"The Landesbank issue is a bit like the undead," the analyst sighs.
"It seems to stay with us for ever." In July 2001, the European
Commission ended years of complaints and evasions by ordering
Germany to remove public guarantees from state banks. Created to do
public finance business for their local governments, the states of
the German federation, the Landesbanken have antagonized Europe's
privately owned banks by using their funding advantage to move into
commercial lines such as asset management, investment banking and
derivatives, undercutting rivals to get market share. Now their
funding advantage has to disappear within three years. And no-one
is sure how the Landesbanken will compete without it.
All over bar the detail
The issue is still unsettled. Germany is in talks with the EC to
settle important details. In a typical European bureaucratic
tangle, the text, when translated into German, is unclear on
whether the grandfathering arrangement that will...
