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Small earthquake in Bavaria

Munich, Sunday November 15

The supervisory board of Bavarian giant Hypovereinsbank decides discretion is the better part of valour and exonerates chief executive Albrecht Schmidt of all blame for causing the biggest ruckus in Munich since the 1972 Olympics.

For two weeks the Munich tabloids lived on the feud between Schmidt and Eberhard Martini, his former counterpart at Bayerische Hypobank, over which of them might be least well equipped to run a financial institution. At the centre of the row was a bunch of dummy investments in east German development projects, signed in the euphoria of unification, which are now worth next to nothing. Hypobank had kept these on its balance sheet at close to book value until the rumour mills started. Then it wrote them down to 85%. But for Schmidt that wasn't enough. As soon as he took charge of the newly merged Hypovereinsbank on September 1 he ordered a revaluation by the auditors. They concluded that this sad property portfolio had somehow, between February and October, lost another 35% in street value. Schmidt bit the bullet and announced a Dm3.5 billion ($2.1 billion) additional write-down warning that there would be an enquiry and "appropriate consequences for personnel".

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