Munich Re boss warns German banks still under threat

Munich Re boss warns German banks still under threat
Photo: DPA
The international financial crisis could claim more victims among German banks, the head of re-insurance giant Munich Re warned.

“Other cases are possible,” Nikolaus von Bomhard told reporters late on Tuesday in the northern port of Hamburg. “We have not seen the end of it.”

He said banks had not yet finished accounting for risky assets on their books, ahead of third-quarter earnings reports to be published in the coming weeks.

German banks have been among the high-profile cases that emerged after the crisis was sparked more than a year ago by the collapse of the US market for high-risk, or subprime mortgages. They had invested heavily in complex securities backed by risky loans on which borrowers have defaulted in large numbers.

Banks such as IKB, SachsenLB and Hypo Real Estate have either been thrown rescue lines worth billions of euros or been taken over by other German banks.

The biggest private German banks, Deutsche Bank and Commerzbank, have also written off billions of euros from the value of investments exposed to the financial crisis, but are not currently believed to be at risk. On Wednesday, German lawmakers were debating a proposed €480-billion ($655-billion) bail-out package for the country’s banks.

The plan includes up to €80 billion in fresh capital for banks and €400 billion in guarantees to jumpstart stalled lending on crucial interbank money markets.

Von Bomhard, the head of one of the world’s biggest reinsurance companies, excluded however a bankruptcy on the scale of US investment bank Lehman Brothers a month ago, a Munich Re spokeswoman told AFP on Wednesday.

Several German banks could nonetheless seek aid contained in a proposal being considered by lawmakers in Berlin, von Bomhard said. Munich Re would not however, because “we have reduced our risky credits considerably in the past few years, which is why we are in a good position now,” the insurance boss said.