began to subside this week as Austrian banking inspectors appeared satisfied with the repatriation of billions of Austrian schillings to Bank fur Arbeit und Wirtschaft (Bawag).

The Financial Times reported this week that Austria's trade union bank has said that it has reacquired all of the outstanding loans made to Caribbean-based companies controlled by Mr. Flottl.

Dr. Flottl is the son of the bank's chairman, Mr. Walter Flottl, who the newspaper said last week admitted that he had authorised loans worth up to 21 billion schillings (more than $1.8 billion) to Caribbean-based offshore companies controlled by his son.

The senior Mr. Flottl had previously indicated that the funds would be repatriated at the latest by the end of May, but in light of the international interest and the fiery controversy being stoked in Austria, it is believed his son's efforts to re-pay the money were hurried along. It was essential to calm the fears of Austrian officials.

According to the Financial Times, the news of the capital being returned to the bank was a relief to bank supervisors, who feared the Bawag might end up losing substantial amounts as a result of the transactions.

The discovery of the deal touched off heated exchanges in Austria and led to much media speculation. Increasingly, Austrians were looking at the highly respected banker with suspicion, even though bank regulators, having launched a full scale investigation, found no grounds to act against the bank.

International press reports last week were filled with rumours that Dr.

Flottl's Bermuda-based company, Ross Capital Markets Ltd., had been a big seller on European bond markets.