KfW: A bank once deemed Germany’s dumbest

The KfW is a German government-owned development bank led by a managing board which reports to a supervisory board chaired by Wolfgang Schäuble, the finance minister. KfW covers over 90% of its borrowing needs in the capital markets, mainly through bonds that are guaranteed by the federal government.

Together with its exemption from corporate taxes due to its legal status as a public agency and unremunerated equity provided by its public shareholders, KfW is able to provides loans at lower rates than commercial banks. It is not allowed to compete with commercial banks, but it facilitates their business in certain areas.

Lending by KfW’s two main business units is in Germany and other European countries. Its largest subsidiary, KfW IPEX Bank GmbH, lends predominantly internationally. A smaller subsidiary, the German Investment Corporation, and a business unit, KfW Development Bank, are exclusively active in the international arena.

In Sept 2008, as investors scrambled to get their funds out of Lehman, KfW wired it €426m. Germany’s Bild newspaper in turn called KfW “Germany’s Dumbest Bank”.