Sources close to German lender BayernLB have said that the bank is in talks with the European Commission regarding capital strengthening, with the state of Bavaria backing the plan.
One of the sources mentioned that the European Central Bank is also keen to go ahead with the move in order to shore up Bavarian lending.
BayernLB were involved in a state aid investigation several years ago, and they will be hoping the latest negotiations with the EU can go ahead without another probe, and the sources said they want to wrap up an agreement before the end of the first quarter next year.
Neither the EU Commission nor the ECB were available for comment on the story, while a BayernLB representative said the nature of the talks were confidential but confirmed that the bank was seeking help from the state of Bavaria.
BayernLB were hobbled after the financial crisis of 2007-2009 as they were bound to pay back 6 billion euros of aid that the Bavarian local government had provided the lender. The payments needed to be completed by 2020 if the bank wanted regulatory approval for the funds.
“Bavaria are adamant that the bank requires further bolstering due to Austrian bank Hypo AlpeAdria, which was later nationalized, being involved in the original aid deal,” said Anthony Russell, Senior Vice President at Monex BMO Securities in a note to investors yesterday.
The EU is expected to make a decision in the next few months.
