Second German bank lines up for rescue

October 25th, 2008 - 9:13 pm ICT by IANS  

Hamburg, Oct 25 (DPA) A second German bank lined up Saturday for a government rescue, as officials reportedly debated whether to force recapitalisation on shy commercial banks.One of the banks run by Germany’s 16 states, BayernLB, has already appealed for help, and a second landesbank, HSH Nordbank, run by the states of Hamburg and Schleswig-Holstein, said it had decided in principle to apply.

Landesbanks, which also have powerful non-government shareholders, have been among institutions hit hardest in the past year by investment in subprime US mortgages.

“The board of HSH Nordbank has decided in principle to make use of the government measures,” a spokesman, Rune Hoffmann, told DPA.

“But we are not under pressure of time.” He said the company’s prime objective was a resumption of interbank lending. He said HSH’s diverse shareholders had not yet finally approved the move.

A third landesbank, WestLB, was on the verge of applying for help, the news weekly Der Spiegel said Saturday.

It quoted the chief executive, Heinz Hilgert, saying that WestLB would also seek a government takeover of its toxic securities.

The magazine said government officials were meanwhile debating how to force recapitalisation on Germany’s commercial banks, which have resisted taking up the government offer.

Commercial banks reportedly fear a loss of credibility if they seek state aid. Their senior executives would also face a pay cap as a condition for aid.

Quoting sources, Der Spiegel said German Finance Minister Peer Steinbrueck planned to summon commercial bank chiefs to Berlin in two weeks to press them to jointly apply for help.

A fresh embarrassment awaited the state of Bavaria over its landesbank, BayernLB, which needs 6.4 billion euros (about $8 billion) in new funds, Spiegel added.

It said Bavaria and its trustee savings banks had hoped for relief from a promise earlier in the year to guarantee 4.8 billion euros of the sum, and did not realise the week-old federal aid package ruled this out.

The Bavarian government quarrelled this week with the savings banks, which as joint owners of BayernLB successfully resisted a government bid to sack BayernLB chief executive Michael Kemmer.

Tags: , , , , , , , , ,

Posted in Business |