WestLB is set to exit the structured retail products market in Germany as it implements a restructuring, which was approved by the European Commission late last year.
As part of the restructuring, WestLB has been split into three parts including a regional bank with about €40bn in assets, dubbed Verbundbank, which will provide service to regional savings banks and will be taken over by Frankfurt-based Helaba, along with 451 former WestLB employees.
A "bad" bank, known as Erste Abwicklungsanstalt (EAA) has also been created. EAA has already been working to wind down bad assets worth around €51bn as at the end of 2011; and a financial services and portfolio management company called Portigon, was also launched. Portigon started business on Monday with around 3,500 former WestLB employees, but is expected to end the year with less than 2,700.
Portigon is expected to help with the winding down of bad assets held by EAA.
A Portigon source told SRP that the new firm will provide portfolio management and other services for group companies Helaba and EAA, as well as for third party providers.
"Basically, certificates that were issued under [the] Savings Banks Finance Group and its customers are transferred to the bond bank (Helaba)," he told SRP. "Details will be announced after the contract signing."
The source said that some business segments are still under review and could still be sold and that all unsold portfolios will be transferred to Erste Abwicklungsanstalt, an agency charged with the sale of assets.
Most of Helaba's €168bn of assets under management were transferred to the state-backed "bad-bank" by 30 June.
The multiple separations of WestLB's assets and risk positions is one of the largest efforts made in Germany to implement an orderly winding down of a troubled bank.
Authorities responsible for bank supervision - BaFin and the Bundesbank - are watching to ensure that the transfers of ownership do not lead to market jitters about who is responsible for assets, including complex derivative portfolios.
According to SRP data, WestLB is a top 5 provider in terms of issuance and sales volumes. In 2011, the bank took the fifth spot in the German market share with 7% and an estimated €2.7bn sold. In 2012, the bank had climbed to the third spot with a 9% market share and €1.6bn sold.
SRP data also shows that WestLB's market share was even better in the core structured products market (not taking into account flow products). In 2011, the bank took a 9% market share (€2.7bn) and so far this year, it is in second place with 11% market share (€1.6bn), behind German's top provider, Deutsche Bank.
WestLB's last products in the German market were issued on 11 June and struck on 25 June. No further West LB products have been recorded in the German market since.