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Landesbanks face new dawn

The unthinkable became true when the German government agreed to the demands of the European Commission to abolish state support for Landesbanks and savings banks last month. German private banks were quick to announce their interest in taking over some of the 562 savings banks, which have a market share of around 50% - the highest share of public banks world wide. But it might not be that easy. Although the agreement catapults the process of consolidation of Germany's overcrowded banking sector into a higher gear, it won't happen in the very near future.

The reason is that whereas the Gewährträgerhaftung (guarantee obligation) will be abolished, the Anstaltslast (maintenance obligation) will merely be replaced "in order to comply with the following principles," reads the agreement. "The financial relationship with the public owner shall not be different from a normal commercial ownership relation governed by market economy principles just as between a private shareholder and a limited company."

The private banks, which initiated the process by a formal complaint to the Commission in 1999, take this to mean that the public-law institution will be transformed into a joint stock company or something very similar.

But this is certainly not what the finance ministry thinks.

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