- A handful of banks made a loan to the ex-chairman of South African retailer Steinhoff International
- The loan went belly-up after Steinhoff became embroiled in an accounting scandal.
- That cost Wall Street banks over $US1 billion on their fourth-quarter earnings.
- Bank of America has hired an outside law firm to figure out whether the losses could’ve been prevented, according to The Wall Street Journal.
A bad loan to the ex-chairman of embattled South African retailer Steinhoff International cost Wall Street banks over $US1 billion on their fourth-quarter earnings – and Bank of America would like to know how it was able to happen.
The bank, which booked a $US292 million charge related to Steinhoff in the fourth quarter, hired outside law firm Davis Polk & Wardwell late last year to probe the €1.6 billion ($US2 billion) loan to Steinhoff’s former chairman Christo Weiss that a handful of global banks – including Citigroup, JPMorgan, and Goldman Sachs – took part in, according to a report in The Wall Street Journal.
After Steinhoff became embroiled in an accounting scandal, the share-backed loan went belly-up, and the banks as a group were on the hook for over $US1 billion in losses.
Davis Polk & Wardwell is interviewing Bank of America employees and investigating whether there’s any way the losses could’ve been avoided, keeping the company’s board apprised of the inquiry’s progress, according to the WSJ.
“One of the reasons we have record-low credit losses is because we take the time to analyse what happened when things don’t go as planned and learn from it. It’s the responsible thing for a financial institution to do,” a bank spokesman told the WSJ.