|
EC probes German bank
|
 |
July 6, 1999: 10:13 a.m. ET
WestLB, largest German state-owned bank, may be forced to repay state aid
|
LONDON (CNNfn) - Germany's largest state-owned bank, Westdeutsche Landesbank, has lashed out at the European Commission ahead of a meeting Thursday, which according to the bank's estimate could force it to repay 808 million euros ($827 million) in state aid.
Dr. Friedel Neuber, chairman of WestLB, attacked the executive body of the European Union, claiming the groundwork for its imminent decision was "based on the wrong assumptions and is grossly misleading."
But a spokesman for acting competition commissioner Karel van Miert denied its two-year investigation is flawed. "If we shared that view we would not be [submitting] our proposal on Thursday," he told CNNfn.com.
The Commission is set to rule on a complaint lodged by the Federal Association of German Banks against WestLB in December 1994.
The charge alleged that WestLB had benefited unfairly from cheap capital after the German State of North Rhine-Westphalia transferred a housing agency to the bank's books in 1992. The move boosted WestLB's equity by 3 billion euros.
Neuber's complaint centers on the proposal by the Commission, which WestLB claims will force the bank to pay a premium on this equity at a rate of 26.7 percent before tax, which amounts to 808 million euros.
Van Miert's spokesman points out that after tax this figure is equivalent to a 12 percent return, compared to sector average rates of 14 percent in 1992. He also told CNNfn.com that the Commission is only looking to force a premium payment on the portion of the capital that the bank actually used for loans, which amounted to 1.3 billion euros.
Neuber points out that German government data show that the average return on capital paid by publicly-traded German banks is 10.3 percent pre-tax. He added that if the proposal before the Commission is approved, it "would result in a significant competitive disadvantage for all public-sector banks."
Jürgen Haferkorn, German analyst with credit rating agency Duff and Phelps in London, believes the Commission is right to find against WestLB, but said he couldn't comment on the rate of return. "It is unfair competition. WestLB is competing with private banks on a very large scale," he said.
A spokeswoman at the Commission in Brussels confirmed that the WestLB case was on the agenda for Thursday's meeting. 
|
|
|
|
|
|
WestLB
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
