BERLIN, July 3 (Reuters) - Germany's Bundestag lower house
of parliament approved a "bad bank" plan on Friday that aims to
relieve banks by enabling them to shift billions of euros in
troubled assets off their books.
The parliamentary parties in the ruling coalition earlier
this week agreed to sweeten the plan to encourage banks to tap
the measure and offload toxic assets that have hindered lending
activity and aggravated Germany's deepest post-war recession.
Finance Minister Peer Steinbrueck said German banks needed
to escape from a downward spiral of writedowns.
"With each of these steps downwards banks eat up more of
their capital resources and that is extremely dangerous," he
told the Bundestag.
"It is dangerous for two reasons: Either one day you have so
little capital that you face insolvency," he said, adding: "What
is a bigger problem is that this capital, which is being eaten
up as assets are devalued further, is no longer available for
what we urgently need in Germany: new business."
Under the German "bad bank" model, banks can place toxic
assets in special purpose vehicles (SPVs) -- or "bad banks" --
once a book value has been calculated by a third party.
Under the deal reached between the ruling coalition experts,
the cut-off point for valuation will now be June 30, 2008 and
not March 31, 2009 as previously intended.
Fixing the date before the collapse of Lehman Brothers in
September -- an event which greatly intensified the financial
crisis, causing major declines in the value of assets -- allows
lenders to put a higher value to troubled assets.
"No one can rule out that one way or another the banking
sector will have further problems in the coming months,"
Steinbrueck added.
The Bundesrat upper house of parliament is due to vote on
the measure in a week so that it can be approved before the
parliamentary summer recess.
(Reporting by Paul Carrel and Brian Rohan)
(For a factbox with details of the plan, please click on
[ID:nL171261])
Content Provided by
Reuters Reuters is the largest international news agency -- providing professionals around the world with stories that move the markets.
- 
- 
- 
Welcome,
Guest!
News
