MUNICH, March 20 The former chief executive of
German lender Hypo Real Estate (HRE) covered up liquidity
problems just weeks before its near collapse almost a decade
ago, a public prosecutor alleged in a Munich court on Monday.
Georg Funke and former chief financial officer Markus Fell
are both facing charges of falsifying the bank's earnings
reports in 2007 and 2008. Fell is also facing a charge of market
Fell denied the charges on Monday, and Funke will present
his defence on Tuesday. Both former managers have previously
denied any wrongdoing.
Germany bailed out HRE in 2008 and nationalised it in 2009
after the bank faced huge writedowns on its mortage-backed
securities exposure, which collapsed in the aftermath of Lehman
Brothers bankruptcy. The ensuing global financial crisis also
squeezed the bank's liquidity position.
The government injected capital of 10 billion euros ($10.8
billion) into the stricken bank and offered 145 billion euros in
liquidity guarantees, of which it used 124 billion.
Prosecutors alleged on Monday that Funke and Fell had known
since 2007 the bank was facing liquidity problems and its state
financing subsidiary Depfa, bought in the same year, had been
nearly illiquid as early as September 2007.
Despite some HRE staff and external auditors describing the
bank's liquidity as critical, the managers had assured up until
just weeks before the bank's near-collapse that there were no
serious problems with its liquidity position, the prosecutors
alleged in court.
($1 = 0.9301 euros)
(Reporting by Jörn Poltz; Writing by Arno Schuetze; editing by