By M.S. Mendelsohn
JUNE 27, LONDON — Failure of Bankhaus I.D Herstall [sic] KGaA, Cologne, because of heavy foreign exchange losses was announced by the German authorities Wednesday.
A joint statement by the Bundesbank and the Federal government's Credit Supervisory Board said that the $522.8 million-deposit Bankhaus Herstatt had suffered large foreign exchange losses and large uncovered liabilities which the bank had misrepresented in its books.
As a result of this, the official statement went on, there was no possibility of the bank's continuing in business. Its banking license has been withdrawn and its business is to be liquidated.
The official statement added that the Bundesbank and the major German commercial banks had agreed to try to mitigate the effect of the losses that would be suffered by the creditors of Bankhaus Herstatt. It was unofficially but authoritatively understood that the central bank and the major commercial banks would try to make liquidity available to victims of the Herstatt collapse to lessen the danger of the failure's spreading.
There was no immediate disclosure of the amount of loss involved.
Bankhaus Herstatt is listed as having assets at the end of 1972, the latest date reported, of just more than 1.853 billion Deutschemarks ($729 million at current exchange rates). It has 31 branches in Cologne and Bonn, and some abroad.
Bankhaus Herstatt is capitalized at 44 million marks ($17.3 million). The main stockholder, with about 80% of the capital, is Dr. Hans Gerling of Cologne.
For 1973 the bank discloses after-tax profit of 10.3 million marks ($4.0 million), against a profit of 7.8 million ($3.0 million) in 1972. The bank's balance sheet total had risen … to 2.076 billion marks ($181 million) in 1973.
In its annual report, published April 23, Herstatt said that its foreign exchange dealings had produced a gratifying profit in 1973.
