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EU pushes BayernLB to sell E.Europe units – sources

  German state-owned bank BayernLB is facing pressure from the European Commission to sell holdings in emerging European countries, several people familiar with the matter told Reuters.

The bank needs the European Union to approve a €30 billion ($40 billion) state-sponsored bailout.

The EU is concerned that the aid could constitute an unfair competitive advantage and has been pushing German banks, such as BayernLB’s fellow landesbank WestLB, to restructure in exchange for approval of state support.

The only major holding that the European Union’s executive body is not asking BayernLB to sell is internet bank DKB, the sources said. BayernLB declined to comment on the matter.

The Commission declined to comment on whether it had demanded that BayernLB sell some of its holdings, but said it expects BayernLB to present a restructuring plan soon.

BayernLB owns MKB, Hungary’s No.3 lender, and is among the biggest banks in the former Yugoslavian countries via its Austrian arm Hypo Group Alpe Adria.

The western parent banks that dominate lending in the crisis-struck emerging European countries play a key role in the International Monetary Fund’s and the European Union’s bailout plans for countries including Hungary, Romania or Serbia.

The banks have committed to continue funding subsidiaries and lending to clients in those countries, for which most other forms of external funding such as foreign direct investment have virtually dried up due to investors’ risk aversion.

The EU has said the re-capitalization of western European banks should benefit their subsidiaries in eastern Europe, but a sell-off could mean an uncertain future for these units. (Reuters)