German public-sector banks WestLB and NordLB have chosen Japan's Shinsei Bank as a partner for their planned "bad bank" joint venture, into which they want to spin off their so-called bad or risky debt, WestLB announced on Wednesday. WestLB and NordLB want to spin off their bad debt into a separate company in order to clean up their balance sheets. "Together with Shinsei Bank and JC Flowers, NordLB and WestLB are setting up a joint venture for non-performing loans," WestLB said in a statement. The venture, to be called SGK (Servicegesellschaft Kreditmanagement GmbH), "is the first in the German public-sector banking industry to offer the purchase, restructuring and realization of non-performing loans," the statement said. "The joint venture will provide services to both public-sector institutions and the private banking sector in Germany." Based in Frankfurt, SGK would commence operations as soon as it receives approval from the competition authorities. NordLB and WestLB would initially transfer 400 million euros ($480 million) in bad or risky commercial property loans to the unit, the German banks said.