Financial Regulatory Forum

German bank crisis not over -rescue fund head

October 7, 2009

Hannes Rehm, new head of steering committee for Financial Market Stabilisation Fund (SoFFin), leaves his office after a photo call in Frankfurt February 3, 2009. REUTERS/Alex Grimm (GERMANY)    HAMBURG, Germany, Oct 7 (Reuters) – The financial sector  faces big challenges even after governments intervened massively to prop up tottering banks, the head of Germany’s nearly 500 billion euro ($735 billion) bank rescue fund Soffin warned.
   “It’s too early to give the all clear. New challenges are on the way,” Hannes Rehm told Hamburg’s business journalists’ club late on Tuesday in remarks for release on Wednesday.
   The G-20 group of rich and developing nations and the EU Commission in Brussels were both setting up new rules aimed at boosting banks’ capital requirements, he pointed out.
   In addition, sluggish economic growth meant that banks must add to their “risk buffers” for bad loans, he said, adding that he was surprised that more banks in Germany had not moved to take advantage of new rules allowing them to shift problem assets off their balance sheets and into a “bad bank.”
   Regional state-backed lender WestLB [WDLG.UL] is preparing to set up a bad bank, sources familiar with the situation have told Reuters, and other lenders are eyeing the move. [ID:nL1577600]
   “We are seeing a certain reluctance at the moment,” Rehm said, adding that Soffin was speaking to some banks but it was unclear what the outcome would be.
   Banks appeared to require more information about Soffin’s instruments and procedures, he said.
   Soffin funds have also gone to stock-exchange listed lenders such as the country’s No. 2 player Commerzbank <CBKG.DE> and the now nationalised Hypo Real Estate <HRXG.DE>, but less than half of the 500 billion euro pot has been used so far, Rehm said.
   Banks have used 132 billion euros of the 400 billion euros available to back debt issues, while Soffin has also paid out about 25 billion euros to bolster banks’ equity capital, he said.
   Germany’s biggest bank, Deutsche Bank <DBKGn.DE>, has not taken any government cash and insists it will not. ($1=.6802 Euro) (Reporting by Jan Schwartz, Writing by Jonathan Gould; Editing by Hans Peters) ((Reuters Messaging: jonathan.gould.reuters.com@reuters.net; +49 69 7565 1242))
 Keywords: GERMANY/BANKS
  
Wednesday, 07 October 2009 08:49:31RTRS [nL7532919 ] {C}ENDS

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