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Germany, EU may end savings bank dispute & allow sale of lender

Germany and the EU may be close to ending a dispute over the rights of savings banks to protect their brand, opening the way to a bid from private lenders for a chain of the retail banks in Berlin.

The European Union agreed to uphold German law that protects the brand of the savings banks or „Sparkassen” on the condition that Germany agrees to an exception in the case of the Berliner Sparkassen chain, said Finance Ministry spokeswoman Ulrike Abratis. „It looks very good,” German Finance Minister Peer Steinbrueck said before a meeting of European finance ministers today in Brussels. „After long negotiations, we now have preconditions to reach an agreement.”
He declined to give more details. Germany, supported by the DSGV Sparkassen federation, opposes allowing private investors to buy the savings banks. The EU views the sale of Berlin's savings banks as a test case to ease restrictions on the sale of the public lenders to private bidders. The row was triggered by conditions set by the European Commission for the sale of the Landesbank Berlin Holding AG, formerly known as Bankgesellschaft Berlin AG, a state bank with a Sparkasse unit. The EU ordered Berlin to sell its bank with its units as a condition of approving a city-financed bail-out in 2001.

The city, one of 16 German states, has debt of about €60 billion and planned the sale of its Sparkassen this year. The proposed compromise reached today points to a truce between Germany and the commission in their dispute over opening the country's banking market to more competition. Banks, including Deutsche Bank AG, are seeking to expand their retail business. The Frankfurt-based lender in June bought the Berliner Bank, a unit of the Landesbank.

The Berliner Sparkasse controls about 50% of the city's retail accounts, the Landesbank has said. Germany's Sparkassen legislation, which restricts use of the banks' name, obliges the 650 savings banks to use profit for the public good. The banks hold total assets of €3.3 trillion ($4.33 trillion) and employ 370,000 at 21,800 branches, according to the DSGV savings bank group's Web site. The legal status that bars a sale of the lenders to private investors remains in tact in the proposed compromise, said Stefan Marotzke, a spokesman for the DSGV Sparkassen group, in an interview.

The potential accord „underlines that the sale of the Berliner Sparkassen won't become a precedent for privatization.” „Naturally, this dispute could flare up anew should another bank need rescue,” Reinhard Schulz, a lawmaker from the ruling coalition, said in an e-mailed statement today. The commission in 2001 recognized that Germany's Sparkassen legislation is compatible with EU competition rules, said Steinbrueck on August 31. The government aims to uphold Germany's three-pillar banking system, he said. (Bloomberg)