German bankers suspended for Lehman transfer
Aaron Kirchfeld and Patrick Donahue
September 20, 2008
KFW Group suspended two management board members following criticism of the German state-owned development bank's transfer of money to Lehman Brothers the same day the US securities company filed for bankruptcy.
Peter Fleischer and Detlef Leinberger and the department head in charge of risk management would be suspended with immediate effect until the incident was clarified, the Frankfurt-based bank said yesterday. German Economy Minister Michael Glos and Finance Minister Peer Steinbrueck, who head KfW's board, said they would overhaul the bank's risk management as soon as possible.
That the transfer to Lehman took place "is a clear signal that risk management is not intact at KfW," Mr Steinbrueck said. "We'll have to take measures to examine how KfW's risk control can be improved."
KfW faces losses, as well as public and political opprobrium, for making an "automated payment" of €350 million ($A631 million) to Lehman for currency swaps on September 15 that couldn't be halted after prior approval. Bild, Germany's biggest-selling newspaper, ran a headline on its front page yesterday calling KfW "Germany's dumbest bank".
The development bank has total exposure of about €536 million to Lehman because of the currency swap and €186 million in bonds. KfW had previously stated the swap was worth about €300 million. The value increased to about €350 million because of changes in the dollar conversion amount.
KfW has already drawn flak for agreeing on August 21 to sell IKB Deutsche Industriebank AG, the first German casualty of the subprime mortgage market collapse, to Lone Star Funds for less than 20% of the price the German Government had sought. KfW's board officially approved the sale yesterday.
BLOOMBERG
Aaron Kirchfeld and Patrick Donahue
September 20, 2008
KFW Group suspended two management board members following criticism of the German state-owned development bank's transfer of money to Lehman Brothers the same day the US securities company filed for bankruptcy.
Peter Fleischer and Detlef Leinberger and the department head in charge of risk management would be suspended with immediate effect until the incident was clarified, the Frankfurt-based bank said yesterday. German Economy Minister Michael Glos and Finance Minister Peer Steinbrueck, who head KfW's board, said they would overhaul the bank's risk management as soon as possible.
That the transfer to Lehman took place "is a clear signal that risk management is not intact at KfW," Mr Steinbrueck said. "We'll have to take measures to examine how KfW's risk control can be improved."
KfW faces losses, as well as public and political opprobrium, for making an "automated payment" of €350 million ($A631 million) to Lehman for currency swaps on September 15 that couldn't be halted after prior approval. Bild, Germany's biggest-selling newspaper, ran a headline on its front page yesterday calling KfW "Germany's dumbest bank".
The development bank has total exposure of about €536 million to Lehman because of the currency swap and €186 million in bonds. KfW had previously stated the swap was worth about €300 million. The value increased to about €350 million because of changes in the dollar conversion amount.
KfW has already drawn flak for agreeing on August 21 to sell IKB Deutsche Industriebank AG, the first German casualty of the subprime mortgage market collapse, to Lone Star Funds for less than 20% of the price the German Government had sought. KfW's board officially approved the sale yesterday.
BLOOMBERG
