Germany gives HRE bank another 2.08 billion euros: SoFFin

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Germany will pump another 2.08 billion euros (2.79 billion dollars) into the troubled bank Hypo Real Estate, the financial market stabilisation fund SoFFin said Wednesday in a statement.

The latest cash injection will help HRE establish a "bad bank," to which it plans to transfer 210 billion euros in risk positions and non-strategic assets, the statement said.

On September 10, SoFFin announced that it would extend an additional 40 billion euros in loan guarantees to HRE, which had already received 103.5 billion euros in such guarantees.

HRE has now also received a total of 9.95 billion euros in cash from SoFFin, the statement added.

HRE, which last year narrowly avoided bankruptcy before being nationalised, was the only German bank to fail Europe-wide stress tests in July.

The specialist in property lending and municipal financing has become dependent on state guarantees to refinance its debt on financial markets at affordable interest rates.

HRE began creating a "bad bank" in July and SoFFin said Wednesday it has decided to move 191 billion euros worth of assets to it by September 30, if the European Commission grants its approval.

HRE collapsed in late 2008 amid a global crisis owing to investment mistakes made by its German-Irish subsidiary Depfa.

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

It was nationalised last year following a long flirtation with bankruptcy.

The bank said last month it had trimmed its losses but declined to say how much it expects to lose this year or to issue a forecast for 2011.

© 2010 AFP

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