WestLB faces growing risk of being broken up: EU regulators

5th November 2010, Comments 0 comments

The European Commission warned on Friday that troubled German regional bank WestLB faced a growing risk of being broken up because its restructuring did not go far enough.

Asked if winding up the bank was an option, European competition commissioner Joaquin Almunia said: "This possibility unfortunately is increasing."

The European Union's executive arm announced earlier that it was extending its investigation into state aid after concluding that WestLB received an estimated 3.4 billion euros (4.8 billion dollars) more than foreseen.

The commission estimated the publicly-owned bank would benefit from a total of 6.95 billion euros in state aid.

It said that before it could approve the aid, the bank should consider "further restructuring measures" to address concerns about distorting competition, or a gradual reimbursement of the sum.

"In the meantime, the Commission continues to doubt the viability of the bank," the competition watchdog said in a statement.

WestLB chief executive Dietrich Voigtlaender replied that "the EU hasn't provided any new facts today to substantiate its position."

Voigtlaender said details of risky asset transfers into a so-called 'bad bank' had not changed since the approved asset transfer began in late 2009.

WestLB has launched a search for new owners but the regional bank BayernLB said Thursday it would abandon merger talks because a mooted deal would not boost profits.

WestLB agreed in May 2009 to cut its assets in half after a public bailout and regional officials have also floated the idea of a tie-up with Hessian counterpart Helaba and a third publicly-owned German bank in order to save the business.

© 2010 AFP

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