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Merkel to seek control of bank, another obtains aid
Published in Saudi Press Agency on 15 - 02 - 2009


As a further German banking group,
mortgage lender Aareal, said it was obtaining billions of euros in
aid Sunday, Chancellor Angela Merkel said Germany will have to take
control of the badly hit bank Hypo Real Estate (HRE), according to dpa.
Her cabinet is to debate plans this Wednesday to partly
nationalize HRE, a mortgage lender which spiralled into disaster last
October and obtained huge federal guarantees. Current rules only
allow the state to take over one third of a troubled bank.
Speaking on ZDF television, Merkel said the government needed a
voting majority at HRE to shape its future.
"Extraordinary crises require extraordinary solutions," she said.
On Sunday, Aareal Bank AG disclosed that the German state had
granted it a non-voting capital injection and federal loan
guarantees.
However, Aareal insisted the move was purely precautionary and
said it had ended 2008 in the black.
Other banks to receive German government backing in the ongoing
crisis have included Commerzbank, which was one-quarter nationalized.
Aareal said it had obtained a capital injection of 525 million
euros (682 million dollars), but the government would be a sleeping
partner only. It also accessed up to 4 billion euros in cover for its
bond issues via federal loan guarantees.
In a statement from its head office in the city of Wiesbaden, it
said the aid had been promised by Soffin, the German government's
Frankfurt-based bank-bail-out agency.
"We are not applying to Soffin in desperation. Our bank is
completely healthy and there is nothing to indicate that this may
change in the foreseeable future," said Aareal chief executive Wolf
Schumacher in a statement.
"We intend to play icebreaker in Germany," he said, referring to
mutual reluctance among other banks to apply for government
assistance. "We have simply bought ourselves two insurance policies."
Schumacher said Aareal believed it was strong enough to cope
unaided with serious challenges such as the international financial
markets crisis," but said Aareal wanted the help because of stricter
capital rules for banks.
It would also avoid being at a competitive disadvantage against
rivals who were benefitting from state aid, he said.
He said the capital injection was similar to buying bonds and did
not mean the German state had become a shareholder.
"It's a difference of night and day," he said, adding that in the
case of Commerzbank, the government held actual equity.
"Aareal remains a 100-per-cent private bank," he said. The
injection had increased the underlying capital ratio at Aareal from 8
to 10 per cent. Aareal was to pay Soffin as sleeping partner a return
of 9 per cent annually.
Figures issued Sunday showed a pre-tax surplus at Aareal in 2008
of 117 million euros, down from 380 million euros in 2007. Aareal did
not forecast its earnings this year.
Germany last year set aside 80 billion euros to inject into banks
and authorized up to 400 billion euros in guarantees. So far a total
of 196 billion euros, mainly guarantees, has been approved, but
Soffin is dealing with dozens more applications.
Commerzbank is the only bank to obtain a true equity injection,
with Germany obtaining just over 25 per cent of its shares.
HRE, also a mortgage lender, has obtained guarantees extending to
52 billion euros, but has not taken equity assistance.
Rejecting criticism that she was interfering with private
enterprise, Merkel said the move to take control of HRE was aimed at
getting Germany's welfare-oriented market economy back on track.
"The state can merely build bridges," she said.
The cabinet is expected to discuss ways of forcing HRE to accept
state control.
Merkel said she would also see to it that US car manufacturer
General Motors' European unit Opel received help.
She said there might be a discussion of guarantees to Opel, but
Berlin would wait to see what aid Washington gave GM.
She added it would fall exclusively to the European Union to
scrutinize French President Nicolas Sarkozy's insistence on
funnelling state aid to French carmakers.
"It will all be looked at again in Brussels and tested to see if
it is a distortion of competition," she said.


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