FRANKFURT, Germany (AP) — Germany's Commerzbank AG said Friday it will wind down its troubled Eurohypo real estate unit instead of selling it, as it had previously been ordered to do when it was bailed out in 2009.
The European Commission agreed to change its requirements for allowing the German government to rescue Commerzbank in the aftermath of the collapse of U.S. investment bank Lehman Brothers.
Commerzbank was originally supposed to sell Eurohypo, which loaned money for commercial real estate projects, by the end of 2014. But Germany maintained that the unit was impossible to sell because it has heavy financing needs.
The European Commission, the executive arm of the European Union, makes banks divest businesses when they are bailed out to offset the harm such steps cause to free-market competition.
The commission said the change ensures that Eurohypo will exit the market. EU competition chief Joaquin Almunia said the change "preserves the balance of the original commission decision."
As part of the new deal, Commerzbank accepted a two-year extension of an EU-imposed ban on buying other companies until the end of March 2014. It will be able to keep a small part of its real-state business in Germany, France, Poland and the U.K.
Commerzbank got some €18 billion ($24 billion) in government capital in 2008 and 2009 under a program to aid German banks as losses from the Lehman collapse spread financial turmoil around the globe. The German government's bank rescue fund still holds a 25 percent stake in Commerzbank.
Commerzbank CEO Martin Blessing said the amended conditions were "challenging, but acceptable."
"We will consistently continue with the chosen course of a reduction in the Eurohypo portfolios," he added. "The objective is that of continuing a small, lower-risk area of the commercial real estate business in Commerzbank."
Commerzbank shares rose 3.2 percent and traded at €1.91 in afternoon trading in Frankfurt.