EU clears 320 mln euro Kaupthing Luxembourg loan

BRUSSELS, July 9 (Reuters) - The Luxembourg government won approval on Thursday from the European Commission to grant a 320 million euro ($445 million) loan to Kaupthing Bank Luxembourg for help with the bank's restructuring.

The executive arm of the 27-nation European Union said the loan was to compensate depositors with the Belgian branch of Kaupthing Bank Luxembourg, and that the Belgian state would contribute 160 million euros towards the financing.

"The aid for Kaupthing Bank is designed to enable all depositors to recover their funds," EU Competition Commissioner Neelie Kroes said in a statement.

"This solution should help to reinforce public confidence in the banking sector without giving rise to competition problems," she added.

Under the restructuring, deposits with the Belgian branch of Kaupthing Luxembourg were sold to Credit Agricole Belgium's Keytrade Bank, an Internet lender owned by a group of Belgian cooperatives and France's Credit Agricole (CAGR.PA).

The Luxembourg-based private banking part of Kaupthing is to be taken over by UK investment fund Blackfish Capital, the Commission added.

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