Germany’s government expects to take a decisive step today in resolving its biggest bank crisis by winning majority control of Hypo Real Estate, ending the threat of expropriation hanging over investors.
The government has clashed with private shareholders over the fate of the lender, which ran into liquidity problems and needs billions of euros in fresh capital to avoid being closed by regulators. Berlin insists that HRE – which is said by authorities to pose a systemic risk to the banking system – needs to be taken entirely into state control so it can be restructured more easily and at lower cost.
Shareholders in the lender will vote today on a huge share increase to be underwritten solely by the government. The proposed issue of extra shares to the government, via Soffin, its bank rescue vehicle, would increase Berlin’s stake to 90%.