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Another €2.08 billion pumped into HRE bank

The Local · 22 Sep 2010, 16:47

Published: 22 Sep 2010 16:47 GMT+02:00

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

On September 10, SoFFin announced that it would extend an additional €40 billion in loan guarantees to HRE, which had already received €103.5 billion in such guarantees. HRE has now also received a total of €9.95 billion 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 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. There was widespread public outrage earlier this month after it became known HRE reportedly paid out some €25 million in bonuses to about 1,400 employees for their contribution to the bank’s overhaul over the last year.

Story continues below…

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.

AFP/The Local/mry

The Local (news@thelocal.de)

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Your comments about this article

17:37 September 22, 2010 by majura
What a waste of money.

Although the Koalition don't deserve it, the €25 mil. (or all the government hand-outs) could've been used to patch up the the 'in-need-of-proper-reform' health care system.

It would make more sense to help those actually with home/personal loans out (case by case of course) rather than save a business that has no other purpose than to make itself the No. 1 priority... something governments the world over just don't quite understand. Socialist-Capitalism doesn't work. Choose one or the other!
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