German reactivates bank rescue fund

AP News
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Posted: Dec 14, 2011 7:29 AM
German reactivates bank rescue fund

Germany is reactivating its financial sector rescue fund as the eurozone debt crisis raises increasing questions about how banks can cover their capital needs.

Chancellor Angela Merkel's spokesman, Steffen Seibert, said the Cabinet decided Wednesday to reopen the euro360 billion ($474 billion) fund, first established at the height of the 2008 financial crisis.

The fund closed to new applications at the end of 2010. But much of the money _ which totaled euro60 billion for potential capital injections and euro300 billion for loan guarantees _ remains untapped.

European authorities have determined that German banks require a total of euro13.1 billion in new capital to comply with tougher new requirements. The country's second-biggest bank, Commerzbank AG, has been told it needs euro5.3 billion.