Greensill Bank: Another embarrassment for Germany as a financial center

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Yesterday evening I was informed about the Greensill Bank moratorium, ”wrote an investor in an email to the private banks' deposit insurance.

“As a private investor, I invested my savings here, 50,000 euros for my retirement, via the Zinspilot portal.

I am now very worried that there could be problems with the deposit insurance here. "

The end came frantically: at the beginning of the week the first rumors surfaced.

On Wednesday, the financial supervisory authority Bafin then initially closed the business operations of the Greensill Bank in Bremen.

The reason: the threat of over-indebtedness.

At the same time, the public prosecutor in Bremen received a criminal complaint from the Bafin against the bank's management.

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Germany has not yet properly cleared up the Wirecard scandal, as the next case will shake the country.

The financial center, which would like to compete with other countries, seems to be a paradise for windy businessmen in the financial sector.

And since then, behind the scenes, a dispute has raged between the Bafin and the private banking association BdB, who is to blame for the new crisis.

The money house has always been a bit peculiar - even when it was still called Nordfinanz.

At that time it caused a regional sensation with dubious credit deals with campsites.

Benedikt Symonedis, the former owner of the small Bremer Bank, was even arrested in the 1990s.

Compared to the excitement now it was a triviality.

For a few days now, the institute has been mentioned in the same breath as bankruptcy cases such as Lehman Brothers and Wirecard.

Above all, this shows that the Greensill bankruptcy threatens to become expensive for some of the parties involved.

It's about three billion euros

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The case reads like a thriller: The money house collected billions from German savers and other investors within a short period of time.

It advertised it with two promises: high interest rates - and the deposit protection of the banking association of private banks.

This protects each customer with up to 75 million euros in the event of a bank failure.

And that has now occurred.

A total of three billion euros may have been lost, according to the industry.

Private banks might have to raise up to two billion euros of this through their own deposit insurance.

Private customers are thus secured.

For the already battered industry, however, that is a considerable sum if it has to fill the hole in the security fund again in the coming year.

“It happened twice - once with the bankruptcy of Lehman and now with Greensill,” says a banker upset.

"Windy guys come here and do business with our good name." That needs to be structurally reconsidered.

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Around 15,000 private investors, many institutional investors and around 50 municipalities that have invested their money there are affected at Greensill.

Monheim am Rhein, for example, has left 38 million euros to the people of Bremen.

Emmerich am Rhein has transferred around six million euros.

Unlike private investors, the municipalities are largely left with the damage.

Stupid German Money, stupid German money.

That was what it was called during the financial crisis, when municipalities had just put their money into dubious investments on the hunt for higher interest rates.

This is exactly what it looks like again.

Less than a year after the Wirecard bankruptcy, investors, supervisors and industry professionals seem to have overlooked many warning signals again.

Once again, the bank regulator Bafin is in the sights, which is subordinate to the Ministry of Finance and thus Chancellor candidate Olaf Scholz (SPD).

Bafin and banks accuse each other

A few weeks ago, he initiated a reform of the authority, and the supervisors are to intervene faster and harder in the future.

But the Greensill case in particular shows how difficult a renovation is likely to be.

There was therefore a lot of argument behind the scenes.

The banks said that they had warned the Bafin a year ago.

Which is supposed to mean: We weren't.

The Bafin, on the other hand, who was already battered, sees no guilt, they have worked together the whole time.

It is a black-peter game in which at the end of the week Scholz's State Secretary Jörg Kukies is said to have negotiated a kind of truce because a public dispute is likely to harm everyone involved.

Far greater than the financial damage is the dwindling confidence in the German financial center.

"The fact that German private banks are now likely to have to pay for losses in the billions through deposit insurance means additional stress in an already tense situation," says Lisa Paus, spokeswoman for the Greens for financial policy.

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The subject was therefore put on the agenda of the Bundestag Finance Committee.

In her sights - no wonder - again the supervision that Scholz is subordinate to.

The municipalities also shoot themselves at the authority: "If the Bafin complied with their inspection obligation and in this case had informed all municipal customers of the bank about the special inspection based on the now confirmed initial suspicion of balance sheet fraud, we would of course have reduced our commitment," said the Osnabrücker Chamberlain Thomas Fillep.

The city had transferred 11.5 million to Greensill in mid-November.

In the end it was probably like this: Everyone involved underestimated the path the former North Finance was taking.

In 2014, Greensill Capital, a company based in London and Australia, took over the institute.

After that, total assets shot up from 353 million to 4.5 billion euros.

Around a third of the 3.2 billion euro customer deposits were collected via online comparison portals such as Weltsparen or Zinspilot, which broker time deposits across Europe.

The money was used to fund the operations of the parent companies in London and Australia.

In retrospect, however, their business is more than questionable.

Greensill is a supply chain financer.

They buy unpaid bills at a discount and then later collect the money for them themselves.

Greensill also granted loans to companies and took over their claims on third parties as collateral.

The case is reminiscent of the Wirecard case

Greensill did the same for the Indo-British steel contractor Sanjeev Gupta.

A considerable part of the collected funds flowed into his empire.

However, this was perfectly concealed in the balance sheet.

In addition, Greensill was likely to pay even if the receivables backing these loans did not yet exist.

In other words, with orders that apparently have not yet been placed - and may never have been.

Which probably reminds some observers of the Wirecard case.

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However, the rapid growth of the balance sheet made the Deposit Protection Fund auditors suspicious.

In the spring of 2019 they went to the books, with interruptions.

At the beginning of 2020, the entanglement with the Gupta empire was uncovered.

However, there was insufficient evidence of serious fraud at the time.

The Bafin was alarmed.

Nevertheless, it took until the end of September for the KPMG auditors to start the forensic examination on behalf of the supervisory authority.

At the beginning of the year, the Bafin then placed several special commissioners from the Bundesbank in Greensill Bank.

Now the events came thick and fast: Suddenly it became clear that the bank could not prove the existence of the receivables.

Going to the public prosecutor's office on Wednesday and the moratorium were the logical next steps.

It is difficult to understand why the supervisors waited so long to take this step.

The fact is: Suspicions are not enough to take action against a bank, because that usually leads to customers panicking and withdrawing their money.

This seals the fate of a bank.

If such allegations turn out to be unfounded in retrospect, the supervisor was ultimately responsible for the end of the house.

Greensill could file for bankruptcy in the next few weeks.

Meanwhile, the Bafin is trying to minimize the damage.

Greensill owns four aircraft, two of which are in Germany and two more are still in the air somewhere.

You are being brought back.

Every asset counts now.

The Bafin is also doing this in its own interest.

Because she is also a creditor when it comes to bankruptcy.

After all, the test report commissioned by you is not only not yet completed, but also not yet paid for by the bank.

Again, it's a five-figure sum.

A lot of money for an authority.