BUSINESSES WITHOUT a business model don't last long unless they are Landesbanken, Germany's regional state banks.

It is hard to keep track of the billions funnelled into Germany's seven regional state banks in 2008 because of exposure to subprime markets and the financial crisis - and the year isn't over yet.

Yesterday's drastic slash and burn of Bayern LB, Germany's seventh-largest, may be an indication of dramatic times ahead.

Just one week ago, the government in neighbouring Baden-Württemberg agreed a €5 billion cash injection for its state bank, LBBW.

In Düsseldorf, €5 billion has gone to bail out WestLB, while Nord LB in Hanover and HSH Nordbank in Hamburg have applied for €20 billion and €30 billion, respectively, in state guarantees.

Germany's Landesbanken are sitting in a leaking boat and everyone knows why it is sinking, but no one wants to be the first to bail.

The Landesbanken, one of three pillars of German banking, once enjoyed state guarantees which meant top credit ratings and better conditions for borrowing and thus lending money. They were stripped of their special status in 2005 after the EU agreed with private competitors that state guarantees distorted the banking market.

Stripped of this advantage and desperate for profits, the Landesbanken plunged even further into the opaque world of subprime loans, off-balance-sheet instruments and asset-backed commercial papers.

As this year's series of multi-billion bailouts demonstrates, Sachsen LB's collapse last year because of debts run up by its Dublin subsidiary in risky off-balance-sheet dealings was just the beginning.

The real problems of the Landesbanken begin at home. Most are owned jointly by the relevant federal state and that state's Sparkasse savings bank. They in turn draw on the Landesbank to act as their own wholesale bank.

The Sparkasse savings banks are in rude good health, with €1 trillion on deposit and a sensible business model - supporting small businesses and local projects - that has shielded the group from the worst of the financial crisis.

The Landesbanken, meanwhile, have no such model. Some finance aircraft and shipping finance, others operate retail banks in the former Yugoslavia and in the Baltic countries.

But their core business - one not lucrative enough to justify their continued existence - remains the servicing of their owners and best customers, the Sparkasse and the federal states.

For many analysts, therein lies the second inherent problem of the Landesbank: oversight.

"These banks give state leaders the means to fund prestigious, if not always profitable, projects, and provide jobs later on for politicians and their friends," said Dr Dorothea Schäfer, financial markets analyst with the DIW economics institute.

Given that influence, state leaders are understandably unwilling to give up control through reforms, mergers or privatisation. But the Landesbank co-owners, the Sparkasse, are piling on the pressure.

Because of Germany's federal structure, Berlin has no direct influence over the Landesbanken. But that could change if the Landesbanken are forced to avail of Berlin's €500 billion state rescue fund.

State premiers, aware that there is no such thing as a no-strings loan, still cling to the hope that they can save their Landesbanken, and their independence, using their own funds. But even Horst Seehofer, Bavarian state premier, has admitted there is "no guarantee" that further massive debts will not appear on the horizon.