Financial Regulatory Forum

EU Commission throws WestLB aid, bad bank into doubt

BRUSSELS, Dec 22 (Reuters) – The European Commission said it doubts that WestLB’s plans to set up Germany’s first “bad bank” complies with EU rules on state aid, granting only temporary clearance for the rescue plan.

“I am surprised about the level of the additional aid required and will make sure that the new aid is fully compatible with EU state aid rules,” Competition Commissioner Neelie Kroes said in a statement on Tuesday.

The Commission said it doubted the measures taken by the German government to rescue the stricken lender were compatible with state aid rules for impaired asset relief.

It would open an in-depth investigation into the plan, under which WestLB is receiving capital of 3 billion euros ($4.29 billion) from Germany, the European Union executive said.

For now, approval was given only to ensure financial stability, it added.

In a separate statement, the German finance ministry said it had no doubts the measures would be given the green light, adding that the EU’s investigation was part of the “usual legal assessment procedure for state aid”.

WestLB to shift 87 billion euros to first German bad bank

The headquarters of WestLB is pictured before the annual news conference in Duesseldorf March 26, 2009. REUTERS/Ina Fassbender (GERMANY BUSINESS HEADSHOT) By Jonathan Gould and Matthias Inverardi
FRANKFURT/DUESSELDORF, Oct 7 (Reuters) – Germany’s WestLB will jettison at least 87 billion euros ($128 billion) in risky assets to the country’s first “bad bank”, a move other lenders are likely to follow.