German Bank Bracing for Losses


By Reuters 2016-06-04 17:59:25

The European Central Bank has urged German state-owned lender Bremer Landesbank to shore up its capital resources against non-performing loans in shipping, three sources familiar with the matter said.

Bremer (BLB) needs another 700 million euros ($800 million) in equity, weekly magazine Focus reported earlier on Saturday, citing talks between the city-state's finance chief and parliamentary leaders.

"There are close discussions with the ECB," one of the sources said. Strengthening BLB's capital is a "matter of intense talks," a second source said.

Germany was one of the world's main centers of global ship finance before the 2008 financial crisis, and the five German banks with the closest links to the shipping industry still have around 80 billion euros on loan to the sector.

NordLB, BLB's majority owner, and BLB itself are bracing for losses this year due to their exposure to shipping.

NordLB's rivals such as HSH, Commerzbank, DVB and KFW have also taken writedowns and boosted capital buffers against the risk of shipping loans turning bad.

The ECB and BLB both declined comment while Bremen's finance chief, Karoline Linnert, didn't return calls seeking comment.

"NordLB is sufficiently capitalized and fulfils all supervisory capital quotas," a spokesman for NordLB said, declining to elaborate.

Focus reported that BLB could provide 300 million euros by itself with shareholders accounting for 400 million euros.