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Banks

UPDATE 1-Steinbrueck to present plan on bad banks -report

(Adds reaction in pars 10-13)

BERLIN, April 12 (Reuters) - Finance Minister Peer Steinbrueck said in an interview published on Sunday that he has devised a master plan to help struggling German banks but said he still opposed creating a single “bad bank” for problem loans.

“My analysis and my proposal are both finished; the chancellor has been informed about both,” Steinbrueck told the Frankfurter Allgemeine Sonntagszeitung.

“After the Easter break the government will discuss internally how we’ll handle the problematic assets.”

Steinbrueck, who previously said there would be no bad bank scheme before September’s federal election, told the newspaper that he still remained opposed to a single bad bank.

“I definitely reject a central bad bank so nothing’s changed,” he said. “The respective banks and their shareholders will have to take on the highest possible degree of responsibility for their own toxic assets.”

Creating a bad bank would be the most radical move taken by a big economy to try to overcome the global financial crisis, which began when a collapse in property prices snowballed into a lending freeze.

Under a bad bank scheme, banks would hive off problem loans into separate vehicles, which would be centrally managed under an umbrella of state guarantees to stop further falls in value until the crisis passes.

This would relieve strained bank balance sheets and make it easier for banks to start lending again.

A government spokesman said on Saturday the government would discuss Steinbrueck’s plans with industry leaders on April 21.

Several lawmakers in Merkel’s government expressed tentative support for the moves afoot to help bank lending.

CDU deputy Michael Meister told the “Berliner Zeitung” daily he was “delighted there is finally movement” on the issue and said unfortunately no solution would leave taxpayers unscathed.

SPD deputy Ludwig Stiegler told the “Passauer Neue Presse” newspaper that it was important to “liberate the banks from their illiquid assets so that they can start lending again”.

But Peter Ramsauer, the Christian Social Union’s parliament leader, expressed concerns. He told the “Traunsteiner Tagblatt” the idea of bad banks run counter to rules of commerce and said they are “an ingenious way to mask the economic facts of life”.

POSSIBLE SOLUTION

Steinbrueck told the newspaper that if all the toxic assets were to be placed in a single bad bank it would put a burden of more than 200 billion euros ($265.6 billion) on taxpayers.

“I couldn’t justify that to anyone,” he said.

Steinbrueck hinted, without providing details, that his plan would try to distinguish between “toxic assets” and those that are only temporarily suffering from liquidity problems.

“We’ve got to differentiate between the toxic paper on the one hand and those assets that are only temporary having liquidity problems -- that’s where the solution could be found.”

Steinbrueck said it is “possible the state could be helpful with those assets because we assume those assets from nations and companies will one day liquid again, and thus the value is not lost forever.”

Financial sources told Reuters last week that the government is mulling the creation of a bad bank system to take hundreds of billions of euros of problem loans under the wing of the state.

One source with knowledge of the matter said the government was looking at a bad bank in “a far more radical plan than anyone expects” to rehabilitate stricken Hypo Real Estate and state banks as well as Commerzbank.

Der Spiegel news magazine reported on Friday the problem loans hived off would be backed by the state guarantees. Finance Ministry officials expect that at most three or four banks would take up such a government offer, the magazine said. ($1=.7530 euros) (Editing by Mike Nesbit)

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