Layoffs Loom

"The number of employees will go from some 1,800 to about 1,000 over the next three years," the bank said in a statement. "Two-thirds of the jobs which are to go will be outside Germany," the bank said, adding that it intended to sell some of its activities.

The Munich-based bank said about 800 jobs would be slashed by 2011 in a first step, adding it would take pains to avoid redundancies. Two thirds of the planned job cuts will take place outside Germany, the bank said.

Hypo Real Estate and its Irish subsidiary Depfa were caught up in a liquidity crunch that worsened after the US investment bank Lehman Brothers declared bankruptcy in September.

Hypo Real Estate has already benefited from tens of billions of euros in a rescue plan worked out by the government and the German central bank since October.

Under investigation for fraud

The troubled bank is also being investigated for fraud. Earlier this week, prosecutors searched the apartments and office of Hypo Real Estate's former board chairman Georg Funke and supervisory board president Klaus Viermetz, both of whom resigned in early October.

The searches were made owing to "suspicion of inexact presentation, market manipulation and charges of fraud," according to the Munich prosecutor's office.