Lehman Bankruptcy Hits Germany, Euro (EUR/USD) Holds Below 1.4250
Lehman bankruptcy could hurt Germany's deposit protection fund. The German subsidiary of Lehman is a member of the deposit protection fund (Einlagensicherungsfond) of the German Banking Federation (BdB) and the bankruptcy could hit the fund with up to EUR 6B, according to Handelsblatt reports. The German paper reports that the fund is currently worth only around EUR 4.6B, while the total credit of Lehman's German subsidiary reportedly amount to EUR 14.3B. The highest amount the deposit protection fund ever had to pay was EUR 1.3B back in 2002, for the near bankruptcy of Schmidt bank. The fund also had to pay 950 m for the IKB bank earlier in the year and helped with Duesseldorfer Hypo, for which a buyer is sought at the moment. Direct losses of individual institutions from the Lehman bankruptcy are rumored to amount up to EUR 400M for individual institutions.
Amid growing concerns for Europe's largest economy, the news failed to trigger a rally in the U.S. dollar (EUR/USD pair), and remains range-bound between 1.4135 and 1.4270.