Calls for Hypo Real Estate to be wound up

City A.M. Reporter
AILING German lender Hypo Real Estate (HRE) should be wound down, a German expert commission has recommended.

“The experts can see only slim chances that a privatisation of HRE would become a success,” said a source with knowledge of a report drafted on behalf of the German government by the expert commission.

Due to overcapacity in the markets where nationalised mortgage lender and state financier HRE is active, the experts concluded that a sale would not yield higher proceeds than a liquidation, the source added.

HRE required more than €100bn (£93.7bn) in German government assistance in the financial crisis, bailed out because it was seen as crucial to the stability of the country’s covered bond market.

The expert commission judged that both HRE and ailing public-sector bank WestLB were “not indispensable” for the German economy and could be wound down, the sources said.

According to sources, WestLB is nearing a deal that will keep key parts under public-sector control, but leave other units to be scooped up by investors.