Commerzbank ups Tier 1 capital through buyback

STRUGGLING German lender Commerzbank yesterday shored up its core Tier 1 capital to the tune of €700m, by buying back hybrid debt from bondholders.

The bank, which earlier this week was rumoured to be in state aid discussions with the German government, said it would pay around €643m to buy back securities with a nominal value of €1.27bn – splashing out around €50m more than it had previously said it would spend.

The €700m boost to its capital ratio – a key measure of financial strength used by regulators – will go someway towards the €5.3bn in fresh capital the bank must find to narrow its ratio to the required amount by the middle of next year.

But despite its latest efforts, regulators are still unsure Commerzbank can meet their demands.

Yesterday, the German government passed a bill to reinstate the country’s bank rescue fund – Soffin – which would allow regulators to force a bank to take state aid if it is struggling.