How a German Bank Lost $425M by Mistake

By CHRISTEL KUCHARZ, ABC News Producer, Germany

While the German stock market is still a bit nervous and investors here are anxious about keeping their heads above water, there are some German financial institutions that see the current Wall Street crisis as a chance to enter lucrative U.S. markets.

Others, however, like the state-owned development bank KfW (Kreditanstalt für Wiederaufbau), are coming under scrutiny.

Today’s edition of the tabloid Bild Zeitung calls KfW “the dumbest bank in Germany” for losing “300 million euros [about $425 million] in an erroneous swap.”

Why?

Germans were shocked by news that the KfW Bank made an ill-timed $425 million transfer to Lehman Brothers on the very day the latter filed for bankruptcy protection.

“It’s a scandal, it’s shocking”, Bild Zeitung told its readers. “How could that possibly happen?”

The KfW bank declined to comment in detail on the transfer, citing an ongoing internal audit, but it did release a statement saying the transfer was made in a swap deal of a kind that is generally based on long-term contractual obligations.

The transfer exposed the government-owned KfW to $425 million in losses, triggering criticism from the Finance Ministry.

Ministry spokesman Torsten Albig told reporters in Berlin the news “was more than surprising and annoying and the government expects a very quick explanation how that could happen. For us, it is inexplicable.”

KfW’s administrative board is meeting today and the "erroneous transfer" is high on the agenda.

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