Germany’s government and financial regulators last night agreed a second bailout package for Hypo Real Estate after the abrupt failure of a first attempt to rescue the property lender.
Angela Merkel, the German chancellor, has pledged not to let the crisis at HRE endanger the country’s financial system. A collapse of HRE – one of Europe’s biggest commercial property lenders, with a €400bn ($550bn, £310bn) balance sheet – would be the biggest bank failure in modern Germany and would have repercussions throughout Europe.
A consortium of banks that pledged last week to support HRE with extra liquidity pulled out over the weekend. The move left government officials and bankers locked in talks for a second successive Sunday, hoping to agree a rescue before markets open today.
German officials said banks had agreed to inject an extra €15bn of emergency liquidity into HRE, bringing the size of the bail-out agreed last week to €50bn, the largest since the outbreak of the financial crisis.