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ECONOMY

IKB faces shareholder wrath over subprime mess

Directors of distressed German business lender IKB faced furious shareholders on Thursday who voiced anger over the management of one of the country's biggest US subprime market victims.

More than 1,000 small shareholders attended a general assembly of the bank, a former safe investment now in the midst of a storm that has had to be rescued several times from bankruptcy since August.

IKB shares have lost around 70 percent of their value over the past six months, and are now worth about €4.25, most of its directors have left, and it expects to post a loss of around €800 million ($1.26 billion) for its 2007/2008 fiscal year, which ends on March 31.

IKB, which specializes in loans to small and medium-sized enterprises, was one of the German banks hit hardest when the US market for high risk, or subprime, mortgages collapsed in August.

Supervisory board president Ulrich Hartmann told the assembly that the board had no way of heading off the catastrophe that almost pushed IKB into bankruptcy.

“The crisis broke without warning,” Ulrich Hartmann told the assembly in the western city of Düsseldorf.

“We had no chance of being able to foresee the risks and ward off the crisis,” Hartmann claimed, because the supervisory board had not been told until it was too late how exposed the bank was to the US subprime market.

“Why did you accept that,” one angry shareholder asked to applause from the crowd.

“You took my money,” another said.

The group has benefited from a series of rescue packages put together by the German government and private banks worth around €10 billion so far. German officials have now ordered an outside audit of IKB, in which state-owned development bank KfW has a dominant holding.

On Wednesday, European Central Bank president Jean-Claude Trichet reminded European Union lawmakers in Brussels that central bankers had issued several public warnings a year before the crisis broke that financial markets were underestimating risks.

“I remember myself saying that we have to be prepared – and the message was for the private sector in particular of course – for a market correction,” Trichet said.

“That was visible in the level of spreads, in the level of risk premia in the level of volatility that was observed in a large number of markets,” he pointed out.

Back in Duesseldorf, IKB sharehoders rejected a management request for a vote of confidence.

“They are completely incompetent,” said shareholder Dieter Eisele, including the government, the central bank and regulatory authorities among those who he said bore responsibility for the debacle.

Shareholders were also asked to approve a capital increase of €1.5 billion, to which KfW has already said it will sign on, increasing its stake from 43 percent at present to around 90 percent.

KfW wants to sell its holding at some point, but is likely to find it hard at the moment.

“Does IKB have a chance to survive,” a small shareholder wondered. “It should be shut down. It should be placed in bankruptcy, properly.”

MONEY

Italy expands €200 payment scheme and introduces public transport bonus

Italy's government will extend its proposed one-time €200 benefit to more people and introduce a €60 public transport payment, Italian media reported on Thursday.

Italy expands €200 payment scheme and introduces public transport bonus

Seasonal workers, domestic and cleaning staff, the self-employed, the unemployed and those on Italy’s ‘citizens’ income’ will be added to the categories of people in Italy eligible for a one-off €200 payment, ministers reportedly announced on Thursday evening.

The one-time bonus, announced earlier this week as part of a package of financial measures designed to offset the rising cost of living, was initially set to be for pensioners and workers on an income of less than €35,000 only.

However the government has now agreed to extend the payment to the additional groups following pressure from Italy’s labour, families, and regional affairs ministers and representatives of the Five Star Movement, according to news agency Ansa.

Pensioners and employees will reportedly receive the €200 benefit between June and July via a direct payment into their pension slip or pay packet.

For other groups, a special fund will be created at the Labour Ministry and the procedures for claiming and distributing payments detailed in an incoming decree, according to the Corriere della Sera news daily.

One new measure introduced at the cabinet meeting on Thursday is the introduction of a one-time €60 public transport bonus for students and workers earning below €35,000. The bonus is reportedly designed to encourage greater use of public transport and will take the form of an e-voucher that can be used when purchasing a bus, train or metro season pass.

Other provisions reportedly proposed in the energy and investment decree (decreto energia e investimenti), which is still being adjusted and amended, include extending energy bill discounts, cutting petrol excise duty and rolling on the deadline to claim Italy’s popular ‘superbonus 110’.

The €14 billion aid package, intended to lessen the economic impact of the war in Ukraine, will “fight the higher cost of living” and is “a temporary situation”, Prime Minister Mario Draghi has said.

The Local will report further details of the payment scheme once they become available following final approval of the decree.

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