Bad bank breakdown has no personal consequences

The embarrassing accounting mistake that the HRE bad bank deals with 55.5 billion euros had offset, remains without personal consequences. Federal Finance Minister Wolfgang Schauble admitted "communication problems" after a crisis meeting with all those involved in Berlin. However, his understanding is not that personal sacrifices must now be made. The focus is on clarifying the facts and improving structures so that something like this does not happen again.

"Misunderstanding in accounting"

"Everyone involved has praised improvement," said Schauble after the meeting, to which he had summoned the institute’s manager to the ministry. He also stressed that his ministry had provided comprehensive information as soon as possible. The core of the "rather annoying story" was a "misunderstanding in accounting" between HRE and the bad bank FMS Wertmanagement. The CDU politician said that the breakdown and the large sum had unsettled the citizens. However, "at no point in time was there a risk to the financial interests of the Federal Republic of Germany". According to Schauble, the Bundesbank should now make proposals within two weeks as to how cooperation and supervision at the HRE Bad Bank could be improved.

FMS had offset itself in its balance sheet by a total of 55.5 billion euros. By correcting the calculation error, the German debt ratio has fallen by 2.6 percentage points in the current year, as the bank’s liabilities are considered government debt. HRE was nationalized during the financial crisis, and contaminated sites were transferred to the Bad Bank FSM. Taxpayers are liable for their losses.

Discussion about the question of guilt

After the booking error, there was also criticism of the Federal Ministry of Finance, which however rejected responsibility for the billion-dollar margin. "We had a certified annual financial statement for 2010 that said it was all good," said ministry spokesman Martin Kotthaus. The Ministry does not exercise technical supervision over the bad bank. The company and the auditor are responsible for drawing up the balance sheet, he said. The SPD, however, spoke of "incredible mistakes in Schauble’s ministry". The parliamentary managing director Thomas Oppermann stated that the Ministry of Finance either did not recognize the explosive nature of the errors or deliberately withheld them. "Of course Schauble bears full responsibility," he said. It is a state bank and there is no one else "who could be responsible for it".

The FDP and Union supported Schauble in the discussion – and instead referred to the role of the PricewaterhouseCoopers auditors. But PwC also rejected any guilt. The nationalized HRE, which has since been renamed the Deutsche Pfandbriefbank, has so far not wanted to comment on events.