MUNICH-The split out of poor or non-performing assets from the Hypo Real Estate group is to take place this week, after Germany's financial markets stabilization fund, SoFFin, said it will transfer around $259 billion of assets into an institution for servicing and unwinding them.

The so-called "Bad Bank" has long been planned for the group, which is the parent of Deutsche Pfandbriefbank, once again highly active in real estate lending across Europe. SoFFin said an additional $2.8 billion in capital will be provided for the institution, FMS Wertmanagement, which will be founded on Sept. 30. SoFFin will also provide capital of $13.5 billion to Hypo Real Estate as part of its bailout efforts.

Hypo Real Estate was struck by a liquidity crisis in 2008 as the financial crisis climaxed, and was subsequently, in effect, nationalized by the German government following a squeeze-out of minority shareholders. That move was particularly fiercely contested by US-based financier J.C. Flowers. New institution FMS, which will receive a transfer mainly consisting of poorly performing credits, securities and derivatives, will be provided with capital of $5.3 billion.