KFW fires two board members over Lehman transfer

BERLIN, Sept 29 (Reuters) - German state lender KfW has fired two board members over the transfer of around 300 million euros to Lehman Brothers on the day the U.S. bank filed for bankruptcy, the finance and economy ministries said on Monday.

KfW's board of supervisory directors decided that Peter Fleischer and Detlef Leinberger would have to leave their posts with immediate effect, the ministries said in a statement. The two board members had already been suspended.

KfW [KFW.UL] has said it mistakenly transferred the funds to Lehman to unwind a swap agreement, in which two counterparties agree to exchange one stream of cashflow against another stream.

The case made front-page news in Germany, with one newspaper calling KfW "Germany's dumbest bank".

It also put pressure on Economy Minister Michael Glos, chairman of KfW's board of supervisory directors, and Finance Minister Peer Steinbrueck, who is deputy chairman.

The ministries said the board backed management plans to examine KfW's risk management and business processes thoroughly.

"The supervisory board reiterates that Germany needs a strong development bank and thus supports the KfW board and all staff in the aim of steering KfW back into calmer waters as soon as possible so it can focus on core duties again," they said.

Sources have said the German lender's total exposure to Lehman was 536 million euros, including the Lehman transfer.

KfW had already taken a hit from liquidity lines given to business lender IKB (IKBG.DE), the country's biggest casualty of the subprime crisis. (Reporting by Philipp Halstrick; editing by David Stamp)