By Bloomberg | Updated: Mar 25, 2017, 07.30 PM IST
Germany's state-owned development bank KfW, which gained
publicity for erroneously transferring hundreds of millions of euros to Lehman
Brothers Holdings Inc. the day the US firm filed for bankruptcy, has done it
again.
KfW in February mistakenly transferred more than
5 billion euros ($5.4 billion) to four banks because of a technical glitch that
repeated single payments multiple times, according to people familiar with the
matter. The total amount transferred was as high as about 6 billion euros, said
one of the people, who like the others asked not to be identified because the
matter is private.
"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."
The incident serves as a reminder of an
ill-timed payment of more than 300 million euros KfW made to Lehman Brothers in
September 2008, just as the U.S. investment bank filed for bankruptcy. At the
time, the German lender failed to refresh its counterparty check that would
have prevented it from processing the regular transaction. The transfer turned
into a political scandal in Germany, with newspaper Bild calling KfW
"Germany's dumbest bank."
KfW, which on its website says it's been awarded
the title of the world's safest bank by magazine Global Finance, isn't the only
lender to suffer a glitch. Deutsche Bank AG's foreign exchange unit in June
2015 mistakenly sent $6 billion to a hedge fund client and recovered the sum a
day later, a person familiar with the matter said at the time.
"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.
KfW was alerted to its error by Germany's
Bundesbank, which told the lender that it had overdrawn its account there, said
the people. Annette Gruttner, a spokeswoman for the central bank, declined to
comment.
Such
errors expose a broader security risk banks face because outdated technology,
an issue Germany's financial watchdog BaFin has recently highlighted. BaFin,
which has conducted a special audit at KfW, has imposed a capital surcharge for
the bank after finding that its information technology systems were inadequate,
according to people familiar with the matter.
Oliver Struck, a spokesman for BaFin, declined
to comment.
The
technology shortcomings are especially alarming because of an increase of
hacker attacks on financial institutions. In January, Lloyds Banking Group Plc
was hit by a cyber-attack that disrupted online services for customers. A
hacking group dubbed "Anonymous" last year attacked at least eight
monetary authorities, including the Dutch Central Bank, the Bank of Greece, and
the Bank of Mexico, people familiar with the matter have said.
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