HSH Nordbank's CDO bet cost German taxpayers up to €14B

HSH Nordbank was a German Landesbank headquartered in Hamburg and Kiel, jointly owned by the states of Hamburg and Schleswig-Holstein. It was the world's largest provider of maritime finance, but had expanded aggressively into global capital markets before the 2008 financial crisis. The bank's trading desk held a $500 million portfolio of US mortgage-linked collateralized debt obligations, including a trade codenamed Omega 55 with BNP Paribas that alone cost the bank €500 million.

When the crisis hit, the bank's losses cascaded from two directions. The CDO portfolio collapsed, and the global shipping recession triggered massive defaults on the bank's core shipping loan book. In 2009, HSH Nordbank reported a €678 million loss and received a €3 billion capital injection plus €10 billion in credit guarantees from its state owners. The bank never fully recovered: it posted another €800 million loss in 2013 and was forced to offload €6.2 billion in troubled assets — mainly non-performing ship loans — back to the states.

The two states eventually calculated that the total cost of their HSH Nordbank investment ranged from €10.8 billion to a maximum of €14 billion. The bank was sold to a private equity consortium in 2018 and renamed Hamburg Commercial Bank. The case became the most expensive example of a German Landesbank using public guarantees to fund global trading positions that its owners did not understand.