Dec. 20 (Bloomberg) -- WestLB AG, a state-owned German lender bailed out during the financial crisis, won European Union approval for its rescue by the German government after it agreed to be wound down and broken up.
The European Commission said it authorized 11 billion euros ($14.4 billion) in state aid for the transfer of assets to a bad bank after WestLB and its shareholders agreed to a restructuring plan to shrink into a so-called Verbundbank that will serve regional savings banks.
The plan “closes this chapter once and for all in the interest of a healthy and undistorted competition between banks and of the taxpayers themselves who have already paid a high price,” EU Competition Commissioner Joaquin Almunia said in an e-mailed statement today.
The commission decision on WestLB ends one of its longest-running banking state aid cases. The Brussels watchdog is responsible for scrutinizing large state payments to lenders that needed help during the financial crisis. It forced bailed- out banks to shrink their balance sheets and change the way they do business to mitigate market distortions caused by billions of euros in government subsidies and guarantees.
WestLB, the third-largest government-owned German bank, needed bailouts from its owners, including the German state of North Rhine Westphalia and the country’s federal government, after running up losses in 2008.
Under WestLB’s revamp, business related to savings banks, which includes a lending unit that serves medium-size companies and has a balance sheet of 40 billion euros to 45 billion euros, will be transferred to a new credit institution on June 30, 2012, the German bank said on June 24. The Verbundbank will have about 400 employees.
Operations unsold by June 30 next year will be transferred to WestLB’s bad bank. North Rhine-Westphalia will take on the ownership responsibility for the rest of the bank, while the savings bank associations, which hold about 50 percent of the lender, will cease to be shareholders.
--With assistance from Niklas Magnusson in Hamburg. Editors: Peter Chapman, Christopher Scinta
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