EU commission approves wind-down plan for Germany's WestLB bank

Dec 20, 2011, 10:46 GMT

Brussels - The European Union's executive on Tuesday closed a two-year investigation into Germany's WestLB bank, as it approved a plan to wind down the troubled lender.

Under the plan, WestLB will stop offering new banking services as of June 30, the European Commission said in a statement.

Its core activities, related to the servicing of German savings banks, will be transferred to a smaller institution, the Verbundbank.

All remaining assets and liabilities will be sold or, if no buyers are found by June 30, taken over by the Erste Abwicklungsanstalt (EEA), a public-private wind-down agency funded by the German government, reported the German state of North-Rhine Westfalia state and the country's savings banks.

EU Competition Commissioner Joaquin Almunia thanked German politicians and bankers 'for coming up with a solution that closes this chapter once and for all.'

German authorities had attempted to keep WestLB afloat in 2008-2009 with an 11-billion-euro (14.3-billion-dollar) rescue package, but the commission rejected it, finding that the plan comprised 3.4 billion euros of illegal state aid.

That decision forced Germany to submit a harsher restructuring plan for the bank in June.

As the EU's executive, the commission is mandated with policing free competition and limiting state aid within the bloc as much as possible.

In its statement, the commission noted that WestLB ran into trouble before the start of the global financial crisis in September 2008, as a result of excessive risk taking as it expanded its core activities and moved into investment banking.