BANKING : EU EXEC INVESTIGATES RESCUE OF WESTLB.

For "reasons of financial stability", the European Commission temporarily authorised, on 22 December 2009, the creation of a bad bank' for the German regional bank WestLB and state aid of three billion euro. However, it has doubts about the measures' compatibility with state aid rules for impaired asset relief and bank restructuring and has consequently opened a formal investigation.

WestLB AG (North Rhine-Westphalia) operates as a central bank and as a commercial bank. It agreed to a major restructuring last May in order to obtain the Commission's go-ahead for an initial set of public aid measures.

In December 2009, the owners of WestLB agreed with SoFFin, a public financial body, on the bad bank that will take over and wind up WestLB's portfolio of toxic and non-strategic assets. Since the bad bank is expected to register losses, it is equipped with equity of three billion euro...