Commerzbank for Bailout

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A number of sources today have reported that Commerzbank is on the verge of asking the German Government for a bailout as it struggles to raise funds to cover the losses on loans it has. According to Sky News

“Intense talks” have been going on for several days, according to sources who spoke to the news agency Reuters.

Several people familiar with the matter told the agency that the aim was to reach an agreement in principle by the Christmas holidays.

Commerzbank told Sky News it does not comment on market rumour and speculation.

Last week, the bank said it needed to raise an extra 5.3 billion euros by June 2012 to cope with a potential default of European government debt under new rules laid down by the European Banking Authority.

t has until January to explain how it will raise the money.

The bank, which has 14 million customers, is trying to raise the extra funds from private investors and has said it could also sell off parts of its business, cut costs or reinvest its profits to shore up its reserves.

Commerzbank’s chief financial officer Eric Strutz said: “We are aware of our responsibility for the supply of credit to the German economy and we will continue to stand by our customers.

“We stand by our intention not to make use of additional public funds,” he said.

Banking and Finance reporter at the Wall Street Journal, David Enrich, told Sky News he was not confident the money could be found through the usual channels.

He said: “The (German) Government already owns about 25% of Commerzbank…they have other options other than going to the Government.

“They can sell assets, they can try and get money from private investors…the Government is likely to come back in and act as a fallback option.”

Shares in Commerzbank have fallen by 74% in value this year.

Fallen how much ? 😉

Also further news from ZeroHedge on the matter.


Reason For Gold Selloff ?


Rehypothecation has been put forward for the reason of the massive sell off of gold over the last few days.This can be defined as follows:

Rehypothecation is a practice that occurs principally in the financial markets, where a bank or other broker-dealer reuses the collateral pledged by its clients as collateral for its own borrowing.”

So in relation to GLD (which is owned by HSBC), an article by ZeroHedge has suggested that after MF Global, investors are beginning to suspect what very few knew already, was that gold accounts owned by clients had their gold reused  and relent. So fewer people are trusting paper gold or that GLD will be of much use when SHTF.

Source: ZeroHedge


A good interview below by Kyle Bass also touches this. Fast forward to relevent part on collateral at 9min 30 secs in.

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