Banking supervisory authorities arenot carrying out any special checks at banks in the wake of the
currency fraud scandal at Volkswagen AG &lt;VOWG.F>, a spokesman
for the Hesse regional state central bank, LZB, said.
    But inspectors are paying particular attention to foreign
exchange matters in their routine checks at banks, he said in
answer to enquiries. There is no evidence rules were broken.
    The LZB spokesman was commenting on press reports that
banks had "parked" open currency positions for short periods with
VW to circumvent regulations limiting the size of open currency
positions that can be carried by banks overnight.
    The press allegations emerged after VW said it may have
lost 480 mln marks as a result of a possible currency fraud.
    LZBs are regional branches of the Bundesbank. Their
inspectors also act for the Federal Banking Supervisory Office
in West Berlin, which regulates banking in West Germany.
    Following the 1974 Herstatt bank crash on currency
speculation, West Germany limited a bank's total open positions
overnight to 30 pct of shareholders' equity and reserves.
    German press reports have said some banks circumvented this
rule by selling excess positions to VW, then repurchasing them.
    The banking regulations only cover banks. Company foreign
exchange activities are not subject to the banking regulators.
    The LZB spokesman said there were no concrete signs that
the regulations had been broken, and it would be irresponsible
to instigate a special check just on the basis of the reports.
    The LZBs receive monthly balance sheet statistics from
banks in their areas, which they check, and they also routinely
inspect all banks in greater detail over longer periods.
    But LZB officials said it would be hard for inspectors to
detect a breach of these rules as they do not check companies
and therefore would not see both sides of any parking deal.
    "If the managements of the banks have not spotted them, it
will be even harder for our inspectors," said one official.
    It would be up to the public prosecutors to order special
checks on suspicion of breaches of these regulations, they
said. Prosecutors in Brunswick are already investigating the VW
currency scandal, and have ordered the arrest of VW's former
chief foreign exchange dealer.
    Breaches of the Banking Law in this way can be punished by
a 100,000 mark fine for the dealers involved, and in extreme
cases by removal of the managers if their active involvement is
proved.
 REUTER
