Flowers resigns from Hypo Real board

Christopher Flowers, the head of the US financial services investment firm JC Flowers, yesterday resigned his seat on the supervisory board of beleaguered German bank Hypo Real Estate as the German government mulls buying the lender.

Mr Flowers, a former Goldman Sachs banker, stepped down to remove any potential conflict of interest in case Germany takes action that forces Hypo shareholders out of their investment in Hypo.

The move follows legislation passed by the German parliament on 20 March to allow the government to buy stakes in the bank, which could lead to the company’s nationalisation. The legislation still needs to be endorsed by Germany’s upper house before it becomes law, however.

New York-based JC Flowers owns about 17 per cent of Hypo.

The German government has already pumped tens of billions of euros into the bank to secure its loans to and help avoid the bank’s collapse.

“We regret very much that at such an important time for Hypo Real Estate we have had to resign from the supervisory board,” Mr Flowers said. “We and our investors had always viewed our involvement as a medium to long-term investment that would provide both capital and deep experience in restructuring the bank. We remain committed to this view.”

JC Flowers stated its preference to remain a shareholder in Hypo and to support the lender’s restructuring, rather than give up its shareholding. It said the German government had received a proposal that that Flowers and fellow-investor Grove International Partners could help coordinate a restructuring plan whereby the government would take a 75 per cent stake plus one share and the bank's voting rights would be revamped.

On Thursday, Hypo said it had been granted yet more extensions on billions of euros of guarantees from the German government, helping secure its finances.