THE LIQUIDITY problems of Dublin-based Depfa bank last September brought the entire German banking system to within a hair’s breadth of collapse, according to Deutsche Bank chief Josef Ackermann.

The head of Germany’s largest financial institution made the claim during a high-risk poker game between the private banks and the government over who would pay for the bailout of Depfa and its German parent Hypo Real Estate (HRE).

Some 17 pages of minutes of the meetings on September 27th and September 28th show that, as far as the participants were concerned, the consequences of the collapse of HRE/Depfa could be “worse than Lehman Brothers”.

The collapse of the American bank on September 15th soon made itself felt in Dublin, where Depfa could no longer secure short-term liquidity to cover its long-term business: loans to governments for the purpose of financing road and bridge-building.

Some 11 days after Lehman’s bankruptcy, Hypo Real Estate chairman Georg Funke told the Bundesbank and the German bank regulator BaFin that day by day the hole in Depfa’s financing needs was “snowballing”.

The following day, Saturday, September 27th, Mr Ackermann and the heads of other leading banks met.

They insisted the federal government in Berlin get involved, but senior finance ministry officials declined to participate in talks on Saturday.

They arrived late on Sunday with an offer that prompted Mr Ackermann to walk out of the meeting in disgust, saying he had to “prepare his people for the collapse of the interbank trading [system] in a few hours”.

He returned when Berlin proposed the banks carry 55 per cent of the bailout cost – with a decision due in 20 minutes.

“The Deutsche Bank chief protests: ‘This is the death of the German banking system’,” according to extracts of the minutes published in yesterday’s Süddeutsche Zeitung newspaper.

A final deal hammered out three hours later saw the banks pay for 60 per cent of the bailout, with an upward limit of €8.5 billion.

The finance ministry in Berlin shrugged off complaints in the minutes that it got involved too late in the HRE/Depfa bailout.

“It was purely negotiating tactics in the interest of the taxpayer,” said a finance ministry source.

“If we had shown up first thing on Saturday morning, the likelihood of the banks being willing to act would have been non-existent,”said the source.

“But we were informed all the time about what was going on.”

A Deutsche Bank spokesman declined to comment on Mr Ackermann’s reported remarks.