The death knell has been sounded many times before: Germany’s unique and myriad network of regional, state-owned banks (Landesbanken) has been brought to its knees several times since the 2008 financial crisis.
Bad loans led to the collapse of two of them and to the bailout of many more. Those that survived have been struggling ever since, with critics, including the Organisation for Economic Co-operation and Development, calling for major consolidation.
The banks’ fight for survival will only get harder this year. Their cozy relationship with Germany’s states, which founded the Landesbanken in the 19th century to foster regional development, could be coming to an end.
So will 2015 be the year that finally breaks the Landesbanken?
HSH Nordbank, a regional lender in northern Germany, could be a test case. The bank barely survived 2014, scraping through the stress tests of the European Central Bank – a comprehensive examination of the health of Europe’s banks. It only passed because of an increased balance sheet guarantee from its majority owners, the states of Hamburg and Schleswig-Holstein.