Cablegate: Another Duesseldorf-Based Bank Rescued

VZCZCXRO7066
RR RUEHAG RUEHAST RUEHBW RUEHDA RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHDF #0024 1151451
ZNR UUUUU ZZH
R 241451Z APR 08
FM AMCONSUL DUSSELDORF
RUEHC/SECSTATE WASHDC 0141
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNFRG/FRG COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHDF/AMCONSUL DUSSELDORF 0157

UNCLAS DUSSELDORF 000024

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: EFIN ECON PGOV GM
SUBJECT: ANOTHER DUESSELDORF-BASED BANK RESCUED

Sensitive but Unclassified -- Not for Internet Distribution

1. (SBU) After German state institutions intervened in 2007 to
save the well known WestLB and IKB banks, the "Duesseldorfer
Hypothekenbank" (DHB), this week also required a rescue
operation. In a "forced sale" on April 21, a fund controlled by
the German Association of Private Sector Banks (BdB) took over
this little known family-owned private bank with 27 billion
euros in assets. The Managing Director of the Association's
North Rhine Westphalia (NRW) branch told us that BaFin and the
Bundesbank became heavily and directly involved in order to
preserve the integrity and reputation of the German "Pfandbrief"
market, which in turn plays an important role in real estate
financing and municipal finance markets. The bank's collapse
could have undermined confidence in these two key markets.
(Note: Pfandbriefe are covered bonds, a special form of mortgage
backed security that has been issued in Germany for more than
100 years and are considered "ultra safe." They are a central
product in German capital markets. End Note)

2. (SBU) Our BdB interlocutor saw little direct relationship
between this case and U.S. subprime woes. According to the
Fitch rating agency, the capitalization of DHB was "barely
adequate," despite a 150 million euro capital injection earlier
this year by the former owner, the Schuppli family. Our
interlocutor speculated that downgrades by rating agencies
triggered the crisis at DHB. This in turn affected the bank's
liquidity (although a DHB Director denied to the press that this
was the problem). Our BdB interlocutor called the rescue
operation "serious, but not of the same dimension as the crises
at WestLB, IKB or SachsenLB." The BdB takeover of DHB is only
temporary and that a sale is expected as soon as an appropriate
buyer can be found, he stated.

3. (U) This message was coordinated with Embassy Berlin.

BOYSE

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