Kommunalkredit fails to find buyers, proceeds with run-off

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After its failure to find buyers, Kommunalkredit Austria AG is expected to close its books and attempt to sell off parts of its assets. The European Commission will try to find a trustee to facilitate the sale.

The beleaguered bank's application for reprieve was granted by the EU in 2011 provided that the bank will be sold by the end of 2012.

"Kommunalkredit will cease new lending, thus not competing on the markets any longer, and ultimately, after the full run down, exit from the market altogether. This will minimize distortions of competition," the European Commission said in a statement today.

As a result, the Vienna-based bank will fund the run-off of its 15.8 billion euros of assets without any more assistance, the commission added.

Kommunalkredit was nationalized in November 2008 to avoid a bank run. It was separated into two entities.The first unit is Kommunalkredit which lends to municipalities. The other one is KA Finanz AG which handled loans, securities and credit-default swaps that are outside of Kommunalkredit's core business.

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