HVB Group, Germany's second-largest banking group, could boost its core capital from a low of 5.6% at the end of last year to 6.8% if it issues Europe's largest mandatory convertible bond, according to Bear Stearns.

Handelsblatt, the German newspaper, reported that HVB Group, formerly known as HypoVereinsbank, is considering issuing a mandatory convertible of between €3bn ($3.2bn) and €4bn. The German bank's shares fell 9.6% to €8.67 on Thursday morning following the report.