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The World From Berlin: Germany's 'Pathetic' Public Banks Need Overhaul - SPIEGEL ONLINE - News - International

Berlin has little choice but to help German banks rid themselves of toxic assets at taxpayers' risk, write media commentators. But in doing so it must insist on a radical restructuring of the publicly owned state banks, or Landesbanken, which have outlived their usefulness.

 Clouds loom over Germany's top banks in Frankfurt, the financial capital. Germany moved closer to ridding its banking sector of toxic assets on Tuesday at a meeting of government ministers and financial regulators who said they expected to have a firm plan to set up "bad banks" -- waste dumps for junk securities that are weighing down banks' balance sheets -- in place by the summer.

The officials agreed to work on finalizing a draft law in the coming weeks, present it to Chancellor Angela Merkel's cabinet by mid-May and get it approved by parliament by the summer.

The value of toxic assets in German bank balance sheets is estimated to be in the hundreds of billions of euros. The bad banks plan, under which banks can set up state-guaranteed companies and transfer their junk securities into them, is aimed at regenerating the financial system and boosting the stalled flow of credit into the economy, which is in its worst recession since World War II.

by Fran on Wed Apr 22nd, 2009 at 02:04:36 PM EST
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