A slowing economy, corporate-bankruptcies and falling home prices in Eastern Germany, have led to German banks accumulating a number of problem loans on their balance sheets. A collective 250 billion of non-performing loans are estimated to be on German bank's books (see ASR 9/9/04) and, market sources say, the opportunity for a burgeoning German NPL securitization market are closer to realization.

"Recently, these banks have financed outside of the securitization market but securitization is being eyed as an exit strategy and we should see the first NPL deal emerge hopefully sometime this year," said a source at Mayer, Brown, Rowe & Maw. A number of German banks are currently restructuring their loan portfolios either by selling NPLs, spinning them off to subsidiaries, or selling them to third parties.

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