Frankfurt (AFP)
In Emmerich, a German city on the banks of the Rhine, the mayor Peter Hinze feels "a great frustration" while his municipality, like dozens of others, will lose millions of euros entrusted to Greensill Bank, an establishment suspected of fraud and threatened bankruptcy.
"We will lose 6 million" or a third of the available cash, confirms to AFP the councilor whose municipality of 30,000 inhabitants, located in North Rhine-Westphalia (north-west), will have to cut back on its expenses common ways to mop up this injury.
The municipality had placed this sum in the accounts of a discreet bank in Bremen (north), renamed Greensill in 2014 after its takeover by a British financial group of the same name, specializing in factoring.
In mid-February, Emmerich made the largest of his bets by entrusting 5 million euros to the establishment.
On March 8, it was a slap in the face: the bank's activities were suspended by order of the German financial supervisor Bafin and on Tuesday the Bremen court placed Greensill Bank, whose assets are valued at 4.5 billion euros , in receivership.
A good part of the deposits, valued at 3.6 billion euros, come from private customers who will recover their savings thanks to a guarantee fund matched by the country's private banks.
But this is not the case for German municipalities, on the left as well as on the right, which have placed their money in the establishment of Bremen: they will let slip more than 250 million euros, according to a partial count made by the AFP in nearly 25 municipalities.
There is also the Thuringia region which says it sits on 50 million euros.
After the damage caused by the 2008 financial crisis and the discovery of risky financial arrangements by some local authorities, the fund's guarantee was stopped in 2017 for municipalities and other large investors.
The German press estimates the total loss at around 500 million euros with more than 50 municipalities concerned.
- Black sequence -
"Germany is the world champion in exports but plays in the regional league when it comes to investments," recently mocked the weekly Spiegel in the face of the announced disaster.
Because confidence in the German financial center has been seriously shaken in recent years by several resounding bankruptcies: that in 2008 of the German subsidiary of the American bank Lehman Brothers, that of the investment bank Maple Bank in 2016, and more recently the scandal that affected the financial company Wirecard.
These cases have "something in common", explains financial expert Gerhard Schick to the Spiegel: "It often happens that a small, largely unknown bank changes its business model - for example because it is bought by a foreign player. (...) The German banks North Channel and Maple, for example, were the German side for international tax evasion and the Greensill Bank the one for the dangerous transactions of the Australian-British parent company. "
Greensill's parent company filed for bankruptcy on March 8 in the United Kingdom, once dropped by one of its insurers and by investors doubting the soundness of its assets.
In Germany, Bafin filed a criminal complaint against the establishment on suspicion of accounting fraud.
- Late warning -
But for Mr. Schick, the German financial policeman also bears his share of responsibility, as does the Federal Association of German Banks (BdB), which took too long to react.
"They noticed in 2019 that the deposits of Greensill Bank customers were exploding (...) everyone could see that Greensill was paying savers more than other banks."
Municipalities chose the well-rated Bremen facility because it did not charge the negative 0.5% rates currently charged by public savings banks and mutual banks.
Wasn't the federal state asking the municipalities to "maintain their financial solidity and not let themselves be overwhelmed by negative interests", as Mr. Hinze underlines?
A good twenty cities will now try to recover part of their stake and intend to launch "liability actions".
The Bafin had ordered an audit on the bank in September then dispatched a special representative there in January: so many rare decisions but not disclosed because of the "strict respect for confidentiality", explains the authority.
In the municipality of Osnabrück, in Lower Saxony (north), the head of Finance, Thomas Fillep, is enraged.
Knowing these red flags, his city would never have invested 11.5 million euros more in mid-November in Greensill, bringing its total exposure to 14 million euros, he claimed in the press.
© 2021 AFP