Dusseldorf, Germany, as a hotbed of financial innovation? There were many surprising twists in the earliest days of the global credit crunch, and this was one: A small Dusseldorf-based lender, IKB Deutsche Industriebank AG, unexpectedly emerged as one of the first European banks to reveal its exposure to battered U.S. subprime mortgages. It was effectively bailed out by the government in February and won a new lifeline Tuesday when the KfW, the government-owned reconstruction bank, extended a €1.5 billion ($2 billion) loan. That follows an earlier roughly €9.1 billion in aid.
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Of course, once the credit crisis got going, IKB quickly had company in its subprime woes with banking giants like UBS taking huge write-offs. Many market observers simply forgot about IKB, as few had recalled the bank's historic start as a real estate lender. IKB was founded in 1924 as one of several banks processing Germany's World War I reparation payments. As its Web site explains, IKB "became the first bank ever to deal on a major scale with the long-term, real estate lien-based financing of companies." - Barbara Rudolph
