UPDATE 1-German lower house approves "bad bank" plan

(Adds detail, background)

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.

A number of German banks, both stock-exchange listed and public sector lenders, could benefit from the plan.

The country's second-biggest lender Commerzbank has shifted some 38 billion euros ($53.27 billion) in risky assets to an internal vehicle where a team of specialists will work them out over the next several years.

Deutsche Postbank , in which Deutsche Bank holds a stake of more than a quarter, has said the bad bank could help in dealing with a 6 billion euro portfolio of complex asset backed securities, part of which it has already written down.

Nationalised property financier Hypo Real Estate , which has received 52 billion euros in government financial guarantees, may offload its wayward state financing business to the bad bank, industry experts say.

Regional public sector banks WestLB [WDLG.UL], LBBW [LBBW.UL], HSH Nordbank [HSH.UL] and BayernLB [BAYLB.UL] are also struggling to find a new home for their billions of euros of bad assets.

SWEETER TERMS

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.

Earlier, the BdB commercial banks' association welcomed the coalition's agreement on the "bad bank" model.

"I regard it as important, so that we are armed for what comes later this year and perhaps in 2010, because we still face a way to go with this economic slump," BdB Managing Director Manfred Weber told Deutschlandfunk radio.

The Bundestag also approved a law to clamp down on tax evasion. The measure will make it mandatory for German citizens and companies who do business or keep a bank account in tax havens to inform the German authorities fully of this.

Steinbrueck has made it his mission to stamp out tax evasion.

"Anyone who evades taxes, damages society and derides the rule of law and makes the state weak at a time when the state more than ever needs to be capable of acting," he told the Bundestag. (Reporting by Paul Carrel and Brian Rohan in Berlin and Jonathan Gould in Frankfurt) (For a factbox with details of the plan, please click on [ID:nL171261])