Germany's Dresdner Bank has become the latest financial institution forced to bail out a special investment vehicle (SIV).

Dresdner, Germany's third largest bank, said that it will pay off all the senior debt in the SIV, which are a type of structured finance vehicle that use short-term borrowing to buy higher-yielding, and therefore sometimes higher risk, assets.

Since July last year, Dresdner Bank has reduced the size of the assets contained in its SIV, from $31.2 billion to $18.8 billion.

The bank said that 90 per cent of the SIV's assets are investment grade with no direct exposure to US sub-prime mortgages, or collateralised debt obligations (CDO), a complex financial instrument.

Since the credit crunch and the US sub-prime mortgage crisis have gripped global financial markets last year, SIVs have become an increasingly problematic area of investment for banks.

Yesterday, Standard Chartered walked away from rescuing a $7.1 billion SIV known as "Whistlejacket" which was put into receivership last week, after the value of its assets continued to plummet.

SIV Portfolio, previously managed by Cheyne Capital Management, a UK hedge fund, is also in receivership, though Goldman Sachs in talks with the receivers about a rescue deal.

Dresdner announced its plans for the SIV as it revealed a full-year €1.3 billion writedown, primarily on assets backed by US sub-prime mortgages.

The disclosure was part of annual results announced by Dresdner's parent company, Allianz, which said tgat total revenues rose from €101.1 billion to €102.6 billion and operating profits increased by nine per cent to €10.9 billion.

However, operating profit at Dresdner Bank fell from €1.4 billion to €730 million. Allianz said: "While all other banking divisions performed well, only some parts of the investment banking business were affected by the dislocation of the credit markets." Commenting on Dresdner, Helmut Perlet, the chief financial officer of Allianz, said: "We are focusing in our long-term capability for value, and we are confident that our banking segment will fulfill this requirement."

Allianz plans to increase its dividend by 45 per cent to €5.50. Shares in the group rose 2.19 per cent to €120.06.

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