Commerzbank and Dresdner Bank, two of Germany's leading commercial banks, are being investigated on suspicion of insider dealing, the German authorities confirmed yesterday. Share traders for the house and client books at both banks are being questioned as part of the widening inquiry into the Krones insider trading scandal, the Frankfurt state prosecutor's office said.
The new moves come only days after Germany scored its first insider trading conviction under long-delayed legislation last year to bring the country into line with international standards.
Harald Kronseder, who manages investments for the founding family of the Krones bus- iness, was fined DM600,000 (pounds 261,000) and given a two-year suspended sentence for selling 1.1 milion Krones preference shares in November 1994, shortly before the business announced a sharp downturn in its fortunes.
Commerzbank is Krones's house bank, and most of the dealing was done through it. The authorities believe that, in all, 15,000 Krones preference shares were disposed of. Harald Kronseder, for his own part, sold only 1,000.
Krones is a leading international supplier of bottling machinery, employing 8,300, with a turnover of some DM1.6bn. It has been badly hit by a downturn in business in North America, partly because of the strong mark.
The newly-formed Federal Securities Commission, the financial watchdog, is also reported to be investigating the Krones dealings on the grounds that the company may have broken stock exchange rules on the prompt publication of share-price sensitive information. The unfavourable development in Krones's business was only made public several weeks after it was common knowledge inside the firm.
The commission expects other insider trading charges to be filed soon. It said it had handed evidence over to prosecutors on four other cases and was looking into another 10, according to Georg Dreyling, deputy chief executive.
Until the introduction of the new legislation, Germany's financial markets had functioned according to gentleman's agreements, which were increasingly discrediting Frankfurt's attempts to promote itself as an international financial centre.