The European Commission has ruled that German lender Nord/LB's huge €3.6bn ($4bn) recapitalisation plan does not constitute state aid.
The bank, which has a shipping portfolio of €6.1bn, will now be able to strengthen its balance sheet and move away from state ownership.
"The EU Commission's decision is an important milestone in strengthening the bank's capital and in the realigning of Nord/LB," said chairman Thomas Burkle.
"We will now consistently continue the restructuring of Nord/LB which has already begun in order to establish ourselves on the market as a profitable and crisis-resistant bank.”
The previous federal state owners and new backer Sparkassen-Finanzgruppe agreed on extensive capital measures in the spring of 2019.
There will be a cash injection of around €2.8bn, of which the State of Lower Saxony will contribute €1.5bn and the State of Saxony-Anhalt €200m. Sparkassen will add €1.1bn.
Lower Saxony is also implementing additional capital relief measures amounting to €800m.
Capital ratio boosted
The move will boost the bank's key CET 1 capital ratio from 6.53% on 30 September to about 14%.
"The implementation of the capital measures, for which various committee and parliamentary opinions are still required, is planned to take place this year as announced," the bank said.
The move has proved controversial, with industry groups challenging the European Commission’s interpretation of state-aid rules, the Financial Times reported.
Academics and antitrust lawyers in Brussels and Berlin view the cost for taxpayers as high and said there was a lack of clarity over whether they will see any return.
The bank has said it is pulling out of shipping and the total maritime portfolio is expected to be just under €4bn by the end of 2019 and €0.6bn by the end of 2021.
