EU approves German bank deposit guarantee

BRUSSELS, Jan. 22 (Chinese media) -- The European Commission

said on Thursday it had approved a German plan to provide a guarantee of 6.7

billion euros (8.7 billion U.S. dollars) to the country's banking deposit

insurer SdB.

"The guarantee is necessary to avoid a serious

disturbance in the German economy and to ensure the stability of the German

banking sector while avoiding undue distortions of competition," the European

Union (EU)'s competition guardian said in a statement.

The guarantee aims at providing collateral for a bond

in the amount of 6.7 billion euros issued by SdB and subscribed by some German

commercial banks.

SdB is a newly created banking entity, which supports

the Deposit Protection Fund of the German private commercial banks in processing

the compensation payments.

The aim of the bond issue is to compensate depositors

of Lehman Brothers Bankhaus, the German subsidiary of the U.S.-based investment

bank which collapsed in September.

It will enable the Deposit Protection Fund to pay

compensation before it receives future payments from the insolvency assets of

the insolvent Lehman Brothers Bankhaus.

The Deposit Protection Fund of the German commercial

banks fully secures the deposits of each and every customer at the private

commercial banks up to a ceiling of 30 percent of the relevant liable capital of

each member banks.