IKB Deutsche Industriebank faced fresh allegations from FGIC. The bond insurer filed a suit against the German bank through a New York City court at the beginning of March.
According to market reports, FGIC sued to get out of a CDO commitment to Calyon on assets IKB had removed from its Rhineland Funding conduit. FGIC alleges misrepresentation, fraud, and a failure to perform certain responsibilities under the CDS and claims it has been exposed to damages of up to $1.875 billion as a result of these obligations. HSH Nordbank filed a similar suit earlier this year, claiming that it had also been mislead by the bank.
On March 27, IKB Chief Executive Officer Guenther Braeunig said in an annual speech that the suits are without any legal basis.
IKB is also facing damage claims by its shareholders alleging that the bank could have averted the its near-collapse. The bank said that it had no chance to recognize the risks and avoid the crisis. Ulrich Hartmann, head of the supervisory board at IKB said that the management board had not sufficiently informed the supervisory board about risks and inquiries from the German Financial Supervisory Authority, BaFin, and that the accounting firm KPMG had failed to disclose potential losses.
The bank has received more than 8 billion ($12.6 billion) in financial aid from KfW, the German government and national banking associations. KfW is in the process of trying to sell the bank that last week also forecasted a higher annual loss of 800 million because of new markdowns.