Toxic deal
October 13, 2009
While it's long been known that an investment deal known as "Omega" caused the troubled German ship financier to lose some 500 million euros (US$740 million) at the end of 2008, there now appears to be new information about who should be held accountable.
Initially, the bank's directors in Hamburg claimed that the deal had been approved by managers at its London branch, who kept the board members in the dark. But reporters for the program "NDR Info" now say they have documents proving that HSH Nordbank's CEO Jens Dirk Nonnenmacher was among the managers who approved the disastrous Omega deal.
NDR claims its documents show that Nonnenmacher and the rest of the board were aware of the money the bank pumped into a toxic collaterized debt obligation (CDO) program managed by French bank BNP Paribas. The documents also reveal that the board was warned that German financial sector watchdog, BaFin, might not approve of the deal. As a consequence, the board decided not to fully inform BaFin about the risks, the report said.
The losses incurred by Omega contributed to HSH Nordbank's deficit of 2.8 billion euros at the end of 2008, at which point the bank was faced with collapse. In February 2009, it received a 3-billion-euro bailout from the governments of Schleswig-Holstein and Hamburg.
New board members in sight?
HSH Nordbank has not yet officially responded to the allegations in NDR's report. According to banking insiders, HSH was maintaining that just one manager was responsible for the losses from the Omega deal, and that the board had been deceived. Financial experts quoted by NDR dismissed such claims as an attempt to distract attention away from what really happened.
The Tuesday edition of the Sueddeutsche Zeitung reported that the bank is now looking to appoint two new members to its board of directors in the coming week. The paper said that the new members will replace controversial CEO Nonnenmacher, adding that BaFin began appealing to the bank in April to fill vacant spots on its board as quickly as possible.
dc/dpa/ndr
Editor: Sam Edmonds