BANKS HAD EXCESS POSITIONS WITH VW - NEWSLETTER
A financial newsletter which reported
last November that car maker Volkswagen AG <VOWG.F> lost large
sums in currency transactions alleged that unnamed banks had
circumvented banking regulations with help from VW's foreign
exchange department.
    VW had no immediate comment and there was nothing in the
report by the newsletter, the Platow Brief, to link its new
allegations with a suspected currency swindle at VW which is
now being investigated by a prosecutor.
    VW said this month that it had had to make provision for
possible losses up to 480 mln marks in the possible currency
fraud.
    A spokesman for the Federal Banking Supervisory Office in
West Berlin said the office was aware that the newsletter had
made the new allegations and would follow this with interest.
    Platow Brief said around 16 mainly foreign banks based in
West Germany had "parked" excess open positions in currency
trading with VW's foreign exchange department.
    Under West German banking law, banks may not end a trading
day with open positions totalling more than 30 pct of their
capital. During the day banks buy and sell currencies, usually
aiming to match up all deals by the end and balance their
books.
    Some traders who take a view on how currencies will move
may prefer to leave certain positions open, a speculative
situation that the German regulations are designed to limit.
    According to Platow Brief, some traders apparently were
getting round the regulation by getting VW to buy or sell
currencies and hold them temporarily so that their books were
squared. Up to 100 mln dlrs was sometimes involved.
    Non-bank corporations are not covered by the restrictions,
imposed after a bank crash in 1974 to protect bank depositors.
    Breaches of the Banking Law in this way can be punished by
a fine for the dealers involved, and in extreme cases by
removal of the managers, if their active involvement is proved.
    But the Federal Banking Supervisory Office said it first
had to be established how far, if at all, regulations were
breached.
    The suspected VW currency swindle meanwhile involved
operations to protect the company against fluctuations in the
value of the dollar, VW spoksmen have said.
    Some operations to hedge against changes in currency values
were not completed, meaning VW stood to lose money.
    A senior executive has been fired and several other people
suspended, while a prosecutor is looking into the matter.
 REUTER
