Brussels, 05/11/2010 (Agence Europe) - The European Commission decided on Friday 5 November to extend the ongoing state aid investigation on the restructuring of German regional bank Westdeutsche Landesbank (WestLB), begun in December 2009. Estimates put the money received by the bank in state subsidies at €3.4 billion more than originally provided for in the process of transferring its portfolio of impaired assets to a bad bank (see EUROPE 10165 and 10047). This would bring the total amount received by WestLB to €6.95 billion.
The Commission believes that further restructuring is required to address the distortions of competition thereby created, or alternatively gradual reimbursement of the sum.
“Our assessment of the viability of the bank depends on the way these options will be considered by the German authorities,” said Commission Vice President with responsibility for competition policy Joaquín Almunia, voicing the view that the situation of the bank was continuing to worsen and expressing doubts as to its viability as things currently stand. The Commission says the bank's current position “still relies on comparatively volatile and risky activities which do not provide the room for manoeuvre necessary for such unstable business”. The German authorities do not share the Commission's assessment. Almunia pointed out that the Commission had decided to extend the investigation to have a transparent procedure which gives all parties the opportunity to have their say.
The German authorities do not expect WestLB to collapse, the Federal Finance Ministry spokesman said, adding that the regional bank, in which the state is now a majority stakeholder, would probably be able to comply with the restructuring conditions imposed by the EU for it to be able to receive further state aid.
The Commission announcement comes a day after the collapse, on Thursday 4 November, of talks on a merger of WestLB and BayerLB, which had been going on since the end of September (see EUROPE 10220). The bank is still seeking new private investors. These could include Asian banks which generally take minority shareholdings with the aim of extending their activities in new markets, according to Reuters. (F.G./transl.rt)