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BayernLB: Chapter 3
The vice-president of the BayernLB supervisory board, Bavarian Finance Minister Erwin Huber, stated that the bank was more affected by the crisis than was previously 'known'. But he stressed that liquidity was guaranteed.
The BayernLB reported a loss of €100m related to US mortgages. Huber: I suspect that the final losses will be greater, but the annual profits for 2007 are not in danger.
Due to "popular demand", the BayernLB has communicated the 2007 end result prematurely:
Net profits: €1bn
Total losses: €1.9bn, consisting of
1) €150m due to US-subprimes, already taken into account within the net profits
2) €450m due to other
losses in relation to the financial crisis
3) €1,3bn due to still other (?)
losses, set against the future investment loss reserve
Interview with banking expert Ekkehard Wenger on the future of state banks.
Süddeutsche: Do state banks have a future, and what should the government undertake?
Wenger: The government should immediately completely withdraw from state banking. Of all banks in Germany, the state banks have been hit the hardest. Even the Deutsche Bank has less rubbish on its hands than some of the state banks or the IKB.
Süddeutsche: Who is responsible for this plight?
Wenger: Responsible are the ownership relationships. As long as the owners do not have to watch over their own
money in these institutes, the managers do whatever they like, and set to gambling and speculating. For a few years this goes on unnoticed, until the statistics catch up with them.
Süddeutsche: Should state banks be privatized?
Wenger: In particular the Supervisory Board, which has been demonstrated as superfluous and totally incompetent, belongs in the rubbisch.
. . . . . . . . . .
Süddeutsche: What does this mean for the taxpayer? Does the Crisis burden the budget of the Federal Finance Minister, Peer Steinbrück?
Wenger: The burnt billions have to be payed for by the taxpayer, even if Mr. Steinbrück attempts to create the contrary impression. He is one of the worst VOLKSVERDUMMER that run around in this country.
[Eulenspargel: VOLKSVERDUMMER = someone who pulls down the 'wool' before the eyes of the public]
. . . . . . . . . .
Süddeutsche: What frustrates you most about this bank crisis?
Wenger: That nobody questions the system of banking supervision
("bafin"). The banking supervision is always presented to us as the institution that guarantees the stability of the financial system. In reality, the banking supervision was caught here completely asleep, together with their Lord and Master Steinbrück.
The Austrian central bank accuses the Liechtenstein HGAA subsidiary, the majority of which is owned by the BayernLB, of unlawful operations in Liechtenstein. The Bavarian parliamentary opposition demands an explanation on whether the Liechtenstein bank "offers investment opportunities which aim at tax evasion"*. The BayernLB disclosed that the HGAA is planning an immediate withdrawal from the Liechtenstein subsidiary.
*) Eulenspargel: The Duchy of Liechtenstein is well known as a notorious tax haven.
The rating agency Moody's fears that the BayernLB depreciations could turn out to be double the previous estimates, €3.8bn (the total volume of structured securities held by the BayernLB amounts to €32bn).
The BayernLB admits to a depreciation to date of €4.3bn. The bank wants to transfer €24bn of risky securities to a foreign SIV, and is hoping for a guarantee of €4.8bn from the two owners in order to redress the balance sheet. On the average, these securities had a time-to-maturity of six years. Not until then could the losses be calculated.
Whether this manoeuvre is in line with EU law is uncertain. A parliamentary investigation commission has been created to investigate the role of the Finance Minister in the Supervisory Board.
The annual profit for 2007 dropped from €1bn the previous year to €175m. Despite this, the bank intends to pay out the same dividends as the previous year. The BayernLB CEO stated "he could see no immediate threat to the bank. The bank has invested in good quality securities. Many banks have done so. The problem lies not so much in the quality of the stock, "but in the fact that the market fur these papers has broken down".
According to FTD the Bavarian government is thinking about selling its 50% share of the BayernLB.
The first quarter loss of the BayernLB is €770m.
In the next two years, 350 BayernLB jobs are planned to be cut on the basis of an "Efficiency Enhancement Program".
The Liechtenstein subsidiary of the BayernLB has been barred from share trading in Canada because of cooperation with dubious dealers (Spam methods*).
*) Generation of buyer interest in penny stocks. As soon as a sufficient number of naive investors have fallen for it, the originators of the campaign sell.