European Union regulators expressed doubts today over the long-term viability of bailed-out German lender Hypo Real Estate while allowing billions of euro in extra state aid for the time being.
HRE, whose business model combined investment banking with real estate finance, had to be nationalised last year, making it Germany's highest-profile casualty of the credit crunch.
The European Commission is now reviewing HRE's restructuring plan to see if it complies with EU state aid rules and ensures the bank's long-term survival.
The EU competition regulator said the transfer of about €200 billion of toxic and non-strategic assets into a "bad bank" and up to €40 billion of extra aid for HRE would be included in the ongoing investigation.
"At this stage I still have doubts about the long-term viability of HRE," EU Competition commissioner Joaquin Almunia said in a statement.
"Before adopting a final decision on the restructuring plan I will closely examine the long-term viability of the bank and the adequacy of the measures to limit distortions of competition and to ensure burden sharing," he said.
HRE was not immediately available for comment.
Germany's bank rescue fund SoFFin agreed on Wednesday to the transfer of €191.1 billion worth of assets as part of a long awaited overhaul of the Munich-based lender to move €210 billion worth of assets off its balance sheet.
Reuters