GERMANY'S largest bank, Deutsche Bank AG, announced an overhaul of its system of internal controls as new details emerged yesterday of the crisis surrounding its London fund management arm.

Trading in three funds managed by Deutsche's Morgan Grenfell Asset Management (MGAM) unit was temporarily halted this week following the suspension of a key manager, Mr Peter Young.

Deutsche Morgan Grenfell spokesman, Mr Markus Will, said yesterday that the bank had issued an injunction against Mr Young, seeking to determine whether he was personally linked to some of the holding companies held in the fund's portfolio.

Mr Young's assets were frozen as a result of the same injunction.

In Frankfurt and London, senior officials from Deutsche Bank and investment bank Deutsche Morgan Grenfell admitted to a breakdown of controls and supervision.

Deutsche board member, Mr Rolf Breuer, was quoted as telling the business daily Handelsblatt, "We are pushing for substantial improvements in internal controls."

Mr Breuer said Deutsche was also reviewing whether MGAM's investment philosophy suited Deutsche Bank's more conservative approach.

Before his suspension Mr Young had invested heavily in speculative high-technology stocks, many of which were not listed on stock exchanges.

Banking sources said Mr Young's holdings had exceeded the maximum 10 per cent limit on such unlisted stocks and he had been ordered to reduce them to 5 per cent.

Rather than reduce the holdings, however, Mr Young is alleged by Morgan Grenfell to have set up more unlisted holding companies, according to remarks attributed to the investment bank reported by the Financial Times.

Initially, investigations into alleged irregularities at MGAM had been led by the investment watchdog, Investment Management Regulatory Organisation (IMRO).

However, Britain's Serious Fraud Office (SFO), which is responsible for investigating major corporate fraud cases, has let it be known that it was in contact with IMRO even though it had not yet begun an investigation of its own.

A spokesman for the SFO said no one had yet referred the case to them, a prerequisite for an investigation to be mounted.

The Securities and Futures Authority (SFA), meanwhile, refused to confirm or deny whether it has begun a probe into the activities of the brokers Fiba Nordic and Ice Securities who dealt in and valued some of the unlisted stocks in the funds' portfolio.