in return for the State aid implemented (indirectly) by the Federal Republic of Germany and approved by the European Union in order to stabilise the DEPFA plc sub-group.
 9.2. 
Germany will ensure that, during the implementation of the restructuring plan and until 31 December 2015 at the latest, HRE and its subsidiaries are only obliged to pay to third parties which are external to the group, by the end of the financial year for the previous financial year, coupons and profit distributions on the core capital instruments, silent participations, participation rights and participation certificates with a share in the loss pursuant to § 10(5) of the German Banking Act (KWG) and any other profit-related own capital financial instruments (e.g. hybrid capital instruments, participation certificates) (excluding shares) existing in HRE at 30 September 2010 provided that they have not been guaranteed by SoFFin (‘other own capital instruments’) if and in so far as HRE or the subsidiary companies in question are legally obliged to do so without releasing reserves or the special item pursuant to § 340g of the German Commercial Code (HGB).
 9.3.  (i) Germany will ensure that, during the implementation of the restructuring plan, and until 31 December 2015 at the latest, HRE and its subsidiaries are obliged to make no repayments of other own capital instruments (e.g. hybrid capital instruments, participation certificates) unless they are required by law while silent participations or other SoFFin own capital instruments which have been contributed or may yet be contributed by SoFFin have not been repaid in full and the book value of the SoFFin own capital instruments is reduced and/or any cumulative profit distributions or coupons on the SoFFin own capital instruments have not been paid in full.
 (ii) Payback also includes the repayment or acquisition of instruments which have been issued specifically for the financing of other own capital instruments, and the repayment or acquisition of which results financially in a payback or repurchase or other reduction in other own capital instruments.
 (iii) 

((a)) the exercising of cancellation rights or any other payback or termination of other own capital instruments due to the expiry of recognition of the instrument in question as a component of the own capital category of HRE or of an entity subject to registration for which it was created;
((b)) replacing an existing other own capital instrument with a new instrument of at least the same own capital category, level and duration, although replacing an other own capital instrument with the SoFFin own capital instruments is not permitted; and
((c)) repurchase of other own capital instruments at significantly less than the issue price.

Germany will ensure that HRE Holding does not pay any dividends for the financial years 2010 and 2011.

10.  10.1. 
During the implementation of the restructuring plan, but until 31 December 2015 at the latest, Germany will ensure that the PBB sub-group:


((i)) pursues a prudent, sound business policy which is focused towards the principle of sustainability;
((ii)) examines the appropriateness of its internal incentive systems in the context of the legal and regulatory requirements and works towards ensuring that they do not provide any temptation to take unacceptable risks and are transparent and focused on long-term, sustainable goals; and
((iii)) takes account of the borrowing requirement of the German and EU economies through economically sustainable conditions which are customary on the market.
 10.2. 
Germany will ensure that HRE does not advertise itself with the State support measures implemented or advertise itself in any other way on the basis of the competitive advantages arising from the State support measures. The exception to this requirement is legally binding or customary market information about those State support measures, e.g. in the annual or quarter-end accounts, communications that are compulsory under capital market law, securities prospectuses or information memoranda.
 10.3.  (i) Germany will ensure that, during the implementation of the restructuring plan but until reprivatisation at the latest, although not before 31 December 2013, HRE acquires no participations in businesses except with the prior approval of the Commission, for instance because such an acquisition is necessary in order to safeguard the stability of the financial market.
 (ii) Acquisition of businesses within the meaning of this commitment includes the partial or full acquisition of businesses by means of transfer of shares in companies and assets and the concluding of other transactions which serve the purpose of acquisition, such as the concluding of futures and options transactions.
 (iii) Restructuring within the HRE group is not affected by this commitment.
 (iv) The acquisition of businesses in the case of so-called ‘bail-out purchases’ during restructuring of credit commitments and the acquisition of project companies or acquisition for other reasons resulting from operational activity in accordance with the business model of the bank are also unaffected by this commitment, provided that such acquisitions do not exceed a maximum total purchase price of EUR [10–80] million until 31 December 2015.
 10.4. 
Germany will ensure that HRE achieves the outstanding milestones in the ‘New Evolution’ IT project according to the project schedule — having regard to the usual uncertainties associated with the implementation of a project of this size. The outstanding milestones are Releases N3–N4/5. The project schedule is attached to the Commitments Document as an Annex.

Notwithstanding the above, Germany will in particular ensure that the methodological integration of market risk management and reporting functionalities is completed by the end of the fourth quarter of 2012. This will include consolidation of market risk methodologies and front office systems in the PBB sub-group and […].
 10.5. 
Germany will ensure that PBB's strategic new business does not issue any new loans that have a RAROC (risk adjusted return on capital) of less than 10 % on a transaction-by-transaction basis.

The RAROC will be calculated as the ratio between the net margin after tax and the economic capital. This commitment applies to new business without taking into account prolongations and restructuring.

Within the meaning of this Commitment Document,


((i)) the gross margin is the difference between the margin invoiced to the customer (expressed in basis points above the IBOR reference rate) and PBB's refinancing costs (expressed in basis points above the IBOR reference rate) represented by the internal transfer price, plus annualised fees;
((ii)) the internal transfer price will reflect the estimated cost of PBB's new refinancing from borrowed and own capital, taking account of the characteristics (maturity, currency, etc.) of the loans to customers;
((iii)) the net margin is equal to the gross margin minus:

((a)) additional costs of all kinds (overheads, salary costs, operating costs, amortisation and depreciation, etc.) estimated on the basis of the observation of the actual total costs of lending to customers;
((b)) cost of average risk calculated for each transaction in accordance with the Basel II methodology (or any banking regulation applicable thereafter) and a tax charge;
((iv)) the economic capital (capital adequacy requirements according to the Basel Committee on Banking Supervision Pillar 1) is calculated in accordance with the relevant Basel II methodology (or any applicable banking regulation applicable thereafter).

11.  (i) Germany will ensure that the necessary sale procedures are initiated without delay in order to ensure that the deadlines relating to reprivatisation/divestiture are met.
 (ii) As far is legally permissible and possible without breach of business confidentiality, reprivatisation will take place in an open, transparent and non-discriminatory procedure. This does not preclude the holding of negotiations with interested parties who are addressed in a targeted manner before or during such a procedure. As far as is reasonable, the sale procedure will be announced through publication in at least one international newspaper or periodical. The terms and conditions of sale may not include any clause which unreasonably limits the number of potentially interested parties or is tailored specifically to certain interested parties. The terms and conditions of sale may refer to the redemption obligation set out in paragraph 5.2(ii)(b). As far as is reasonable and legally permissible, potential purchasers will, after signature of standard non-disclosure agreements, also be granted direct access to all information necessary to conduct due diligence investigations.

12.  (i) Germany will ensure that the full and correct implementation of the HRE restructuring plan of 14 June 2011 and the full and correct implementation of all commitments within this Commitments Document are continuously monitored by an independent, sufficiently qualified Monitoring Trustee who is obliged to maintain confidentiality.
 (ii) The appointment, duties, obligations and discharge of the Monitoring Trustee must follow the procedures set out in the ‘Trustees’ annex.
 (iii) Germany will ensure that, during the implementation of the decision, the Commission has unrestricted access to all information which is necessary for monitoring of the implementation of this decision. The Commission may ask the HRE for explanations and clarification. Germany and HRE will cooperate fully with the Commission and the Monitoring Trustee acting on behalf of the Commission with regard to all enquiries associated with monitoring of the implementation of this decision.

ANNEX  A.  (i) 

((a)) HRE will appoint a Monitoring Trustee to carry out the duties of a Monitoring Trustee as set out in paragraph B(ii) of this Annex; and
((b)) if the reprivatisation of PBB has not been effected by 31 December 2015, HRE will appoint a Divestiture Trustee to carry out the duties of a Divestiture Trustee as set out in paragraph B(iii) of this Annex.
 (ii) Both the Monitoring Trustee and the Divestiture Trustee (‘Trustee(s)’) must be independent of HRE. The Trustee must possess the specialised knowledge that is required in order to carry out its mandate, for example as an investment bank, consultant or auditor, and must at no time be exposed to any conflict of interest. The Trustee will be remunerated by HRE in a way that must not impede the independent and effective fulfilment of its mandate. The cost of the Trustee will, as far as is legally permissible, be borne by HRE, otherwise it will be borne by Germany.
 (iii) 

((a)) not later than four weeks after notification of the decision, HRE will submit the names of two or more persons to the Commission for approval as Monitoring Trustee; and
((b)) as soon as it becomes clear that reprivatisation of PBB cannot be completed by 31 December 2015, and not later than 30 September 2015, HRE will submit the names of one or more persons to the Commission for approval as Divestiture Trustee.
 (iv) 

((a)) the full terms of the proposed mandate with all the provisions which are necessary to enable the Trustee to fulfil its duties;
((b)) the draft of a work plan which describes how the Trustee intends to carry out its assigned duties.
 (v) The Commission has the discretion to approve or reject the proposed trustees and to approve the proposed mandate subject to any modifications that it deems necessary in order to enable the Trustee to fulfil its obligations. If only one name is approved, HRE will appoint the person or institution concerned as Trustee or cause that person or institution to be appointed, in accordance with the mandate approved by the Commission. If more than one name is approved, HRE is free to decide which of the approved persons should be appointed as Trustee. The Trustee will be appointed within one week of the Commission’s approval, in accordance with the mandate approved by the Commission.
 (vi) If all the proposed Trustees are rejected, Germany undertakes to ensure that HRE submits the names of at least two further persons or institutions within two weeks of being informed of the rejection, in accordance with the requirements and procedure set out in paragraphs A(i) and A(iv).
 (vii) If all further proposed Trustees are also rejected by the Commission, the Commission will nominate a Trustee which HRE will appoint or cause to be appointed, in accordance with a trustee mandate approved by the Commission.
 B.  (i) The duty of the Trustee is to guarantee full and correct compliance with the obligations set out in the commitments and full and correct implementation of the HRE restructuring plan of 14 June 2011. The Commission may, on its own initiative or at the request of the Trustee, give any orders or instructions to the Trustee or HRE in order to ensure compliance with the commitments attached to the decision.
 (ii) 

((a)) propose in its first report to the Commission a detailed work plan describing how it intends to monitor compliance with the commitments attached to the decision;
((b)) oversee the management of PBB’s transactions in order to ensure that its economic viability, saleability and competitiveness continue to be guaranteed, and monitor HRE’s compliance with the conditions and constraints attached to the decision. To this end, the Monitoring Trustee has the duty:

((I)) to ensure that PBB’s economic viability, saleability and competitiveness are maintained and that management of PBB is organisationally separate from the companies remaining with HRE;
((II)) to verify that PBB is managed as an organisationally distinct, divestable business;
((III)) after consultation with HRE, to specify all necessary precautions to ensure that, from the date of notification of the decision, HRE obtains no business secrets, know-how, business information or other confidential or proprietary information about PBB unless such information is necessary to execution of the sale or management of the group by HRE or disclosure to HRE is required by law, and thereby to strive in particular to ensure that the integration of PBB into the central IT network is completed as far as possible and economically feasible without endangering the viability of PBB, and to decide whether such information may be disclosed to HRE because its disclosure may reasonably be considered necessary to the execution of the sale or management of the group by HRE, or its disclosure is required by law;
((IV)) to monitor distribution of the assets and personnel between PBB and HRE or the affiliated companies; dual mandates and secondment remain permissible;
((c)) monitor compliance with all other commitments;
((d)) assume the other functions assigned to the Monitoring Trustee in the Commitments attached to the decision;
((e)) monitor the full and correct implementation of the HRE restructuring plan of 14 June 2011;
((f)) propose to HRE such measures as the Monitoring Trustee considers necessary to ensure HRE’s compliance with the commitments attached to the decision, in particular maintaining the full economic viability, saleability and competitiveness of PBB, continuation of PBB as a separate entity and maintaining the confidentiality of information that is relevant to competition;
((g)) review the progress of the reprivatisation process, assess potential purchasers and verify that, dependent on the stage of the reprivatisation process:

((I)) potential purchasers receive sufficient information relating to the business to be sold and its personnel, in particular by reviewing (if available) the data room documentation, the information memorandum and the due diligence process; and
((II)) potential purchasers are granted reasonable access to the personnel;
((h)) submit a draft written report to the Commission, Germany and HRE within 30 days after the end of each quarter. The Commission, Germany and HRE can submit comments on the draft within five working days. Within five working days of receipt of the comments, the Trustee will prepare a final report, incorporating the comments to the extent possible and at its discretion, and submit it to the Commission. The Trustee will also send a copy of the final report to Germany and HRE. If the draft report or the final report contains any information that must not be disclosed to HRE, HRE will only receive a non-confidential version of the draft report and the final report. Under no circumstances will the Trustee submit any version of the report to Germany and/or HRE before submitting it to the Commission. The subject of the report will be fulfilment of the duties set out in the mandate by the Monitoring Trustee and compliance with the obligations by HRE, thus enabling the Commission to assess whether HRE is being managed in accordance with the obligations and to form a picture of the status of the reprivatisation process and of potential purchasers. If necessary, the Commission may specify the scope of the report in more detail. In addition to these reports, the Monitoring Trustee will promptly report in writing to the Commission if it has reason to suppose that HRE is failing to comply with these obligations, sending a non-confidential version to HRE at the same time.
 (iii) If reprivatisation of PBB has not been completed by 31 December 2015, the Divestiture Trustee will sell PBB to a purchaser without specifying a minimum price provided that the Commission has approved both the purchaser and the final binding purchase agreement. The Divestiture Trustee will include in the purchase agreement such terms and conditions as it considers appropriate for an expedient sale. The Divestiture Trustee may include in the purchase agreement such customary provisions relating to representation, warranties and indemnification as are reasonably required to effect the sale. The Divestiture Trustee will protect the legitimate financial interests of Germany and HRE.
 (iv) Until the completion of reprivatisation, the Divestiture Trustee will provide the Commission with comprehensive monthly reports in German on the progress of the divestiture process. These reports will be submitted within 15 days after the end of every month, with a simultaneous copy to the Monitoring Trustee and a non-confidential version to HRE.
 C.  (i) Germany undertakes to ensure that HRE will provide and require its advisors to provide any cooperation, assistance and information that the Trustee may reasonably require in performing its duties. The Trustee will have unrestricted access to any of HRE’s books, records, documents, management or other personnel, facilities, sites and technical information that are necessary to fulfilling the Trustee’s duties under the commitments. HRE will provide the Trustee, on request, with copies of documents. HRE will make available to the Trustee one or more offices at its business premises and will be available for meetings with the Trustee in order to provide the Trustee with all information necessary for the performance of its duties.
 (ii) HRE will provide the Monitoring Trustee, on request, with the information sent to potential purchasers and will grant and require its advisors to grant the Trustee, in particular, the same access to data room documentation and all other information that was granted to potential purchasers during the due diligence procedure. HRE will inform the Monitoring Trustee about potential purchasers, provide the Monitoring Trustee with a list of potential purchasers, and keep the Monitoring Trustee informed of all developments in the reprivatisation process.
 (iii) Germany undertakes to ensure that HRE will grant and require its affiliated companies to grant the Divestiture Trustee comprehensive powers of attorney, duly executed — subject to that which is legally permissible, in particular under supervisory and company law — to effect the reprivatisation, transfer and all actions and declarations which the Divestiture Trustee considers necessary or appropriate for the reprivatisation and transfer, including the appointment of advisors to assist with the reprivatisation process. At the request of the Divestiture Trustee, HRE will ensure that the documents required for effecting the reprivatisation and transfer are duly executed. Germany undertakes to ensure that HRE will indemnify the Trustee and its employees and agents (‘Indemnified Parties’) and hold the Indemnified Parties harmless against, and hereby declares that the Indemnified Parties will have no liability to, HRE for any liabilities arising out of the performance of the Trustee’s duties under the obligations, except to the extent that such liabilities result from the wilful default, recklessness, gross negligence or bad faith of the Trustee, its employees, agents or advisors.
 (iv) At the expense of HRE, the Trustee may appoint advisors (in particular for corporate finance or legal advice), subject to HRE’s approval (this approval not to be unreasonably withheld or delayed) if the Trustee considers the appointment of such advisors necessary or appropriate for the performance of its duties and obligations under the mandate, provided that any fees and other expenses incurred by the Trustee are reasonable. Should HRE refuse to approve the advisors proposed by the Trustee, the Commission may approve the appointment of such advisors instead, after having heard HRE. Only the Trustee will be entitled to issue instructions to the advisors. Paragraph C(iii) will apply mutatis mutandis. The Divestiture Trustee may use advisors who served HRE during the divestiture period if the Divestiture Trustee considers this to be in the best interest of an expedient sale.
 D.  (i) 

((a)) the Commission may, after hearing the Trustee, require HRE to replace the Trustee; or
((b)) HRE, with the approval of the Commission, may replace the Trustee.
 (ii) If the Trustee is removed according to paragraph D(i), the Trustee may be required to continue in its function until a new Trustee is in place to whom the Trustee has effected a full handover of all relevant information. The new Trustee will be appointed in accordance with the procedure referred to in paragraphs A(i) to A(vi).
 (iii) Beside the removal according to paragraph D(i), the Trustee will cease to act as a Trustee only after the Commission has discharged it from its duties. This discharge will take place when all the obligations with which the Trustee has been entrusted have been implemented. However, the Commission may at any time require the reappointment of the Monitoring Trustee if it is subsequently found that the relevant remedies have not been fully and properly implemented.
