Germany's HRE bank seeks €15bn 'bridging solution'

GERMANY'S EMBATTLED Hypo Real Estate (HRE) became the country's first private bank to apply for liquidity assistance - €15 billion in total - from the Berlin's emergency fund.

Speculation was growing yesterday that other cash-strapped private banks may be ready to apply after resisting for the last two weeks. The HRE application comes on top of a €50 billion guarantee package agreed with the German government earlier this month.

That package was needed to keep afloat the bank, one of Europe's largest commercial lenders, after its Dublin-based subsidiary Depfa ran into difficulties.

The Munich-based HRE bank said the €15 billion was to keep it liquid until the larger guarantee liquidity lines came on stream in the middle of next month.

A spokesman called it a "bridging solution" but was unable to say whether the €15 billion line would expire when the €50 billion comes on stream.

Earlier this month, after weeks of hesitation, Berlin announced a €400 billion, three-year guarantee to improve general inter-bank liquidity. In addition, it made €80 billion available for banks in need of urgent capital injections.

Three state banks - BayernLB, WestLB and HSHNordbank - have already filed requests for liquidity lines, but none of Germany private banks wanted to be seen as the first to dip into the pot.

Deutsche Bank boss Josef Ackermann got into hot water for allegedly claiming he would be "ashamed" to accept the government's offer.

The stand-off reached its climax on Monday when Peer Steinbrück attacked bank managers for not taking advantage of the very fund for which they had lobbied.

"I've heard from some bank boards that there should be some incentives for taking advantage of the package -- putting out a plate of chocolates so to speak, to make sure the menu is accepted," he said. The situation, he said, had reached a "level of absurdity that cannot be topped".

Yesterday evening, rumours emerged that all major German banks - Commerzbank, Dresdner Bank, Postbank and even Deutsche Bank - have begun talks with the German government to tap the liquidity fund.