Four Banks Were Accidentally Transferred $5.4 Billion By A German Bank

It has been done by Germany’s state-owned development bank KfW once again.

It had erroneously transferring hundreds of millions of euros to Lehman Brothers Holdings Inc. the day the U.S. firm filed for bankruptcy which had made it gain publicity.

According to people familiar with the matter, because of a technical glitch that repeated single payments multiple times, KfW in February mistakenly transferred more than 5 billion euros ($5.4 billion) to four banks. According to the media, one of the people, who like the others asked not to be identified because the matter is private, said that the total amount transferred was as high as about 6 billion euros.

“KfW has detected the system’s incorrect behavior very early in the process, immediately mitigated the unwanted action and started the necessary process of analyzing the causes,” the bank said in an emailed statement. “The mistake was rapidly identified and eliminated, and the amounts overpaid were successfully demanded back. We regret that during works on the systems, this incident could happen due to human error owing to a configuration mistake.”

Just as the U.S. investment bank filed for bankruptcy, in September 2008, KfW made an ill-timed payment of more than 300 million euros to Lehman Brothers and this Bottom of Form

incident serves as a reminder of that. its counterparty check that would have prevented it from processing the regular transaction, had been failed to have been refreshed by the German bank at that time. With newspaper Bild calling KfW “Germany’s dumbest bank”, the transfer turned into a political scandal in Germany.

“KfW has immediately started comprehensive internal and external audits, in order to clarify the causes of the incident in detail and to draw the corresponding conclusions,“ the bank said.

The sources reportedly said that Germany’s Bundesbank, which told the lender that it had overdrawn its account there, had alerted KfW about its error. There were no comments available from Annette Grüttner, a spokeswoman for the central bank.

An issue Germany’s financial watchdog BaFin has recently highlighted has been outdated technology and such errors expose a broader security risk banks face due to such technology.

According to people familiar with the matter, after finding that its information technology systems were inadequate, BaFin, which has conducted a special audit at KfW, has imposed a capital surcharge for the bank.

There were also no comments available from Oliver Struck, a spokesman for BaFin.

Because of an increase of hacker attacks on financial institutions the technology shortcomings are especially alarming. Disrupting online services for customers, Lloyds Banking Group Plc was hit by a cyber-attack in January.

People familiar with the matter have said that including the Dutch Central Bank, the Bank of Greece, and the Bank of Mexico, at least eight monetary authorities were attacked by a hacking group dubbed “Anonymous” last year.

(Adapted from Bloomberg)

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s