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Austria: Erste, the product factory

Erste Bank handed control of its branch network to local savings banks, and went to work on creating products they could sell.

The financial cornershop

Erste becomes a profitable product factory

Measured by total assets of some €120 billion, Austria's Erste Bank der österreichischen Sparkassen (Erste Bank) is about a third of the size of WestLB, although by total clients – about 2 million – it would be a minnow by the standards of virtually all of Germany's Landesbanken.

Nevertheless, the strategy that Erste Bank has developed since its flotation in 1997 is one that is reportedly being studied very closely by a number of German Landesbanken. According to an Erste spokesman, several German banks have already approached the Austrian bank to find out more about the potential for its business model to act as a blueprint for the development of the Landesbank sector.

Its absolute size apart, there have been at least two very clear differences between the structure of the Austrian and the German savings banking industries. The first is that unlike the local Landeshypothekenbanken, the majority of Austria's savings banks have never been protected by the state guarantees that their German counterparts enjoyed through the Landesbanken's Anstaltslast and Gewährträgerhaftung guarantees.

The second is that Austria's savings banks have not been restricted, as Germany's Sparkassen have, to operating within predetermined regional limits.

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