| DUESSELDORF, July 1
DUESSELDORF, July 1 German state-backed lender
WestLB was broken up in time to meet an EU-imposed
July 1 deadline, with its former owners hoping to draw a line
under years of losses and controversy at what was once the
country's biggest landesbank.
"We are removing a large bank from the market," said Norbert
Walter-Borjans, finance minister of the German state of North
Rhine-Westphalia, which had been a major WestLB stakeholder.
WestLB, whose international ambitions were cut short by a
series of trading scandals and losses that led to repeated
bailouts by its owners, will have cost taxpayers and savings
banks an estimated 18 billion euros ($23 billion) between 2005
and 2028, when the last of its bad assets is wound down.
"It is a terrible end, but one that is preferable to a
terror without end," Walter-Borjans said in a statement on
The European Commission had ordered a change of ownership at
WestLB in response to the billions of euros in state aid and
guarantees the lender had received to cope with its problems.
The Commission also demanded restructuring at its fellow
landesbanks LBBW and BayernLB for state aid
they received in the financial crisis.
WestLB's demise is seen as an important step in the
long-awaited consolidation of the country's landesbanks, which
provide wholesale banking services to their regional savings
banks and compete against publicly-traded lenders like Deutsche
Bank and Commerzbank.
North Rhine-Westphalia's government and savings banks, along
with representatives of the federal government and landesbank
Helaba, which is taking over part of WestLB's
business, ended months of haggling on Saturday to sign the
agreement on WestLB's breakup.
As part of the restructuring, WestLB has been split into
- A regional bank with about 40 billion euros in assets,
dubbed Verbundbank, will provide service to regional savings
banks and will be taken over by Frankfurt-based Helaba, along
with 451 former WestLB employees.
- A "bad" bank, known as Erste Abwicklungsanstalt (EAA),
which has already been working to wind down bad assets worth
around 51 billion euros as of the end of 2011. The EAA will also
be tasked with winding down about 100 billion euros of
additional assets from WestLB's final breakup, including those
of property finance unit Westdeutsche Immobilienbank AG.
- A financial services and portfolio management company
called Portigon, which starts business on Monday with around
3,500 former WestLB employees, but is expected to end the year
with less than 2,700. Staff numbers are expected to decline
further thereafter and Portigon's sole owner, the state of North
Rhine-Westphalia, is due to sell the business by the end of
Portigon is expected to help with the winding down of bad
assets held by the EAA, which will have only about 100