Earlier this month, WestLB's <WDLG.UL> owners stumped up a further 3 billion euros to rescue the lender which said it would slash jobs as it prepares to be sold.
FRANKFURT (Reuters) - The German state that partly owns WestLB has predicted that rehabilitating the stricken regional lender will take up to five years, according to a newspaper report.
Earlier this month, WestLB's <WDLG.UL> owners stumped up a further 3 billion euros to rescue the lender which said it would slash jobs as it prepares to be sold.
The state of North Rhine-Westphalia (NRW), which owns almost 40 percent of the bank, said it would shoulder the fresh risk guarantees, which come on top of 2 billion euros agreed last month to cover losses and write-downs in the wake of global credit turmoil.
In a newspaper interview on Sunday, NRW's finance minister warned that WestLB's problems would not be solved any time soon.
!ADVERTISEMENT!"The clean up will certainly take between three and five years," Helmut Linssen told German newspaper Welt am Sonntag. "Staying patient and rational is necessary. Otherwise all of those involved will lose a lot of money."
Linssen called on the federal German government to help pay for the repair of banks backed by regional governments such as WestLB who have been hit hard by the credit market turmoil.
"The German Finance Minister helps IKB<IKBG.DE>, which made considerable losses out of the risk-paper business. Why doesn't Mr Steinbrueck help publicly-backed banks?"
Company lender IKB, Germany's highest profile casualty of the subprime crisis, was rescued by a government bailout.
Europe's biggest economy has taken a hard beating from credit market turbulence and Germany's regional state-backed landesbanks such as WestLB have been especially badly hit.
Struggling after the abolition of government guarantees that made it cheaper for them to borrow, many seized on the booming market in securitized debt to bolster profit only to run into trouble when credit markets seized up.
The credit crisis, which started when U.S. home owners were squeezed by falling property prices and rising interest rates, has rocked confidence in the global economy.
It battered SIVs (structured investment vehicles), which raise funding by issuing short-term debt to finance longer-term investments in bank debt and asset-backed securities.
The off-balance-sheet vehicles have been caught out as investors shunned complex debt instruments and refused to cough up short-term funding.
WestLB, which ran a series of investment vehicles including SIVs with a value of about 25 billion euros, is worth about 7 billion euros -- roughly the same as the value of its equity.
(Writing by John O'Donnell; Editing by Richard Hubbard)
