The German government has taken measures to guarantee security in the country's banking sector to boost investors' confidence and revive the stagnant lending market as the world struggles to resolve the ongoing financial crisis.

Since the Lehman Brothers' collapse on September 15, the US mortgage crisis spread rapidly to Europe, turning into a global financial meltdown.

Taxpayers in Europe feared that banks in their own countries would fall overnight and the inter-bank lending market has practically come to a standstill due to lack of confidence between the banks. The entire financial market was dismayed as freefall in stocks grips Europe.

The impact of world financial crisis is keenly felt in Germany, where tens of thousands of individual German investors with modest investment suffered direct loss after the Lehman collapse.

Besides, state-sponsored KfW development bank transferred 425 million US dollars to Lehman Brothers Holdings on the same day that Lehman filed for bankruptcy.

The payment, described by the bank as an "automated transfer" provoked an outcry across the political spectrum and earned the bank the dubious title of "Germany's dumbest bank" in the media. Three management board members at the bank were suspended.

To tackle the crisis, the German government pledged guarantee for private bank deposit in early October.

"We say to savers that their deposits are safe," Chancellor Angela Merkel said. "The federal government is also committed to that."

On the other hand, the government also presented a rescue package that would provide 400 billion euros (543 billion US dollars) in bank guarantees and a further 80 billion euros (109 billion dollars) in state funds to recapitalize its banks.

The entire rescue package, amounting to about 20 percent of Germany's gross domestic product, is part of Europe-wide efforts to shore up European financial institutions amid the financial crisis.

The strategy is not only to save the crisis-stricken German banks by injecting funds and offering governmental guarantees, but also to tighten regulation in the whole financial industry.

"The move is to build trust in the banks and economy," Merkel told a press conference in Berlin, stressing that the package is aimed at ensuring the stability of the financial system of the biggest economy of Europe.

The huge financial rescue plan, after being approved last Friday by the upper house of the parliament, took immediate effects. German stocks reversed its downward trend to close higher on the Frankfurt Stock Exchange the same day. The benchmark DAX, index of 30 big companies, soared 158.52 points, or 3.43 percent, to 4,781.33 and it rose 53.68 points, or 1.12 percent to 4,835.01 Monday.

In an interview with Xinhua, Zheng Cong, president of the GSC holding company of the Deutsche Bank, said the rescue plan effectively guaranteed the security of German banking system and prevented the financial storm from evolving into a banking crisis.

Zheng said despite the possible bank deficit and job cutting, the overall security of the banking industry has been guaranteed.

"No more banks will go bankrupt. The financial storm has been put to an end in Germany," Zheng said.

(Xinhua News Agency October 21, 2008)