January 21, 2008 (LPAC)--Acute problems at major German banks IKB and West LB were the subject of an emergency meeting of the German financial regulatory agency BaFin and leading bankers in Frankfurt this weekend.

Kreditanstalt fuer Wiederaufbau (KfW), the state-owned bank which acquired a 38 percent stake in IKB as part of a bailout operation last year, has run into trouble finding a buyer for its IKB shares. While some German and other European banks had initially expressed an interest they are now shying away, fearing that the problems at IKB are more severe than has been admitted. Rumors are now flying that a non-European bank may step in, especially since Merrill Lynch has been chosen to find a buyer.

After months of denying it was troubled, West LB has now admitted that it urgently needs a capital injection after $1.5 billion in losses for 2007. The bank may set aside another $1.5 billion as reserves against future losses, and is reportedly seeking a merger with another German bank, Landesbank Hessen-Thueringen. The planned $3 billion capital injection is intended to come from the North Rhine Westphalia state government and some NRW savings banks, though the plan has encountered objections.

In France, the week began with a report that asset manager Richelieu Finance has crashed, and is seeking to sell itself to a larger financial institution. French daily Le Figaro, reporting under the headline "It is a crash," said that Richelieu saw its assets drop from nearly $5 billion to $2 billion since November, 2007, adding that "the misfortunes of Richelieu Finance will agitate the Paris financial market in the coming days."