Fosse Financial, Italy - German state of North-Rhine Westphalia will back 5bn Euro rescue of WestLB.
According to sources close to Fosse Financial, the finance minister of the German state of North-Rhine Westphalia has expressed serious concern regarding the impact of the global credit crunch on WestLB.
WestLB, the regional bank of North-Rhine Westphalia has been hard hit by its holdings of shares in Volkswagen, BMW and the distributor Metro, and felt the squeeze of the collapse of the US market for high risk home loans. According to sources, reports by Fosse Financial revealed that WestLB raked up appalling losses estimated at 1 billion Euros in 2007.
Under the stipulations of the agreement to bailout WestLB, the bank is to cut almost one quarter of its workforce.
In addition, according to the reports by Fosse Financial, the banks central risks are to be put into a special function vehicle covered by guarantees of up to 5 billion Euros by the banks owners.
In late January, the shareholders of WestLB settled on a guarantee of 2 billion Euros, on top of which the German state of NRW finally accepted to add 3 billion Euros, according to sources close to Fosse Financial.
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