History of the Landesbank (Bavaria)

In Germany, Landesbanken are credit institutions that carry out banking transactions for individual federal states and support the state in promoting the economy.

The history of the legal predecessors of today’s Landesbanken often dates back to the 18th century. In their now familiar form, the banks emerged in the years after World War II, when the German states issued their first state bonds with the help of the Landesbanken. In the respective federal state for which they carry out banking transactions and act in an advisory capacity, they perform a kind of house bank function. In addition, the Landesbanken are authorized to conduct all banking transactions permitted under their statutes. In this respect, they have been operating on the market for years as general commercial or universal banks.

The business model of the Landesbanken has faced a dilemma since the abolition of institutional burden and guarantor liability in 2005; on the one hand, they conduct banking business for their federal state, but on the other hand, they are on a par with private banks and have to hold their own in the market.

Business ideas associated with a public mandate were hardly developed by the Landesbanken. In some cases, they were even sold off again, for example in the housing construction sector. Instead, individual institutions have endeavoured to increase returns on equity through international capital market transactions.

These problems have led to massive changes in the Landesbank sector since the 2008 financial crisis. Five of the eleven independent Landesbanken prior to the crisis have since had to be wound up or rescued with substantial state funds.

BayernLB Holding AG has been the sole owner of the Bank since September 9, 2002. Indirect owners via this holding company are the Free State of Bavaria and the Association of Bavarian Savings Banks.

They offer financial products and services to retail customers, medium-sized and large corporate clients and real estate customers. BayernLB fully consolidates DKB, a commercial bank that conducts public-sector, corporate and online retail operations, and Bayerische Landesbodenkreditanstalt (BayernLabo), a Bavarian regional development bank. DKB serves as a tech bank and partner on sustainability topics for BayernLB’s customers. Real Estate & Savings Banks/Financial Institutions provides real estate lending, functions as central bank to the Bavarian savings banks and is a partner to public sector and financial institutions. Corporates & Markets provides support in structured asset finance, corporate lending and select capital markets products mainly to companies from the energy, mobility, technology, manufacturing and engineering and construction and basic resources industries.


This article was written by Magdalena Szabo, a German apprentice studying Business Administration.

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