THE NEAR-COLLAPSE of Sachsen LB bank last year has claimed its most prominent victim yet with the resignation yesterday of Saxon state premier Georg Milbradt.
His announcement comes as the Saxon state parliament continues to investigate the dealings of the bank he helped set up during his time as Saxon finance minister in the 1990s.
Its Dublin-based subsidiary, Sachsen LB Europe, experienced liquidity problems last year because of risky subprime dealings, forcing the sale of the entire bank in December at a knock-down price.
"I've taken the decision to leave office because I wanted an orderly and harmonious handover to prevent further damage both to myself and to others," the Christian Democrat (CDU) state premier said in a statement.
Earlier this month, Mr Milbradt denied all responsibility or knowledge of the complex Dublin activities and said that he left the bank in "good health" when he departed the state finance ministry seven years ago.
However, his position became more difficult when it emerged last week that Mr Milbradt had taken out personal loans totalling €172,000 from the bank and had invested €360,000 in one of its funds. The loans raised no legal concerns, but critics suggested it reflected poor political judgment.
The ongoing parliamentary inquiry in Dresden continues to throw new light on the activities of Sachsen LB, known as Sachsen Bank since its relaunch this month as a subsidy of the Stuttgart-based Landesbank Baden-Württemberg.
As well as Ormond Quay, a Dublin off-balance sheet investment or conduit worth €26 billion, the Leipzig-based bank operated a fund from Germany since 2003 known as "Dublin II", worth €46 billion.
A consultant's report into the affair criticised the bank's board for poor risk management and for high dependency on the Irish-based subsidies.
By the time the subprime credit crunch reached Europe last year, over 80 per cent of Sachsen LB's revenue was generated in Dublin.
German chancellor Angela Merkel has made little effort to support her Saxon premier and his departure is unlikely to have any influence on federal politics in Berlin.
Mr Milbradt proposed his finance minister Stanislaw Tillich to replace him as premier and to continue Saxony's grand coalition with the Social Democrats (SPD).
