German regulator orders small bank closed

A small German bank on Wednesday became the country's first lender to fold since the subprime crisis began after regulators ordered it to cease operations and initiated insolvency proceedings.

Regulator BaFin said in a statement it had ordered Weserbank, a small private bank based in the northern town of Bremerhaven, to stop doing business because repeated efforts to raise capital and cut debt had failed.

“Since the bank changed its business model, it has no longer been in a position to generate revenues on a sustainable basis necessary to cover its ongoing operating costs,” BaFin said in a statement.

Customers’ assets at the bank, which began life in 1912 as a lender to abattoirs and has a branch in Germany’s financial capital Frankfurt, are protected, the regulator said.

At the end of 2007 Weserbank’s total assets were €120 million and its liabilities €25 million, BaFin said.

Weserbank chief executive Gerhard Nimschik said the lender was a casualty

of the global credit crunch sparked last year by US homeowners defaulting on risky home loans.

Another German bank, IKB, a lender to small and midsized companies, was the

first German casualty but it has been thrown a lifeline of billions of euros by the government.