Hypo Vereinsbank is being investigated on charges of embezzlement, concerning possible irregularities in property transactions of the former Bayerische Hypotheken- und Wechselbank which merged with Bayerische Vereinsbank last September.
Leading prosecutor Manfred Wick, said: “We have confiscated files and are now in the process of analysing the material.” Among the issues being examined is whether HypoBank employees have extended loans without arranging the necessary valuations. This investigation follows the announcement last October of €1.8bn (DM 3.5bn) of provisions to cover the loans.
The provisions relate to transactions completed during 1990-93. At the time, Hypo Bank had teamed up with other property developers and invested heavily in development schemes and sites especially in East Germany. Overall, the bank’s subsidiaries, Hypo Real and Hypo Tecta, have been involved in 52 joint ventures. In addition, the bank lent towards speculative property developments on a large scale. Altogether HypoBank has put aside €3.8bn (DM 7.2bn) in provisions between 1995 and 1997.
HypoBank is also having to deal with investors who were sold finance by salesmen with little knowledge of the real estate market, and are now considering compensation claims. In some cases HypoVereinsbank is seeking a mutually acceptable solution for the borrower and the bank. “In cases where the borrower got into financial difficulties, for example in the case of unemployment, we are trying to work out individual solutions with the borrowers in an out-of-court settlement. This also applies to cases where the bank has been negligent,” commented Thomas Pfaff, HypoBank spokesman.
