Germany's HRE bank gets 40 bln euros in guarantees: agency
Germany's troubled Hypo Real Estate bank, which last year narrowly avoided bankruptcy before being nationalised, will get another 40 billion euros in state guarantees, a state agency said Friday.
Germany's banking sector stabilisation fund SoFFin said it would "increase the volume of guarantees (for Hypo RE) to an amount up to 40 billion euros", adding that the additional guarantees would be available to the bank until the end of the year.
The new support should allow the Hypo RE to avoid "any liquidity crises", said SoFFin, which the German press had speculated could hit the bank as soon as later this month.
The specialist in property lending and municipal financing was the only German bank to fail Europe-wide stress tests in July, and has already received 7.85 billion euros (9.96 billion dollars) in cash from SoFFin along with 103.5 billion euros in loan guarantees.
The bank has become heavily dependent on state guarantees to be able to refinance its debt on the financial markets at affordable interest rates.
Hypo RE collapsed in late 2008 amid a global crisis owing to investment mistakes made by its German-Irish subsidiary Depfa.
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.
It was nationalised last year following a long flirt with bankruptcy.
© 2010 AFP