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State aid: Commission opens in-depth investigation into aid package for German bank Hypo Real Estate

The European Commission has opened under EC Treaty State aid rules an in-depth investigation into state support measures for German bank Hypo Real Estate. This is a first step towards finding a viable long-term solution, in close contact with the German authorities.

Two proposals for the German Bad bank model

Most (German newspapers) papers (yesterday April 22nd 2009) report on cabinet-level discussions (April 21st) on the establishment of a German Bad Bank. Finance Minister Steinbrück said yesterday that two models are currently being evaluated and that a draft proposal will be presented to government within the next two weeks. The first model foresees banks transferring bad assets to ‘special purpose vehicles’; this model could be implemented speedily.

The NTMA (Ireland) and NAMA (The Bad Bank) - The Matter of the Pricing of Imparied Assets.


Breakfast at Lemon, Dawson StreetThe concern of my taxi driver in Dawson Street the other night was that both the US and UK authorities had considered the bad bank proposition and dismissed it, however Ireland has gone headlong for that strategic approach, "ah well" (he said) "sure, if they get this bit wrong in Leinster House, then we are all (bleep bleep)!!"

NAMA (the National Asset Management Agency) was first proposed in a report prepared for the Irish NTMA (National Treasury Management Authority) by Dr. Peter Bacon (apparently known as 'Rasher' to his friends). NAMA is the formal title of 'the Bad Bank of Ireland'; the original report (abridged version) which is interesting in its practical 'business-like' perspective, addressing the arithmetic of valuing impaired assets transferred from a banking system to a government vehicle & the implications therof on the capital position of the banks and on the consequent freedom or otherwise of the property market is available on the NTMA site here;- http://www.ntma.ie/Publications/2009/NAMAsummary.pdf


Germany: The Government and the banking system: HRE and Commerzbank

Berlin bids for all HRE shares, Steinbrueck urges EU to give ground on Commerzbank aid, Berlin bids for all HRE shares, The Financial Times

Germany’s government on Thursday launched its first takeover offer for a bank stricken by the financial crisis, saying it wanted to acquire all of Hypo Real Estate through an offer to shareholders. Shareholders in the property lender are being offered €1.39 per share in the voluntary public takeover offer. The offer represents a 10 per cent premium over the legal minimum as an urgently-written bank rescue law came into force. The law ultimately gives the government powers to expropriate shareholders to take control of banks. By making the voluntary offer, Berlin wants to show it has taken all steps at its disposal before it moves – as it expects it will have have to – to force any holdout investors to sell their HRE shares.


Structured Product (Toxic or Impaired) Asset Pricing and Valuation Theoretical & Applied Modelling References BLUEPRINTS (ABBU)

This is all part of the 'Theory Forge' (or theoretical framework) which I have been initiating recently. Our publications work (we think) by explaining more fully our theoretical point of view & our specific approach to quantitative analytics in risk management and finance. The content is mostly taken from the higher level theoretical background with which we approach specific client engagements.

ECB: Guiding Principles for Bank Asset Support Schemes

The Eurosystem identified seven guiding principles which can be seen as sufficiently broad to apply to all schemes falling under the wide category of asset support measures. These guiding principles are elaborated further below and can be summarised as follows:

EU banks must disclose toxic assets for aid

Banks must disclose their problem assets if they want to avoid lengthy wrangling with Brussels over aid schemes, Europe’s top competition watchdog warned at the weekend.

In a tough-talking speech, EU competition commissioner Neelie Kroes told executives that she would not sign off on restructuring schemes under European Union state aid rules if banks continued to conceal their troubled assets.

”To protect taxpayers and maintain the level playing-field, the public purse will simply not be open to banks who do not want to open their books in return,” she told a conference, organised by Deutsche Bank.

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