Herstatt bank / Former Kreditinstitut (Germany)

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The Herstatt bank was a Cologne private bank, which last was in the possession of Iwan David Herstatt. In June 1974 it became insolvent due to foreign exchange speculations. Their collapse was the then largest bank failure of German postwar history.

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Enterprise history

The Iwan David Herstatt born in Cologne the banking house stool & CO transfers in the year 1955. and from it the I.D bases. Herstatt KGaA, together with his youth friend Hans Gerling, the 81.4% at the enterprise will trust the new banking house in the road under Saxonia living 6 in the Cologne city center 52,000 customers of the bank their money on 78.000 accounts and 15,000 depots on.

The foreign exchange speculations and "gold-young "

After omission of the coupling of the European currencies to the US Dollar speculations with foreign exchange develop for the principal item of the banking transaction. These business is completed by the so-called "gold-young ", that is 6 very young coworkers, who are only scarcely over 20 years old. The group of Danny Dattel is stated. The foreign exchange department works to a large extent without control and with little contact to the other divisions. Gold-young up to 10 foreign exchange per man may buy million dollar, which they mask by use of stooges. Due to at that time not yet used and futuristically working computer engineering and the global communication lines this range is called enterprise-internally "space station Orion ", following the TV serial space patrol Orion.

The Crash

After the oil crisis 1973 set gold-young on a rising US Dollar. In the year 1973 the gross income at foreign exchange amounts to 63 billion DM (!), this corresponded half of the Federal Budget. The volume of the dollar speculation had size of 8 billion DM, so that an exchange rate fluctuation of 1% 80 millions DM profit or loss resulted in. But the rising dollar rate does not occur, the course falls starting from at the beginning of 1974. On demand Dattel explains opposite Herstatt that one can press the loss of 400 millions DM to 100 millions DM, if the dollar positively develops. At that time a profit of 200 millions DM from other business faces that. On 16 June 1974 Herstatt does not communicate to the supervisory board chairman Hans Gerling a loss of 500 millions DM, with own capital funds of 77 to million DM defiance of a rescue attempt is the bank any longer to be saved. On 26 June 1974 the Federal Supervisory Office for the credit system arranges the locking of the switches in Cologne and Bonn. Tags on it it comes into Cologne to tumults to bank under Saxonia living, the police must the building secure, which falls German share quotation.

The creditors

Succeeds disbursing from the remainder ability of the bank, a fire-brigade fund of the German private banks and the fortune of Herstatt and Gerling, the creditors to a large extent. Hans Gerling sells for the satisfaction of the requirements 51% of the portions to the Gerling Holding to a German industrial consortium (VHDI) and Deutsche Bank.

Private customers receive their inserts to more than 80% back, to savers with inserts under 20.000 DM to 100%, banks and municipalities to 65.4%. Among them also the city Cologne with 190 millions DM, the city Bonn with 12,2 million DM and the ore diocese Cologne are.

The processes

1984 become I.D. Herstatt to an imprisonment of 4 1/2 years condemns. The BGH waives this judgement and Herstatt 1987 to a probation sentence by 2 years because of unfaithfulness is condemned and the punishment at the beginning of the 90's issued. Six other managers are acquitted or receive mild punishments. Danny Dattel is explained for negotiation unable. This very day Danny Dattel on money from the foreign exchange transactions, 7000 creditors complains still waits for remainder payments of 10 billion ". As long as these procedures are not validly decided, the completion of the enterprise cannot be locked. The I.D Herstatt KGaA is therefore still in liquidation.

Consequences

In the consequence of the Herstatt bankruptcy the German banks created an insert contingency fund, in order to protect their savers against the consequences of a bank insolvency, the complete loss their Einlagen.Ausserdem the laws over request periods for bankruptcy and settlement proceedings were intensified. Also the establishment of the liquidity consortium bank is at the impression of this bank crisis.