German bank gets fresh 10-billion-euro boost

28th May 2010, Comments 0 comments

The German state-owned bank Hypo Real Estate has received another 10 billion euros (12 billion dollars) in public loan guarantees owing to fresh tension on financial markets, a German fund said on Friday.

The decision to tap additional guarantees provided by the German financial markets stabilisation fund SoFFin was taken "because of the current situation on financial markets," a SoFFin statement said.

Hypo RE can now draw on a total of 103.5 billion euros in state guarantees to obtain financing on interbank markets at reasonable rates, but has become dependent on such support.

The specialist in property lending and municipal financing is in the midst of a complex restructuring programme and a failure of that process "would have huge consequences for the German economy," a statement quoted SoFFin president Hannes Rehm as saying.

Hypo RE is highly exposed to potential losses from the purchases of bonds issued by troubled eurozone countries like Greece, Ireland, Italy, Portugal and Spain.

At the end of March, the bank had around 39 billion euros in exposure to such sovereign debt, a situation that has now become a touchy issue on money markets.

Hypo RE has also received 7.85 billion euros in a capital injection from SoFFin.

Last year, the bank paid back seven billion euros of around 50 billion euros in state and private bank loans.

- Dow Jones Newswires contributed to this story -

© 2010 AFP

0 Comments To This Article