Brussels, 12/02/2001 (Agence Europe) - A delegation led by Mr Caoio Koch-Weser, State Secretary at the German Federal Ministry of Finance, and Mr Peter Steinbrück, Minister of Finance of Nordrhein-Westfalen, met Commissioner Mario Monti on Friday and presented a proposal for splitting Westdeutsche Landesbank (WestLB), Germany's biggest public bank with assets of EUR 394 billion under its management. The proposal provides for the creation of two separate entities, one carrying out public service activities and the other taking over the commercial activities. Mr Monti welcomed this initiative, saying he hoped it would "lead to a solution", but added that there was still a lot of work to do. "This is not just about the case of WestLB, but about the system of public guarantees as such", stated a spokesman at the conclusion of the latest meeting. There is a need to find an overall solution for all cases of problems resulting from these guarantees, he added.
Following a number of complaints lodged by private European banks for unfair competition, on 26 January 2001 the Commission sent a letter to German authorities asking them to come up with a solution to the problem of guarantees granted to public credit institutions. The Commission considers that, insofar as they influence the competitive position of banks and affect trade between Member States, the guarantees in question ("Anstaltslast" and "Gewährträgerhaftung") constitute state aid that is incompatible with Community law (see in particular EUROPE of 27 January, page 9).
Commenting on the proposal, details of which were not disclosed, Mr Monti stated that it was "a step in the right direction" but that it does not provide possible solutions for a number of issues, in particular: a) it does not address the question of the guarantees for savings banks as well as for other Landesbanken; b) it requests an exemption for savings banks from application of the transparency directive without giving any reasons (applied to the banking sector, the transparency directive requires that banks providing both public services for which they receive compensation from the State and other activities must keep separate accounts; c) it does not represent any step forward on the question of equity transfers in favour of WestLB and other Landesbanken.
The Commission is presently examining the proposal and intends to cooperate with German authorities to find a simultaneous, overall solution for all cases where there is a distortion of competition as a result of these guarantees. In this context, it is expected to request details of German officials. The solution could entail a variety of options to suit the different financial institutions, observed Mr Monti, as long as the minimum requirements necessary to remedy the distortion are met. Germany, which has one month from 26 January to find a comprehensive solution to the problem, has asked for an extension of this deadline.