October 25, 2018 / 11:10 AM / 10 months ago

UPDATE 1-Watchdog imposes hefty capital surcharge on German state bank KfW

* Bafin imposes 2.75 percent capital surcharge

* Total requirement 15.75 pct vs June reading of 19.9 pct

* IT deficiencies led to watchdog’s action (Adds minimum overall capital requirement)

FRANKFURT, Oct 25 (Reuters) - German financial watchdog Bafin has imposed a hefty 2.75 percent capital surcharge on KfW after finding deficiencies at the German state bank’s information technology and internal auditing processes.

Including the surcharge, KfW now needs to show a minimum capital ratio of 15.75 percent. As of the end of June, KfW’s tier 1 capital ratio stood at 19.9 percent.

The surcharged will likely be upheld until 2021, KfW Chief Executive Guenther Braeunig told journalists at an event in Frankfurt on Wednesday.

In 2019, BaFin will scrutinize KfW’s modernized IT and in 2020, the watch-dog will review KfW’s internal audit department, he added.

The surcharge and review of KfW’s systems follow an accidental transfer of 7.6 billion euros ($8.67 billion) from KfW to four other banks last year due to a glitch in the bank’s information technology. KfW got the money back, but incurred costs of 25,000 euros.

KfW is 80 percent owned by the German government while the rest is held by German regional states. ($1 = 0.8764 euros) (Reporting by Andreas Framke; Writing by Arno Schuetze; Editing by Maria Sheahan)

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