EU to approve guarantees for Germany's WestLB-sources

BRUSSELS/DUESSELDORF (Reuters) - The European Commission will approve state help for Germany's WestLB after it was hit by the financial markets crisis, sources familiar with the situation said on Monday.

Both the Commission and the state government of North-Rhine Westfalia, which partly owns WestLB, declined to comment.

The local government has said it will cover up to 5 billion euros ($7.8 billion) in losses from risky investments made by WestLB. This support plan has been sent to Brussels for approval.

WestLB has been battered by trading losses and asset writedowns, prompting repeated emergency measures as the bank's problems worsened.

The total of 5 billion euros in guarantees and assistance agreed by WestLB's owners will be used to finance a special purpose company and cover any losses it may face.

The arrangement provides crucial support to the bank's credit rating. A lower rating would raise its borrowing costs, crimping business.

(Reporting by Matthias Inverardi, David Lawsky and Ilona Wissenbach; Editing by David Cowell)