Morgan Grenfell executives face the axe next month

Deutsche Bank is expected to demand the resignations of a number of senior executives at Morgan Grenfell as a result of the scandal surrounding Peter Young, the fund manager suspended last week.

But it emerged yesterday that the executives in the firing line could have six weeks' breathing space until the bank completes its inquiries.

Morgan Grenfell intends to publish the findings of the investigation which is attempting to find out how 38-year-old Mr Young was able to set up a web of illicit Luxembourg companies to hide the scale of his investments in risky high technology firms in Scandinavia.

Mr Young's investment decisions were overseen by his immediate boss, Glyn Owen, chief investment officer at Morgan Grenfell Asset Management, who is among the most vulnerable. Attention is also being focused on Keith Percy, the fund management chief executive.

However, Graham Kane, chief executive of the unit trust business, was a marketing rather than fund management specialist and is likely to argue that he should not be in the frame.

The losses at the asset management operation, a crucial part of Deutsche Morgan Grenfell - the powerhouse behind Deutsche Bank's push into investment banking - are also an embarrassment to Michael Dobson, chief executive, the only British member of the German bank's board, but there is no suggestion at the moment that his position is threatened.

Discussions within Deutsche Bank about shifting responsibility for the unit trust operations back to Frankfurt have led to unease among British regulators, who would rather the German banking giant kept the responsibility for the fund management operations in London.

"We like to have close contact with those who are answerable to our rules. That is the preferred state," said Phillip Thorpe, chief executive of Imro, the investment regulator.

While Mr Thorpe said Imro liked its regulated firms to be run locally, he acknowledged this was not always possible.

"We have a lot of businesses we regulate which are branches or subsidiary operations, where aspects of the business will be here, and regulated by us, and aspects will be overseas," he said.

As the Serious Fraud Office continued to pore over documents relating to the pounds 1.4bn fund and the maze of Luxembourg companies used for the deception, Morgan Grenfell's investigators - headed by Robert Smith, the firm's highly regarded head of development capital - will also aim to uncover how Mr Young hid his activities from his managers for so long.

Imro handed papers to the SFO last week, but as yet these have not produced enough evidence of fraudulent activity to persuade George Staple, SFO director, to open a full-scale criminal inquiry.

Over the weekend, Imro appointed forensic accountants, Deloitte & Touche, to assess if compensation was due to any of the 90,000 investors in the funds.

Morgan Grenfell, and ultimately Deutsche Bank, will foot the bill. "The one thing we are certain of is that... where compensation is due it will be paid," Mr Thorpe said.

Morgan Grenfell's own advisers, the law firm Slaughter & May and consultants Ernst & Young, who are also assessing the case, are to investigate a Jersey bank account held by Mr Young, to establish if he benefited personally from his actions.

The injunction freezing Mr Young's assets names a Luxembourg firm, Russ Oil & Technology. A shareholding in this company has been found in a custody account held in Jersey in Mr Young's name.

Jersey accounts are commonly used among Morgan Grenfell employees, with the approval of the company. The purpose is to avoid tax on bonuses paid in Deutsche Bank shares.

Mr Young could not be reached for comment yesterday but his wife was reported as confirming that he was in a troubled state of mind. "I asked Peter to go shopping. He came back with 30 jars of pickled gherkins. My husband does not see that as strange," Harmanna Young said.

The couple and their two young children have recently moved to a new pounds 400,000 home in Amersham, Buckinghamshire, which they bought for cash. A Land Registry search shows no mortgage.

In April, Mr Young was told to reduce his stakes in the unlisted companies, which at one stage comprised almost 30 per cent of the portfolio when regulations only permit 10 per cent.

But instead of slimming down his stakes, he used the Luxembourg companies to buy up failing investments.