Germany's BayernLB to cut 5,600 jobs

The cuts at the bank, which has been hit hard by the global financial turmoil, would be made through 2013, said the source, who requested anonymity because he was not authorized to comment ahead of an official announcement.

The Munich-based bank, which is Germany's second largest state bank after Landesbank Baden-Wuerttemberg is set to unveil the official restructuring plans later Monday.

BayernLB and other public-sector wholesale banks — which are owned by a combination of state governments and municipally backed local banks — have faced hefty write-downs as a result of the subprime lending and credit crisis.

Last week, Bayern LB's main shareholder, the southern state of Bavaria said it would increase the bank's capital by euro7 billion ($8.8 billion) in two tranches — euro3 billion this year and euro4 billion in the first quarter next year.

The bank said last week it would also reduce the amount it asked from the federal government in its bailout program to euro3 billion from euro5.4 billion.

BayernLB said the recapitalization, totaling euro10 billion, was required because of the "rapid economic slowdown" and because the value of its asset-backed securities portfolio had deteriorated during the financial market turmoil.

The bank said any future losses on its asset-backed securities portfolio — worth up to euro6 billion — would be guaranteed by the bank and the state of Bavaria for the entire term of the investments.

BayernLB also asked the federal government for a further euro15 billion in guarantees from its bailout fund on Nov. 10 to be able to issue new credit. The government has not yet issued a decision on the matter.

"The recapitalization and restructuring measures should equip BayernLB for the future and lead it through these financially difficult times," BayernLB said in a statement last week.