Are all nationalized banking companies
Ten years after nationalization : To date, the HRE has cost 15 billion euros
Ten years after the forced nationalization of the Munich scandal bank Hypo Real Estate, there is no end in sight to the financial and legal reappraisal. Once a DAX group operating on the international stage, HRE is now leading a shadowy existence as a state GmbH, which is primarily concerned with conducting legal proceedings: as plaintiff and defendant at the same time.
Because neither the lawsuits of HRE against former board members nor the lawsuits of former shareholders against the bank have been decided so far. “The conclusion of these legal proceedings depends on when HRE can be dissolved as a company,” explains the Federal Ministry of Finance on request. "The business purpose of HRE is its own dismantling."
Ten years ago, HRE was in the headlines almost every day. In the wake of the financial crisis, the real estate bank got into such a dangerous situation that the federal government decided to nationalize it in order to prevent the otherwise certain bankruptcy. On October 13, 2009, the last reluctant shareholders were forced out with a compulsory settlement, the federal government was thus one hundred percent owner. Nationalization should prevent an even bigger catastrophe. An insolvency would presumably have triggered a conflagration with further bank failures.
The closing balance depends on the outcome of various lawsuits
The rough cost estimate ten years later: around 15 billion euros, made up of the billions in government aid and the losses of the bad bank, which was spun off in 2010. The federal government stabilized HRE at the end of the last decade with cash injections of almost ten billion euros. Of this, the financial market stabilization fund still has 7.6 billion euros on the books. On the credit side, HRE and the bad bank FMS Wertmanagement, which was spun off in 2010, paid back EUR 800 million in guarantee fees for guarantees to the state treasury. The final balance of the state aid is pending and depends on the outcome of various lawsuits.
So far, the bad bank has also lost a lot of money in total. In 2010 the federal government outsourced HRE contaminated sites with a nominal value of 175 billion euros to the winding-up agency. In fact, about ten billion euros of this was lost, a large part of it due to the debt haircut for Greece in 2011. Since then, FMS Wertmanagement has even made profits by realizing the old HRE papers, but too little to offset the initial losses with Greek government bonds. From 2012 to 2018 there was a total of 1.3 billion euros in profit. Bad Bank is not allowed to do new business. The sole purpose of their existence is to recycle HRE contaminated sites. At Bad Bank, the final invoice may not be available for decades, when not a single one of those involved in 2009 will be alive.
Former HRE CEO Georg Funke died last year. At the end of 2018, the settlement bank still had a good 69 billion HRE papers on its books. The longest-lived of these papers have maturities up to the year 2078. As the portfolio gets smaller every year, the returns naturally also shrink. But with the settlement bank running up a lot of money, one day the costs will exceed the returns. Former boss Stephan Winkelmeier estimated in spring 2018 that FMS Wertmanagement would be in the red by the middle of the next decade at the latest. "We plan not to sit here until we all have a rotten smell," said Winkelmeier at the time. The banker has implemented this resolution: He is now head of BayernLB.
The original plan of the Federal Ministry of Finance was to dissolve the bad bank again in 2020. That didn't make sense. “A sale of the remaining assets and the associated derivatives would only be possible in a short time by accepting immense losses,” explains the Federal Ministry of Finance. Therefore, FMS Wertmanagement is currently working on a “medium-term target”.
The legal disputes between HRE and its former board members remain on the one hand and former shareholders and HRE on the other. There is no end in sight here either. dpa
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