The commercial crime court opened proceedings against seven current and former board members, the regional court in the southern city Stuttgart, where LBBW is based, said in a statement on Thursday.

The court decided to take on the case based on the prosecutor's charges of accounting fraud against former LBBW Chief Executive Siegfried Jaschinski and six other managers, who sat on LBBW's board from 2006-2008.

The defendants, which include LBBW's current deputy chief executive Michael Horn and Hans-Joachim Strueder, now a manager at peer HSH Nordbank, said in a joint statement that they continue to believe that the allegations are unfounded.

The prosecutors argue that the board in 2005 and 2006 decided unlawfully to transfer risks to special purpose vehicles, disguising the real situation of the bank and in 2008 downplayed the dramatic situation in its annual report.

The trial is due to start in the first quarter of 2014.

LBBW said in a statement that its supervisory board would address the issue, declining to comment further.

LBBW, along with other regional state-owned lenders known as landesbanks, lost billions of euros on risky investments in the financial crisis, forcing its owners to prop it up with a 5 billion-euro capital injection in 2009, funded with taxpayer money, and an additional 12.7 billion euros in loan guarantees.

While policymakers have reacted to the crisis with new banking rules aimed at preventing taxpayers from having to foot bailout bills in the future, few bank executives have faced criminal or civil cases.

In Germany, where the second biggest lender, Commerzbank, (>> Commerzbank AG) and four landesbanks were among those taking state aid, only the former CEO of corporate lender IKB (>> IKB Deutsche Industriebank AG) has been convicted of wrongdoing.

He received a 10-month suspended sentence, after being found guilty of market manipulation.

The complete former board of landesbank peer HSH Nordbank is also currently on trial. The six men are charged with breaching fiduciary trust and two of them face additional charges of accounting fraud.

The LBBW managers charged in Stuttgart could face up to three years in jail, although sources familiar with the situation said the most likely outcome was fines.

The German regional state of Baden-Wuerttemberg and the municipally-owned savings banks of Baden-Wuerttemberg both own stakes of around 40 percent in the bank, while the state's capital, the city of Stuttgart, owns just under 19 percent.

(Reporting by Arno Schuetze and Ilona Wissenbach)

Stocks treated in this article : IKB Deutsche Industriebank AG, Commerzbank AG