Germany denies preparing to rescue Deutsche Bank

Wed Sep 28, 2016 12:56pm EDT
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By Arno Schuetze

FRANKFURT (Reuters) - The German government denied that it was working on a rescue of Deutsche Bank (DBKGn.DE: Quote) after a newspaper report about such plans fueled fears over the future of the biggest lender in Europe's largest economy.

European Central Bank President Mario Draghi said that the bank's low interest rate policies were not to blame for the German group's problems but declined comment on whether the state should step in to help.

Deutsche is fighting a fine of up to $14 billion from the U.S. Department of Justice and concerns over its stability had pushed shares to a record low on Tuesday.

Faced with a costly bill for litigation, Deutsche is getting rid of non-core businesses and said on Wednesday it had sold its British insurance business Abbey Life in a $1.2 billion deal.

The German finance ministry moved swiftly to dismiss a report that a rescue plan was being prepared in case Deutsche was unable to raise capital to pay legal bills which include cases dating back to its expansion before the financial crisis.

Weekly Die Zeit had reported that the government and financial authorities were working on possible steps to enable Deutsche to sell assets to other lenders at prices that would ease the strain on the lender.

The paper said that the German government would even offer to take a direct stake of 25 percent if needed. It added, however, that it still hoped Deutsche would not need state support and that only scenarios for a rescue were being discussed.

"This report is wrong. The German government is not preparing any rescue plan, there is no reason to speculate on such plans," the finance ministry said in a statement.   Continued...

A statue is seen next to the logo of Germany's Deutsche Bank in Frankfurt, Germany, January 26, 2016.    REUTERS/Kai Pfaffenbach/File Photo