WestLB, hit hard by the financial crisis, will become Germany’s first lender to create a 'bad bank' after agreeing yesterday to offload at least €87bn ($128bn) in non-strategic assets.

The publicly owned Landesbank is one of only a few German banks expected to utilise the scheme, which followed a law passed this summer allowing the creation of such entities.

Many of WestLB’s peers are expected to restructure their own assets without government help due to reservations about the costs Berlin will charge for bad banks and potential interference by the government.

However, WestLB yesterday said its supervisory board had approved agreements that would lead to the shift of unwanted assets from its balance sheet.

Financial Times