IKB chief says bank could not have known of subprime risks

Mar 27, 2008, 13:49 GMT

Dusseldorf - The management of IKB Deutsche Industriebank AG faced a stormy shareholders' meeting Thursday insisting that it could not have identified the risks arising from its investments in the US mortgage market that plunged the bank into a crisis.

'We fulfilled our duties,' IKB chief Ulrich Hartmann told angry stockholders, who have watched their shares nose-dive since the bank emerged as an early casualty of the subprime mortgage market crisis which triggered a global credit squeeze.

'We had no chance to recognize the risks and to avoid the life- threatening crisis,' Hartmann said at the group's annual general meeting in Dusseldorf.

The IKB specializes in Germany's small-to-medium sized business sector.

Trading was suspended in IKB shares earlier this month after the ailing bank announced losses greater than previously expected.

IKB said losses would total 800 million euros (1.2 billion dollars) over the financial year to March 2008, up from a maximum of 700 million euros previously made public.

Since the US housing market crisis emerged in the middle of last year, the state-owned development Kreditanstalt fuer Wiederaufbau (KfW) has spearheaded a series of bailouts for IKB to cover losses and to head off insolvency as well as the threats it posed to the German banking sector.

The KfW is IKB's main shareholder, holding a 43-per-cent stake in the Dusseldorf-based bank.