Financial Crisis Legacy

Struggling Regional Banks Rid Themselves of Bad Assets

Bavaria's finance minister Markus Söder. Bavaria is the main shareholder of Bayern LB. Source: DAPD.
Bavaria's finance minister Markus Söder. Bavaria is the main shareholder of Bayern LB.
  • Why it matters

    Why it matters

    Germany’s Landesbanken have cost federal and state governments billions of euros in bailouts since the financial crisis. The latest asset sales bring these banks closer to closing a dark chapter.

  • Facts

    Facts

    • BayernLB’s primary owner is the state of Bavaria. It still owes the German government €4 billion that has to be paid back by 2019.
    • LBBW is part-owned by the city of Stuttgart, the state of Baden-Württemberg and the state’s savings and loan banks. It took a bailout of €5 billion after the financial crisis.
    • Germany’s Landesbanken are among 127 European financial institutions being subjected to a comprehensive review of their balance sheets by the European Central Bank.
  • Audio

    Audio

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It hasn’t been easy for Germany’s Landesbanken over the last six years. Many of these banks, which are part-owned and guaranteed by the states, made bad loans and acquisitions ahead of the 2008 financial crisis and had to be bailed out to the tune of billions of euros by the German government.

For these banks, the legacy of the financial crisis remains a daily worry. Now, two of these state-owned banks, Bavaria’s Bayern LB and the Stuttgart-based LBBW, may have succeeded in shedding a major remaining portion of the bad loans on their books.

The asset sales could hardly have come at a better time. Germany’s Landesbanken are among the 127 European financial institutions currently being subjected to a comprehensive review of their balance sheets by the European Central Bank, the results of which will be released in October.

“We’re happy it’s over,” BayernLB chief executive Jörg Riegler said Thursday as he announced the sale of its Hungarian subsidiary, Magyar Külkereskedelmi Bank, or MKB, to the Hungarian government.

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