BayernLB piled €24B into US subprime and needed a €10B bailout

BayernLB (Bayerische Landesbank) was one of Germany's largest state-owned Landesbanken, headquartered in Munich and owned by the Free State of Bavaria and the Bavarian savings banks association. Before the 2008 financial crisis, the bank had invested over €24 billion in US subprime mortgage-backed securities — a staggering concentration for a regional public-sector bank that was supposed to lend to Bavarian businesses and municipalities.

When the US subprime market collapsed in the summer of 2007, BayernLB suffered a €2.3 billion loss for the year. The first quarter of 2008 added another €2 billion in write-downs. CEO Werner Schmidt resigned in March 2008. The bank was the first German financial institution to accept assistance from the federal government's €500 billion rescue package. Bavaria injected €10 billion in capital and provided €4.8 billion in guarantees for the bank's portfolio of complex securities.

Beyond the subprime disaster, BayernLB had also acquired a 50% stake in the Austrian bank Hypo Alpe Adria in 2007 for €1.625 billion. Seven former executives later went on trial for overpaying by €550 million. Schmidt himself was convicted of bribing Austrian politician Jörg Haider to facilitate the acquisition. In 2015, BayernLB took another $1.3 billion writedown related to Hypo Alpe Adria's bad bank Heta.