Banking and investment services: Commission investigates German bank aid

United Kingdom

Commission investigates German bank aid

The Commission has launched an investigation into claims that Germany has given unlawful State aid in the form of a capital injection of DM 5.9bn (£2bn) to the Westdeutsche Landesbank.

The investigation was launched after the German association of private sector banks complained to the Commission. The source of the dispute was the integration into West LB in 1992 of the State-owned institute for the promotion of house building, which provides low-cost housing for the socially disadvantaged. West LB cannot use the money for other business and pays a "market rate" for this capital, against which it can raise funds.

The complaint was the second attack on the capital injection by the private banks. The Commission rejected the first, which was that the injection should not count towards West LB's own funds.