KBC Group has outlined details of faked
contracts at its UK leasing arm which could result in losses before
tax of up to €175m.
Parent bank KBC Group said in a statement: “A
respected vendor, with which KBC Lease UK had a good working
relationship, had deceived KBC Lease UK into refinancing fictitious
contracts.
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“So far, the investigation has revealed that
the vendor had clandestinely paid a – now former – employee of KBC
Lease UK, which facilitated the acceptance of such files, and
prevented the irregularities being detected in time through the
normal control mechanisms.
“On paper, the credit proposals appeared
normal. Some proposals were approved by head office, others
rejected. However, the investigation shows that while some
contracts were real, many others turned out to be fake.”
KBC Lease UK then called a number of
contracting parties and end customers, and found that the customers
in question were real, but were not aware of certain contracts,
confirming they were fake.
The statement continued: “Moreover, the vendor
had made all payments on time and down to the last penny as if the
money had come from the counterparties.”
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By GlobalDataThe maximum net potential amount after tax is
estimated at €125m and a provision for the upper boundary has been
made. KBC has also taken preventive legal measures to protect its
interests and recover as much of this as possible.
As soon as the problems were uncovered, KBC
informed the relevant authorities in the UK. It has also filed an
insurance claim aimed at getting back the amount at risk. Other net
income across the group came to negative €96m during Q4 because of
the provision.
It has also been revealed that troubled UK
funder Total Asset Finance, now in administration, owes the banking
group £133m (€156m).
The Merchant Banking unit at KBC also suffered
a serious blow following the economic crisis in Ireland, booking an
impairment of €300m on loans and receivables there during the
fourth quarter. The total amount of impairments for KBC Bank
Ireland came to €500m for the whole of 2010.
KBC Lease Group, a subsidiary of KBC, achieved
a rise in net income of 2.7 percent to €76 million for 2010,
compared to €74m in 2009. Earnings fell 42.9 percent to €20m in Q4,
compared to the same three months in 2009. However, earnings rose
5.3 percent in Q4 compared to Q3 2010.
Problems with contracts between KBC Lease UK
and unnamed third parties came to light in the final quarter of the
year.
claire.hack@vrlfinancialnews.com
