Berlin - Key stakeholders have agreed to underpin a tottering state-owned German bank, WestLB, to stop it lurching into insolvency, a Finance Ministry spokesman in Berlin said Tuesday. WestLB, based in the western city of Dusseldorf, will be the first German
bank to use government aid to split itself into a "good bank" and a "bad bank." The tainted side of the business will be hived off with 85 billion euros of semi-distressed credit on its books.
Final details have still to be applied to the rescue plan negotiated by the landesbank's shareholders, which comprise the state government of North Rhine Westphalia and that state's non-profit public
savings banks.
A landesbank is a German bank controlled by regional governments. WestLB, which a decade ago aimed to become a world player, was hit early by the
financial crisis in the
United States and has had to downsize its staff and operations.
The rest of Germany's landesbanks and the federal government, via its bank rescue arm SoFFin, are to help inject credit into the "good bank" to help it regain its feet and stop risk spreading through the system.
Reports said the deal averts intervention by BaFin, Germany's
banking regulator, which has powers to stop transactions at a struggling bank and nationalize it.
