German banks take flak over Schneider fall: Chancellor says lenders should have checked property group more carefully

THE BUFFETING of Germany's big banks in the wake of the collapse of the fugitive Jurgen Schneider's property empire continued yesterday. Chancellor Helmut Kohl said the fault lay with institutions not applying credit controls properly rather than the absence of such controls.

The Chancellor said there was no need to tighten loan conditions further: banks had to apply the same rigorous checks to their large clients, such as Mr Schneider, as they apply to small customers seeking a mortgage.

Mr Kohl's remarks are likely to add fuel to popular resentment at what is perceived to have been the indiscriminate preferential treatment of important customers at a time when recession-hit small businesses are finding it difficult to extract loans.

The collapse of Germany's biggest private property group left outstanding bank debts of more than DM5bn ( pounds 2bn) and another DM250m owing to tradesmen and contractors.

The whereabouts of Mr Schneider and his wife are still not known. They are co-owners of about 80 properties held by the secretive property group, against which bankruptcy proceedings have been started. Interpol is helping the German authorities search for the couple, even though there is no arrest warrant.

Hans-Hermann Eckert, spokesman for the chief public prosecutor in Hesse, where Frankfurt is situated, said he expected a warrant to be issued in the next few days. The spokesman also said that the German judicial authorities were including the activities of creditor banks to Mr Schneider as part of their investigations into possible fraud by the property developer.

Mr Eckert said he could not exclude the possibility that banks might be suspected of involvement in fraud or abetting fraud. Deutsche Bank, Mr Schneider's biggest creditor which is owed more than DM1.2bn, said yesterday it was confident the investigations into the property group's collapse would show there had been no criminal actions on the part of the banks.

The bank said it had offered the authorities all necessary documents when it launched its fraud complaint against Mr Schneider at the Frankfurt prosecutor's office last week.

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