Saturday, April 9, 2011

German Finance Minister Says Failing German Banks Should Not Be Bailed Out by the Government

German Finance Minister Wolfgang Schaeuble says that any German banks who are on the verge of collapse should not expect any bailout money from the German governmnet.

According to Reuters, two German lenders, Helaba HDLG.UL and NordLB NDLG.UL, could fail upcoming  Europe-wide bank "stress" testing. The results are due to be published in June.

"If the results of the tests show a need for fresh capital, the owners are there to cover these needs," Schaeuble said. "It is not the case that one can appeal to the state.

"The funds of Soffin (German's bank rescue fund) ... are not available for any new requests," said Schaeuble. "It is no longer like in 2008 that there are no alternatives ... we have an insolvency law."

Schaeuble wants German savings banks and regional states that partly own the two lenders to prop up the banks so that they do not have to turn to the German government fund for help.

If this is how he views the German banks in crisis, you can imagine how he views German participation in further bailouts of the PIIGS. That said,  Helaba and NordLB are relatively small banks. Let's see if he is as adamant about his view when more influential banks need money.

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