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More German State Banks Line Up For Rescue

Two more German banks seemed set to line up Saturday for a government rescue, as officials reportedly debated whether to force recapitalization on shy commercial banks.

A woman walks into HSH Nordbank

HSH Nordbank seems set to follow BayernLB's example

One of the banks run by Germany's 16 states, BayernLB, has already appealed for help, and a second landesbank, HSH Nordbank, run by the states of Hamburg and Schleswig-Holstein, said it had decided in principle to apply.

Landesbanks, which also have powerful non-government shareholders, have been among institutions hit hardest in the past year by investment in subprime US mortgages.

"The board of HSH Nordbank has decided in principle to to make use of the government measures," a spokesman, Rune Hoffmann, told DPA news agency in Hamburg. "But we are not under pressure of time."

He said the company's prime objective was a resumption of interbank lending. He said HSH's

diverse shareholders had not yet finally approved the move.

Will WestLB also apply?

A third landesbank, WestLB, was on the verge of applying for help, the newsweekly Der Spiegel said Saturday.

It quoted the chief executive, Heinz Hilgert, saying WestLB would also seek a government takeover of its toxic securities.

The magazine said government officials were meanwhile debating how to force recapitalization on Germany's commercial banks, which have resisted taking up the government offer.

Commercial banks reportedly fear a loss of credibility if they seek state aid. Their senior executives would also face a pay cap as a condition for aid.

Summoning CEOs

Quoting sources, Der Spiegel said German Finance Minister Peer Steinbrueck planned to summon commercial bank chiefs to Berlin in two weeks to press them to jointly apply for help.

A fresh embarrassment awaited the state of Bavaria over its landesbank, BayernLB, which needs 6.4 billion euros ($8 billion) in new funds, Spiegel added.

It said Bavaria and its trustee savings banks had hoped for relief from a promise earlier in the year to guarantee 4.8 billion euros of the sum, and did not realize the week-old federal aid package ruled this out.

The Bavarian government quarrelled this week with the savings banks, which as joint owners of BayernLB successfully resisted a government bid to sack BayernLB chief executive Michael Kemmer.

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