German regional bank HSH Nordbank said on Monday it is to have access to up to EUR 30 bn in governmental guarantees from SoFFin, the German financial market rescue fund.

German regional bank HSH Nordbank said on Monday it is to have access to up to EUR 30 bn in governmental guarantees from SoFFin, the German financial market rescue fund.

'This decision is a clear signal: it strengthens our bank and creates sufficient flexibility for the further development of our business model. We are working on a set of concrete measures, with which we will advance the future strategy of HSH Nordbank', said CEO Dirk Jens Nonnenmacher.

The company said that its shareholders will also ensure that the bank is 'sufficiently capitalised', and added that the sale of assets is also under consideration.

HSH Nordbank said earlier this month that about half of the state funding will be used to support the bank's business model, while 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.

CEO Dirk Jens Nonnenmacher replaced Hans Berger who stepped down this month acknowledging that the management under his leadership had failed to anticipate the severe effect the credit crunch would have on the company.

HSH was the third German financial institution to approach the government's rescue fund in October following similar moves by Hypo Real Estate and Commerzbank. Last week Hypo said it plans to ask the government for a further bailout on top of the EUR 50 bn lifeline agreed in early October. On Friday the commercial property lender also announced that it was granted a EUR 20 bn framework guarantee from SoFFin to shore up its capital structure. Hypo RE can use the guarantees to collateralise debt securities, which are due for repayment by 15 January 2009 at the latest.

The financial crisis may unleash a new wave of consolidation in the German bank sector. The Financial Times reported in its weekend edition that Landesbank BadenWürttemberg is in 'concrete merger talks' with BayernLB in a move which could create a financial group with assets of about EUR 900 bn. The merger talks follow an announcement by LBBW that it will make a loss this year. 'The German market is too small for seven independent Landesbanken. There must, therefore, be a concentration on two to three groups,' Peter Schneider, president of Baden-Württemberg's association of regional savings banks, which owns 36% of LBBW, told the Financial Times.