LBBW took €5B state bailout after €800M subprime writedown

Landesbank Baden-Württemberg (LBBW) was one of Germany's largest Landesbanken — state-owned regional banks that traditionally focused on conservative lending. But like many of its peers, LBBW had ventured into U.S. subprime mortgage securities during the housing boom, chasing higher yields than its traditional lending business could offer.

In November 2007, LBBW revealed it faced an €800 million writedown on its U.S. subprime holdings. The loss was large enough to erode the bank's capital base and triggered a crisis of confidence. Despite being a state-backed institution, LBBW was forced to seek a €5 billion state bailout to stay afloat. The European Commission approved the restructuring plan in 2009 as part of the broader European banking crisis response.

The controversy did not end with the bailout. In late 2009, state prosecutors raided LBBW's Stuttgart headquarters as part of an investigation into alleged breach of trust in connection with the subprime investments. In February 2014, several LBBW managers were put on trial for accounting charges related to how the securities had been valued on the bank's books.