The European Banking Authority said the measure the bank is taking to boost its capital was an acceptable way to meet its new minimum core tier one capital requirement of 9%, as reported by the Financial Times.
The part-guaranteed assets deal and its structure is expected to open a new room for other state-owned banks, who are struggling to comply with tough regulatory capital demands.
NordLB has had to pay a heavy price to secure the deal that included a coupon of nearly 6.3% on the €700m middle tranche of the guaranteed assets the state is taking on.
As part of the deal, the first loss and the risk on the rest of the assets would have to be absorbed by the bank.
The German business lender said that the capital loan facility will cost NordLB €44m a year to service, will add about half a percentage point to its capital ratio.
Current, banking rules of the EU mandates that NordLB balance sheet should clearly reflect the loans, including high-quality loans, to avoid creating a kind of bad bank, which has been forced on some failing Landesbanken.
