Fraud probe

Over 240 investigators searched the LBBW premises as well as ten private homes for incriminating documents that would back up fraud allegations made against several of the bank's directors.

Seven acting and former LBBW board members are accused of serious misappropriation of corporate funds worth several hundred million euros. They could face prison sentences of up to ten years.

Prosecutors suspect the bankers continued to back high-risk investments in the US subprime mortgage market in 2006, even after it became apparent that the market was about to collapse.

"LBBW is fully supporting this inquiry so as to assist a rapid elucidation of what is true here," a bank spokesman told German press agency dpa.

LBBW was one of several large regional German banks that pumped millions into risky assets which lost much of their value during the financial crisis that unfolded in 2007.

Widening investigation

Stuttgart prosecutors launched an inquiry months ago into senior executives of the bank's real-estate arm, LBBW Immobilien GmbH, and said in August that they had evidence against some executives.

Last month, the inquiry widened to the parent bank, and Baden-Wuerttemberg state police were tasked with an in-depth investigation, leading to Monday's concerted raids.

LBBW posted a loss of 620 million euros (936 million dollars) in the first nine months of this year, largely due to risky loans.

In exchange for a state bailout, the bank has been forced to drastically curb its operations and refocus on financing small- and medium-sized German enterprises.

nk/dpa/AFP

Editor: Susan Houlton