"It's the best thing that ever happened to us," says Guenther Merl, head of Landesbank Hessen-Thueringen (Helaba). He is referring to a case taken to the European Commission in 1994 by Germany's private-sector banks against their public-sector rivals, such as Helaba. "It rather backfired," says Mr Merl. That may sound odd, because the public banks lost. They will forfeit their state guarantees from next year, and last month were ordered to pay EUD4 billion ($4.8 billion) in back interest for assets funded at below market rates. But most of this money will return to them in the form of new capital from their owners, and the commission's ruling has sent a fresh breeze of competition through the state sector. While the private banks have been reducing their lending exposure, the public banks have been picking up business.
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