IKB Deutsche Industriebank was the first European casualty of the subprime crisis

IKB Deutsche Industriebank was a German mid-market lender headquartered in Düsseldorf, specializing in financing for small and medium-sized enterprises. Through its structured investment vehicle Rhinebridge, IKB invested heavily in US subprime mortgage-backed collateralized debt obligations. When the US subprime market collapsed in the summer of 2007, Rhinebridge's investments became worthless, and IKB became one of the very first European banks to declare financial trouble from the crisis.

The first rescue came in July 2007, when KfW (the German state-owned development bank) together with Deutsche Bank, Commerzbank, and other commercial banks assembled a €3.5 billion rescue fund. A second rescue of €1.5 billion followed in February 2008 when other banks grew reluctant to contribute more. The European Union opened an investigation into whether these bailouts violated state aid rules.

In a specific transaction later investigated by the US SEC, Goldman Sachs had arranged CDOs that IKB bought while hedge fund Paulson & Co. helped select the underlying subprime bonds and then bet against them. IKB lost $150 million on that deal alone. IKB survived and was sold to private equity firm Lone Star Funds in 2008. Four of the bank's five top executives resigned between August and November 2007.