Lenihan ruled out role in Hypo deal
Brian Lenihan was asked by his German counterpart last autumn about taking part in a rescue package for Munich bank Hypo Real Estate (Photo: AFP/Getty Images)
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Finance Minister Brian Lenihan was asked by his German counterpart last autumn about taking part in a rescue package for Munich bank Hypo Real Estate, as its IFSC-based subsidiary Depfa Bank was hit by a severe funding crisis last September, the Irish Independent has learned.
It is understood Peer Steinbrueck made the suggestion in a telephone call with Mr Lenihan around the time the German finance minister was assembling an initial €35bn credit line for Hypo from the Berlin government and a consortium of local banks.
Mr Lenihan was quick to rule out participation in a rescue deal, as Hypo's 2007 takeover of Depfa, headquartered in Dublin since 2002, had moved its ultimate ownership back to Germany.
Assistance
Sources said the German overture for assistance never amounted to a formal request.
Separately, Depfa was among less than a handful of IFSC-based institutions that made a failed bid to join the Irish banking guarantee scheme. They were turned down because of the sheer size of their liabilities and the fact that they didn't have an Irish retail customer base.
Depfa Bank, a public sector lender, founded in 1922 by the Prussian government, had €230.8bn of assets and €226bn of liabilities at the time of the Hypo merger -- dwarfing the balance sheets of the country's two main banks.
Bank of Ireland has €194bn of assets and €182bn of liabilities, while AIB's assets and liabilities stand at €182bn and €171.9bn respectively.
By mid-April, Berlin had provided Hypo with a total of €102bn of government debt guarantees and credit lines, and owned a 47pc stake in the stricken lender.
However, this week, shareholders reluctantly approved a €5.6bn recapitalisation of the group -- giving the Federal government a 90pc stake and an automatic right, under German law, to squeeze out the remaining minority investors.
A report into Hypo, carried out by the Bundesbank, Germany's central bank, at the request of the financial watchdog BaFin, raised an alarm about Depfa's short-term borrowing needs and the broader group's risk management.
It was delivered to the German finance ministry last July, but the official to whom it was addressed never saw it, as he was on vacation and it was filed away.
- Joe Brennan
