THE FORMER risk controller of troubled property lender Hypo Real Estate (HRE) has said management greed and poor oversight, not just the difficulties of Irish subsidiary Depfa, caused the company’s near-collapse last year.
Stéphane Wolter said yesterday that the Munich-based property lender was heading for serious financial problems of its own, regardless of its purchase of Depfa in 2007.
That is at odds with the German government’s explanation for its bailout of HRE last September.
Berlin says the group faced ruin because of liquidity problems at Depfa caused by the Lehmann Brothers bankruptcy – problems it says could not have been predicted. “The collapse of Lehmann acted like a catalyst. It didn’t cause the near-end, just sped it up and increased the effect,” said Mr Wolter. “Looking closer, a lot was predictable. The activity reports by Depfa showed that things were out of balance.”
Berlin has provided more than €100 billion in loans and guarantees since last September and is now completing a full state takeover of the bank.
At an ongoing parliamentary inquiry, government MPs have portrayed the HRE difficulties as due to factors beyond the control of German regulators: sloppy business practices in Dublin and a unique piece of bad luck on Wall Street. But Mr Wolter claimed yesterday that pressures at HRE to meet ambitious 30 per cent yields were also to blame.
He also pointed the finger at rating agencies. At the time Depfa was on the market, he said, the agencies threatened to downgrade HRE if it did not diversify its business. “The agencies share considerable blame for the misery.”
Although markets viewed Depfa in 2007 as an “unwanted child”, Mr Wolter said HRE managers felt under pressure to buy the Dublin company to save its rating and stay in business. “Two weeks before the difficulties, one agency gave Depfa a higher rating than HRE. For the HRE treasurers that was a disconcerting experience.”
