Germany banking: NordLB shows urgent need for reform
Berlin alone cannot change the costly quirks of Germany’s state-owned corporate banks.
Publicly owned regional wholesale banks were part of the financial architecture behind Germany’s post-war economic miracle.
However, globalization and European integration – especially the advent of a stronger EU single market and competition framework – has rendered the Landesbanken increasingly obsolete. WestLB’s sub-prime losses and the later and longer rusting of northern Landesbanken’s shipping portfolios are the inevitable harbingers of the eradication of their independence.
Now, negative rates and the less partial supervisory policy of the banking union are further hastening their demise – above all the ECB’s increasing determination to bring down non-performing loan ratios across Europe. Indeed, the single supervisor, combined with state-aid rules, is behind a frantic search for capital at Hanover-based NordLB, before it properly recognises the worthlessness of its shipping book: perhaps blowing a hole in its 2018 results of more than €3 billion.
The Landesbanken must join together if they have a future as part of the third public-sector pillar of Germany banking, alongside cooperatives and private banks. Belatedly, the public-sector banks’ umbrella group in Berlin, the DSGV, and the federal finance ministry seem to have recognised this since coming under new leadership last year: Helmut Schleweis at DSGV, and Olaf Scholz at the ministry, alongside deputy finance minister Jörg Kukies (previously of Goldman Sachs).