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Business

Bundesbank Probed Over Posh Executive Villas

Just weeks after the resignation of its president in an ethics scandal, Germany's central bank has again fallen under the loop for the luxurious homes it provides its top brass.

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Are Bundesbank chiefs living in taxpayer-supported luxury?

Germany's central bank, the Bundesbank, has denied allegations that it provides its board members and top executives with villas and homes using public funds. Media reports this week alleged the bank had provided its top executives with lavish villas built or purchased using taxpayer money.

"The chairman never lived at the expense of taxpayers," a Bundesbank spokesperson said.

Earlier this week, Germany's Federal Audit Court confirmed it had opened a routine audit of the Bundesbank's real estate dealings.

Bundesbank: They paid rent

In a written statement, the Bundesbank said that in the past, members of its board were provided with real estate in cases where they were needed for "specific security requirements and duties of representation." In 1998 the Bundesbank issued a more restrictive policy under which only the president of the Bundesbank and his deputy are provided with housing. And those executives who were provided with housing had to pay the going rent for the area. But media reports this week disputed that claim, saying the executives were paying cheaper rent than their posh neighbors.

Christine Scheel, a member of the Green Party who leads the Finance Committee of Germany's parliament, the Bundestag, said the allegations warranted a fresh look at the laws governing the Bundesbank. Speaking to German public radio station Deutschlandfunk on Wednesday, Scheel said the Bundestag's auditing committee should review the Federal Audit Court's report and then "consider whether we should change the Bundesbank law."

The Bundesbank sought to assuage politicians' concerns, saying its real estate dealings had been justified. "Because there is no official Bundesbank residence, the bank in some cases purchased homes or had them built when an official entered into office and didn't have their own home," a spokesman told the German wire service DPA. "After leaving office, board members can continue to live in the homes, but they have to keep paying rent."

The spokesman said he was not aware of the number of instances where homes where purchased, and that an internal investigation is currently being carried out.

A thing of the past?

The Federal Audit Court has been investigating the Bundesbank's real estate dealings since the beginning of the year, and the current allegations aren't new. Earlier inquiries made by the audit court in the mid-1990s led to criticism that was later addressed by the Bundesbank. The Bundesbank spokesman said the current audit is part of a routine examination made by the Federal Audit Court.

According to the Bundesbank, the institution currently has 4,700 apartment rentals for its 14,240 employees, with a book value of €119 million. These units were assembled as part of an earlier federal government practice of providing housing for employees. "In the course of its structural reforms, the Bundesbank's board decided to reduce the number of apartments and to divest itself of apartments that were no longer needed."

In 1998, responding to earlier criticism from the Federal Audit Court, the Bundesbank also reduced the number of executives to whom it made housing available. Recently, the Bundesbank has come under increased ethics scrutiny following a scandal involving its former president. Ernst Welteke resigned in April after being embroiled in a perks scandal for accepting favors from Desdner Bank and BMW.

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