5 November 2010 Last updated at 11:26 ET

EU warns troubled German bank WestLB over state aid

WestLB, a troubled state-controlled German bank, has been warned it may be wound down if it does not quickly comply with European competition rules.

Competition commissioner Joaquin Almunia said the European Commission had repeatedly asked for a revised restructuring plan, but had not received one from German authorities.

The possibility that WestLB would be broken up was "increasing", he said.

"Time is running out... decisions are required as [soon as] possible."

WestLB transferred about 77bn euro of its toxic and non-strategic assets to a so-called "bad bank" earlier this year.

The Commission, which provisionally approved a restructuring in May 2009, is investigating whether WestLB breached competition rules after receiving an extra 3.4bn euro in state aid.

It said that before it could approve the aid, the bank should consider "further restructuring measures" to address concerns about unfair advantages over other banks, or a gradual reimbursement of the sum.

Mr Almunia also said he had growing doubts that WestLB's business model could restore its viability.

However, WestLB's chief executive Dietrich Voigtlaender said the Commission had failed to present new facts to back up its position.

The German finance ministry said the government did not expect WestLB to collapse and that the bank would be able to meet EU conditions.