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BayernLB Deal Negotiations Continue, German Savings Banks Say

Bavaria’s savings banks said that talks are continuing on a deal to restructure Bayerische Landesbank, Germany’s second-biggest state-owned lender, in return for European Union approval of its bailout.

“The negotiations on the role of savings banks in BayernLB’s restructuring are still ongoing,” Theo Zellner, president of the Bavarian Savings Bank Association, said today in an e-mailed statement. “The talks have not broken down,” he said.

German savings banks have backtracked on an agreement over their level of contributions to a restructuring plan that would have included the sale of BayernLB’s LBS Bayern mortgage lending unit, a person familiar with the matter said yesterday.

Their withdrawal might endanger a deal with EU Competition Commissioner Joaquin Almunia, who told the Sueddeutsche Zeitung earlier this month that EU officials were close to an agreement with the bank’s owners, which include the German state of Bavaria, on the terms for EU approval of BayernLB’s bailout.

The European Commission has required banks to shrink balance sheets and sell off assets to compensate for the harm to competition arising from state aid. As a last resort, it can force authorities to recoup the aid they have provided.

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