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EUROPEAN UNION

WestLB submits restructuring plan

Troubled regional bank WestLB announced Wednesday that Germany's government had submitted a last-minute restructuring plan to the European Commission that included cutting a third of its assets by 2015.

WestLB submits restructuring plan
Photo: DPA

These cuts came on top of a 2008 plan that already involved reducing its assets by half, the bank said.

The new proposals also included plans to ease the purchase or transfer of its assets by putting risky holdings such as bad loans in a “bad bank,” to be disposed of later when market conditions are more favourable.

The bank would split its activities into four parts, some of which could be taken up by savings banks and others sold to investors, said the bank.

These steps would incur new charges, which would be passed on to the shareholders, the regional and federal state authorities, the statement said.

It did not specify how much those charges would be.

Deputy finance minister Steffen Kampeter said they had put three options to the European Commission and that it was now up to them to respond, Dow Jones Newswires reported.

The owners of WestLB – regional savings banks and the German state of North Rhine-Westphalia, and the federal government – had until Tuesday to submit a plan to restructure the bank to the European Commission.

They were also expected to come up with candidates who were ready to take it over. Media reports have identified interested buyers as the US investment funds Apollo, JC Flowers and Lone Star.

WestLB got into trouble through risky investments in the US real estate market that went sour in 2007, and has depended on state aid since then to stay in business.

The EU Commission approved the aid but demanded the bank be restructured and either made viable or sold off.

It called for more efforts from the bank in return for the €3.4 billion in public aid it had obtained to set up the “bad bank” facility into which the group has already dumped €77 billion of toxic assets.

If Brussels is not convinced by efforts to turn WestLB around, the Commission could order it be dismantled.

AFP/ka

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BANKING

Card over cash? Why Germany is seeing a new payment preference

Cash has long been king in Germany, with many smaller retailers refusing to join the rest of the world in adopting contactless payment systems. But card-based payments are on the rise, as recent stats about Girocard use reveal.

Card over cash? Why Germany is seeing a new payment preference

Germany has long been a very cash-based country, occasionally to the dismay of frustrated tourists at the Döner shop.

A few German phrases express the people’s love of physical money. There’s ‘only cash is true’ – Nur Bares ist Wahres. Or Bargeld lacht, literally meaning cash laughs, but used to imply that cash is what’s wanted, similar to ‘cash is king’ in English.

But the classic German preference for cash appears to be evolving, as the use of girocards is growing, even for small transactions.

How are girocards being used?

Girocard, an ATM and debit card service offered by German Banks, was designed to allow customers to use virtually all German ATMs and, increasingly, to make purchases at businesses.

READ ALSO: Ask an expert – Why is cash still so popular in Germany, and is it changing?

Last year, consumers in Germany used their Girocard more often than ever before for cashless payments. A total of €7.48 billion payment transactions with the plastic card were counted – 11.5 percent more than in the previous record year 2022, according to figures published by the Frankfurt-based institution Euro Card Systems.

Whether at the bakery, petrol station or supermarket, customers are increasingly pulling out their cards at the checkout, even for smaller amounts. As a result, the average amount paid with the Girocard fell from €42.34 to €40.69 within a year. 

The rise of card payments in Germany

Contactless payment, which is possible with girocards and credit cards that have an NFC chip, got a boost during the Covid pandemic, as retailers promoted it for hygiene reasons. 

But the use of card payments has continued to grow in Germany since then, boosted partly by the increasing use of girocards.

Promoting the use of girocards, some German banks have expanded their cards’ functions: Sparkassen, Volksbanken, or Raiffeisenbanken offer girocards for the digital wallet, for example.

Banks want to continue upgrading the payment card with further applications. For example, a project is being tested which would add an age verification function to girocards that would be useful when a customer is buying cigarettes.

On the retail side, it’s clear why the Girocard is preferred to other debit options.

“We see that debit cards from international providers cost up to four times more,” Ulrich Binnebößel, Head of the Payment Systems & Logistics Department at the German Retail Association (HDE) told DPA.

What’s the difference between the Girocard and other debit?

The Girocard is a strictly German phenomenon. It can be seen as the latest iteration of the EC card, which was created to consolidate payment systems following the unification of former East and West Germany.

In 1991 different debit card systems, including Eurocheque guarantee cards from former West Germany and Geldkarte ATMs from former East Germany, were unified into Eurocheque cards.

Then in 2001, the Eurocheque system was disbanded, but German banks continued to use the EC logo for “electronic cash’” cards, or EC cards. In 2007, the German Banking Industry Committee introduced Girocard as a common name for electronic cash and the German ATM network.

Girocards are only issued and accepted in Germany, so if you want to get one of your own, you’ll have to join a German bank, and shell out those notorious German banking fees.

READ ALSO: Why it’s almost impossible to find a free bank account in Germany

Alternatively, you can get by with internationally accepted debit cards provided by a bank in your home country, or otherwise by joining an app-based European banking service like N26. 

But be warned, without the Girocard in hand, at some smaller retailers you may be told, “Leider nur Bargeld oder EC-Karte.

With reporting by DPA

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