Dresdner Bank Plans to Support Ambac Rescue

Dresdner Bank, part of insurer Allianz, intends to support a rescue package for U.S. bond insurer Ambac Financial Group Inc, the head of Dresdner's investment banking operations said.

Various rescue options for Ambac were under discussion, Stefan Jentzsch told reporters at the German bank's annual news conference on Monday.

"If what is now on the table comes to pass then we will take part in the package," he said, adding Dresdner was ready to put up a sum in the low tens of millions of euros.

Dresdner is one of several banks working on a deal that could shore up Ambac's balance sheet and preserve its top credit rating, thus avoiding a credit rating downgrade that could force investors to sell billions of dollars of securities.

Jentzsch said he saw no acute problems at any other bond insurers, known as monolines.

A person familiar with the matter told Reuters on Friday that a rescue package for Ambac could be announced on Monday or Tuesday, and prospects for such a deal supported global financial markets.

"This is the one big piece of speculation that emerged over the weekend," said Dirk Becker, a banking analyst at Landsbanki Kepler's Frankfurt office.

"A rescue of Ambac would temporarily help the sector if investors can avoid all the markdowns on paper insured by Ambac," he added.

The DJ Stoxx index of European banks advanced 2.4 percent.

Ambac, facing billions of dollars of expected losses from guaranteeing repackaged subprime mortgages, is talking to banks and regulators about raising extra capital to keep its top credit ratings.

The source said on Friday that a deal had not yet been signed and may still fall through, but talks with banks including Citigroup , UBS and Wachovia were advancing.

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