Commerzbank, HSH Nordbank line up for rescue funds

Commerzbank, Germany's second-largest bank, has said it will seek EUR 8.2 bn in cash and EUR 15 bn in funding guarantees from SoFFin, the stabilisation fund established by the German government in response to the turmoil in the global banking sector.

Commerzbank was only the second financial institution to approach the government's rescue fund to shore up its capital structure despite urging from ministers for more banks to do so.

The first was Hypo Real Estate, the second-largest property lender in the Germany. The bank negotiated a EUR 50 bn lifeline with a consortium of the German government and private financial institutions in October, and was granted a EUR 15 bn facility by SoFFin pending the finalisation of the arrangements for the larger package.

Eurohypo, the largest real estate financier in Germany, and German property fund manager Commerz Real are units of Commerzbank. Under the agreement SoFFin will have a 'silent participation' and therefore no appointee on Commerzbank's supervisory board. The bank in turn cannot pay out dividend in 2009 and 2010. The salaries of directors are capped at EUR 50,000 and they will not receive bonuses in the next two years.

German economy minister Michel Glos has welcomed Commerzbank's decision to come forward to seek aid from SoFFin. '"I can only call on banks that need financial help to take this state aid as well,' he said.

The plea seems to be filtering through. HSH Nordbank, a regional bank involved in real estate and shipping finance, has said it will apply for a guarantee facility totalling EUR 30 bn.

HSH Nordbank said about half of this amount will be drawn down with a view to supporting the bank's business model. 'The second half will be used as a precautionary measure in the event the turbulence on the financial markets make the coverage of further risks necessary,' the bank said.