The governments of the German states of Hamburg and Schleswig-Holstein agreed on Tuesday to inject EUR 3 bn into regional bank HSH Nordbank, which is undergoing a radical restructuring. The states - which own 60% of HSH Nordbank - are also providing a further EUR 10 bn in guarantees.

The governments of the German states of Hamburg and Schleswig-Holstein agreed on Tuesday to inject EUR 3 bn into regional bank HSH Nordbank, which is undergoing a radical restructuring. The states - which own 60% of HSH Nordbank - are also providing a further EUR 10 bn in guarantees.

The bank's real estate lending activities will be significantly curtailed under what HSH Nordbank describes as a 'realignment'. Commenting on the decision by the state governments, Dirk Jens Nonnenmacher, CEO of HSH Nordbank said: 'We now have the possibility of rapidly bringing our business model into line with the new underlying conditions on the financial markets, which will enable us to be successful once again.'

But German newspaper Bild reported that Schleswig-Holstein faces potential bankruptcy as it attempts to support HSH Nordbank. Wolfgang Kubicki, chairman of the Free Democratic party in the state, said the bank may need a further EUR 3 bn before the end of the year. Calling on the Federal Government for help, he warned: 'If no support is forthcoming, Schleswig-Holstein faces a political bankruptcy like Iceland,' Bild said.

HSH Nordbank was forced to restructure its business after reporting almost EUR 3 bn in losses in 2008. Under the realignment, HSH Nordbank intends to close down its real estate activities in Western Europe and the US, and refocus on its home regions of Hamburg and Schleswig-Holstein in Northern Germany.

Also on Tuesday, former senator Wolfgang Peiner announced he would not seek another term on the supervisory board of HSH Nordbank when his contrast runs out in April.