Bayerische Landesbank (BayernLB; Bavarian State Bank) is a publicly regulated bank based in
Munich
Munich ( ; german: München ; bar, Minga ) is the capital and most populous city of the German state of Bavaria. With a population of 1,558,395 inhabitants as of 31 July 2020, it is the third-largest city in Germany, after Berlin and Ha ...
,
Germany
Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwe ...
and one of the six
Landesbank
In German-speaking jurisdictions, ''Landesbank'' (plural ), , generally refers to a bank operating within a territorial subdivision () that has autonomy but not full sovereignty. It is occasionally translated as "provincial bank".
Austria-Hungar ...
en. It is 75% owned by the Free State of
Bavaria
Bavaria ( ; ), officially the Free State of Bavaria (german: Freistaat Bayern, link=no ), is a state in the south-east of Germany. With an area of , Bavaria is the largest German state by land area, comprising roughly a fifth of the total lan ...
(indirectly via BayernLB Holding AG) and 25% owned by the ''Sparkassenverband Bayern'', the umbrella organization of Bavarian
Sparkassen. With a balance of €220 billion and 7,703 employees (in the group; 3,343 in the bank itself), it is the seventh-largest financial institution in Germany.
Main business activities
As a commercial bank, BayernLB Group offers private and commercial customers a universal range of services in private, industrial, investment and foreign business. This includes
loan
In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that ...
s,
securities trading
A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...
and
asset management, as well as mid-term and long-term
bond
Bond or bonds may refer to:
Common meanings
* Bond (finance), a type of debt security
* Bail bond, a commercial third-party guarantor of surety bonds in the United States
* Chemical bond, the attraction of atoms, ions or molecules to form chemica ...
issuance and
securitization. The bank is refinanced through a variety of commercial
debenture
In corporate finance, a debenture is a medium- to long-term debt instrument used by large companies to borrow money, at a fixed rate of interest. The legal term "debenture" originally referred to a document that either creates a debt or acknowle ...
instruments.
As a state and municipal bank, BayernLB is responsible for comprehensive credit and financial counsel for the state of Bavaria and its
municipalities
A municipality is usually a single administrative division having corporate status and powers of self-government or jurisdiction as granted by national and regional laws to which it is subordinate.
The term ''municipality'' may also mean the go ...
and
districts.
Through its subsidiaries, the bank is involved in a variety of further business areas. The Bayerische Landesbodenkreditanstalt is an organ of state housing policy. Through its full ownership of the
Deutsche Kreditbank
Deutsche Kreditbank (DKB) is the second-largest direct bank in Germany with 4.5 million customers, fully owned by Bayerische Landesbank. In 2018 the company, with its parent company BayernLB, ranked 7th on the list of the biggest banks in Germ ...
, based in Berlin, BayernLB is also involved in
retail banking.
History
![BayernLB](https://upload.wikimedia.org/wikipedia/commons/0/03/BayernLB.jpg)
Through its predecessor, the Bayerische Gemeindebank (founded 1914), and its much older subsidiary, the Bayerische Landesbodenkreditanstalt (founded 1884), BayernLB can claim to have more than 100 years of history. In its current form, the bank was founded by law on June 27, 1972, through the merger of the two institutions. Its first President was
CSU veteran politician
Karl Theodor Jacob. Later managers and Board members would also frequently be drawn from politics.
The bank expanded internationally in the 1990s, gaining toeholds in East Asia, Eastern Europe and the United States. Through the 2007 acquisition of a 50.01% share in
Hypo Alpe-Adria-Bank International for a sum of €1.625 billion, BayernLB expanded its geographic presence to Austria and the Balkans.
Involvement in the mortgage crisis
In early 2008 it was revealed that BayernLB had made large losses due to investments in
sub-prime mortgage securities in the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...
. Although the extent of these investments has been the topic of speculation, it was revealed from the company's Q2 2008 financial report that over €24 billion had been invested in critical securities, with losses of 2.3 billion euros in 2007 and a further 2 billion euros in the first quarter of 2008.
The heavy public criticism took its first toll in March 2008 when CEO Werner Schmidt resigned less than a week after the bank wrote down €1.9 billion as a result of the US subprime crisis. The crisis also consumed the governing
CSU party and its chairman,
Erwin Huber
Erwin Huber (born 26 July 1946) is a German politician. He was chairman of the Christian Social Union of Bavaria from 2007 to 2008.
Early life
Erwin Huber was born in Reisbach in the district of Dingolfing-Landau, Bavaria. He attended elementa ...
, who as Bavarian
Minister of Finance
A finance minister is an executive or cabinet position in charge of one or more of government finances, economic policy and financial regulation.
A finance minister's portfolio has a large variety of names around the world, such as "treasury", " ...
was the acting chair of the bank's Administrative Council and was accused of covering up the extent of losses. The bank and the losses were major factors in the September,
2008 parliamentary elections, in which the CSU had its worst election result since 1962 and Huber resigned. Later that year, BayernLB became the first German financial institution to accept assistance from the federal government's €500 billion rescue package. The state of Bavaria injected 10 billion euros in capital into the lender and gave it €4.8 billion in guarantees for a portfolio of complex securities that turned sour after the collapse of
Lehman Brothers
Lehman Brothers Holdings Inc. ( ) was an American global financial services firm founded in 1847. Before filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank in the United States (behind Goldman Sachs, Morgan Stanley, a ...
. At the time, BayernLB agreed to repay 5 billion by 2019, while 5 billion euros would remain in the bank as part of Bavaria's 75 percent stake in the lender. Local savings banks own the rest.
The bank representatives advise economy was not ready for an increase in borrowing costs, and so the goal is to keep interest rates on hold. But it said it would end some of the measures it had introduced during the global downturn to increase the amount of money in the financial system. The German economy later recovered from recession but growth has flatlined since 2012. This is in stark contrast to more developed economies that fell into recession.
Post-crisis developments
In 2010, BayernLB held preliminary talks over a possible merger with
WestLB WestLB AG (derived from ''Westdeutsche Landesbank'', i.e. "Western German state Bank") was a European commercial bank based in Düsseldorf, Germany which was mainly owned by the German state of North Rhine-Westphalia. Landesbanks are a group of pa ...
but discussions were broken off after only a few weeks. That same year, it became the first of Germany's bailed-out Landesbanken to return to profitability, making pre-tax profits of about 885 million euros. By 2014, BayernLB returned 2.7 billion euros to its state owner Bavaria; in 2016, it repaid another 1.3 billion euros. The final tranche of 1 billion euros was paid in June 2017.
In 2016, BayernLB entered into a partnership with
Standard Chartered through which the latter will help finance Asian operations for German export-oriented small and medium-sized businesses.
BayernLB (Bayerische Landesbank) has concluded its EU state aid proceedings in June 2017 ahead of schedule, having repaid a total of almost 5.5 billion euros to the Free State of Bavaria. Under a ruling by the EU in 2012, BayernLB was required to pay a total of 4.96 billion euros to the Free State of Bavaria by 2019 at the latest. The early repayment of the last outstanding state-aid money was made possible by BayernLB's strong business performance and the solid capital base that goes with it. The responsible authorities (ECB, German Bundesbank, BaFin and the European Commission) also acknowledged BayernLB's financial stability by approving the payout of the silent partner contributions. As member of a protection scheme for Germany's Landesbanken, BayernLB had to pay 120 million euros for the
NordLB rescue deal struck in February 2019.
Notable legal cases
In the early 2000s, BayernLB made headlines with a succession of legal scandals. In 2011, the bank's former chief risk officer was arrested after he received an alleged $50 million corrupt payment in connection with the bank's 2005 sale of a stake in
Formula One
Formula One (also known as Formula 1 or F1) is the highest class of international racing for open-wheel single-seater formula racing cars sanctioned by the Fédération Internationale de l'Automobile (FIA). The World Drivers' Championship, ...
motor racing.
In a 2012 suit filed in a New York court, BayernLB asserted that
Deutsche Bank
Deutsche Bank AG (), sometimes referred to simply as Deutsche, is a German multinational investment bank and financial services company headquartered in Frankfurt, Germany, and dual-listed on the Frankfurt Stock Exchange and the New York Sto ...
sold
residential mortgage-backed securities to external clients while secretly criticizing them within the bank and ultimately profiting from their failure. By 2014, both banks agreed to settle the $810 million lawsuit out of court.
A number of legal cases over BayernLB's €1.63 billion acquisition of Hypo Alpe-Adria-Bank International Group AG in 2007 have marred relations between Bavaria and its southern neighbor Austria. In 2014, former chief executive Werner Schmidt was found guilty of bribing the late Austrian politician
Jörg Haider
Jörg Haider (; 26 January 1950 – 11 October 2008)
was an Austrian politician. He was Governor of Carinthia on two occasions, the long-time leader of the Freedom Party of Austria (FPÖ) and later Chairman of the Alliance for the Future of ...
to facilitate the acquisition. In what was the first case in Germany to put management board members on trial for overpaying for an acquisition, seven former BayernLB executives went on trial over claims they overpaid by €550 million when they purchased the majority stake of Hypo Alpe-Adria-Bank.
[Karin Matussek (January 27, 2014)]
M&A on Trial Has Ex-BayernLB Bank Managers Risking Prison
'' Bloomberg Business''.
See also
*
SaarLB (75.1%) (Saarland Landesbank)
*
Deutsche Kreditbank
Deutsche Kreditbank (DKB) is the second-largest direct bank in Germany with 4.5 million customers, fully owned by Bayerische Landesbank. In 2018 the company, with its parent company BayernLB, ranked 7th on the list of the biggest banks in Germ ...
(DKB) (direct bank)
*
MKB Bank MKB may refer to:
Business
* MKB Bank, the third-biggest commercial bank in Hungary
* MKB Raduga, a Russian aerospace company
* MKB Fakel, a Russian government-owned aerospace defense corporation
Community
* Moogooru Karnataka Brahmin, a sect ...
(Hungarian bank)
*
MKB Romexterra Bank (Romanian Bank)
*
Hypo Alpe-Adria-Bank International (Austrian bank, was a subsidiary)
*
MKB Unionbank
Unionbank ( Bulgarian: Юнионбанк, ''Yunionbank'') was a major Bulgarian retail and commercial bank with headquarters in Sofia.
As of the end of 2010, its assets amounted to over €1.7 billion and growing, while the share capital of t ...
(Bulgarian Bank)
References
External links
BayernLB*
{{Authority control
Landesbanks
Companies based in Bavaria
1972 establishments in West Germany
Banks established in 1972
Banks under direct supervision of the European Central Bank