New push to merge German publicly-owned landesbanks

City A.M. Reporter
German finance minister Wolfgang Schaeuble yesterday launched a new campaign to merge publicly-owned landesbanks, which suffered in the credit crisis and could lose support more quickly under new capital rules.

The Basel III agreement on bank capital rules passed at the weekend has given new momentum to long-running plans to consolidate or privatise such regional lenders, the finance ministry spokesman Michael Offer said.

“The need for action has increased, and it’s correct that the finance minister will increase his efforts to work towards a solution on this issue,” he added.

Consolidation could start with the sale of a landesbank in the western state of North Rhine-Westphalia (NRW).

“The trigger could be the sale of WestLB,” a high-ranking landesbank source said. “But I wouldn’t expect much support from the state premiers, because they want to maintain the status quo for the most part.”

Landesbanks like WestLB, LBBW and BayernLB provide wholesale banking services to their local public savings banks and are a source of prestige and patronage for state politicians.