Germany is Keeping Banking System Barely Alive
Sudden Stops to the banking system could be caused by Germany's banks
Submitting your vote...Foreigners might not be aware of this, but in this very moment the continuation worldwide financial system depends on Germany’s Regulators.
Recently German news reported that Hypo Real Estate (HRE) should be closed by the regulators, as the capital requirements demanded by law are not met since end of 2008. So far regulators have not stepped in and provided a moratorium over HRE, which is a good thing for the banking system, but eventually a bad news for those who believe in justice.
The HRE case is a damocles sword hanging over the worldwide banking system. It is a system relevant institution and if it would have to be closed down, the effects would be similar to the Lehman failure. Now, it is obvious that German regulators and governments will not allow for this to happen, even if they have to bend or extend current rules.
HRE is a grave for hundreds of billions of Euros of German tax payers´ money. The financial institution, which is one of the largest issuers of covered bonds has been rescued and guaranteed by the government. But even the government is limited in their attempts to rescue the bank. The current fights with the main shareholders alreadz caused significant headache to the German government. Even a plan to seize shareholder rights had been prepared in order to get the situation under control.
The big question is what will happen, if more people, investors and especially the European commission will perceive this news. An illegal support to the German banking industry is the last thing, which Europe needs. Nellie Kroes, who is carefullywatching over competition laws and practices in Europe, is known not to be friend with German finance minister Steinbrueck. And Europe will have the last word on this issue. Definitely it is going to be a great summer in European politics!