Hypo to get another $70b

MUNICH - Hypo Real Estate Holding, the lender whose implosion last year was Germany's biggest bank failure since World War II, is to get another €40 billion ($70 billion) of state guarantees to safeguard restructuring efforts.

The infusion will swell Government guarantees to the Munich-based lender to €142 billion, Germany's Soffin bank- rescue fund said.

The German Government took over Hypo Real Estate last year after the lender's Dublin-based Depfa Bank unit couldn't raise financing when the bankruptcy of Lehman Brothers Holdings froze credit markets.

It was one of seven banks to fail stress tests conducted on 91 of Europe's biggest lenders in July.

"The executive committee at Soffin came to this decision to avoid any liquidation bottlenecks during the planned transaction," the fund said.

Liquidity problems could occur because of "unfavourable" market developments, Soffin said.

Hypo Real Estate won approval on July 8 to establish a so-called bad bank to house as much as €210 billion of "non-strategic assets".

The amount represents more than half of Hypo Real Estate's total assets at the end of last year. Two weeks later, Hypo was named as the only one of 14 German banks to fail the European Union-wide stress tests.

The bank's Tier 1 capital ratio, a measure of financial strength, dropped to 4.7 per cent - in a test scenario that simulated a sovereign-debt crisis and economic recession - below the 6 per cent minimum required, the Bundesbank and Germany's financial regulator, BaFin, said in July.