The German state of North Rhine Westphalia will cease to have a "Landesbank," or state bank, as a result of a restructuring plan approved on Thursday by the state assembly.

Parliamentary approval came late in the day after politicians had earlier unexpectedly blocked the last-ditch plan to restructure the troubled state bank, Germany's third largest. The plan had been voted down due to disagreement among politicians over technicalities of the voting process.

New 'Verbundbank'

WestLB, which is owned by the state of North Rhine-Westphalia and a regional savings bank, was once Germany's most internationally ambitious state-owned bank, having built up a substantial project and principle finance business. But the bank has been losing money over the past several years, requiring repeated state bailouts.

The European Union had demanded, as a condition for receiving billions of state aid during the financial crisis, that the bank shrink and eventually find a private-sector owner.

Under the agreement, WestLB is to be split into a Verbundbank, owned by the savings banks, and a "service and portfolio management bank," owned by North Rhine-Westphalia.

The Verbundbank is to provide central banking services to savings banks in the region. The service and portfolio bank is to provide services to the Verbundbank, the WestLB bad bank and third parties.

It is to sell its banking businesses and stock holdings or transfer them to WestLB's bad bank, the EAA. Among the banks rumored to be interested in buying this business is HSBC Trinkhaus & Burkhardt.

Author: John Blau (Reuters, AFP)
Editor: Chuck Penfold