Municipalities are threatened with penalty interest for high balances in their accounts.

What is the best way for the city of Giessen to invest excess funds in the future?

In doubt, it is about sums in the millions.

But almost 15 months after the shock triggered by the insolvency of Greensill Bank, there is still no answer.

The university town on the Lahn is one of those German municipalities that had invested money with this bank.

She has ten million euros in the fire.

How much of it Giessen will see again and when that could be the case is unclear.

Private investors have long since been compensated.

You have benefited from the deposit insurance.

However, this type of protective shield does not apply to cities and municipalities.

Therefore, in Hesse alone, Eschborn, Schwalbach and Wiesbaden, for example, also have to worry about their greensill millions.

Thorsten Winter

Business editor and internet coordinator in the Rhein-Main-Zeitung.

  • Follow I follow

The office of insolvency administrator Michael Frege does not publicly state the sum of the confiscated insolvency assets.

It also does not comment on the prospects for individual creditors among the affected cities to third parties: “We will inform the municipalities directly about the status of the insolvency proceedings.

This includes information about the prospect of receiving quota payments.”

In the meantime, one thing is clear: the Treasury of the city of Gießen cannot invest money profitably for the time being.

The investment ban imposed by the former Mayor Dietlind Grabe-Bolz (SPD) as a result of the insolvency continues to apply, as a spokeswoman announced.

That means: fixed and even daily allowances are taboo for the magistrate, which is now managed by Frank-Tilo Becher (SPD).

"Surplus liquidity stays in the bank accounts," she explains.

Penalty interest will be charged for this.

The spokeswoman does not like to say how high they are.

Investment as an almost interest-free risk

The city does not expect significant interest.

However, the interest rate previously offered by the Greensill Bank also appears to be low in retrospect: the bank had offered 0.1 percent.

That was more than local customers were supposed to receive from other banks.

Ultimately, however, the offer turned out to be an almost interest-free risk.

The city of Gießen, like Eschborn, Schwalbach and Wiesbaden, had aimed for a risk-free interest rate.

All in all, Hessian cities have invested around 82 million euros in Greensill.

This was announced by the Interior Ministry a year ago.

Eschborn in the Main-Taunus district transferred the largest share with 35 million euros, followed by Schwalbach with 19 million, Wiesbaden with 15 million, Giessen with ten million, Hanau with two million and Schauenburg in the district of Kassel with one million euros.

Counties would not have put money in the bank.

Advice and risk analysis neglected

The green-red-red coalition in the Gießen town hall will not alone decide which lessons are to be drawn from the Greensill bankruptcy.

Rather, this should be clarified by a cross-party working group in cooperation with the Treasury.

According to the city spokeswoman, the members of this working group have so far discussed the issue of counterparty risk, which in this case means the risk of default after a capital investment.

In addition, city politicians and the Treasury discussed the topics of security and advice.

They took up a criticism of the local authority.

The regional council of Central Hesse had complained that the city only found out about maturities, interest rates and the rating of possible credit institutions, but did not obtain any further advice and did not examine any risks.

It is still unclear how to deal with so-called sustainable investments - although this term can also include investment funds on shares and interest-bearing securities in addition to government bonds that are marked accordingly.

Can the city of Gießen, for example, buy exchange-traded index funds backed by fail-safe federal bonds, so-called ETFs?

The answer to this question is also pending.

Investors can buy and sell securities of this type every working day, as they are traded on the stock exchange.

The catch: You are liable to a price risk.

Waiting for the city day

As reported by the circle of city politicians, they had hoped for a guideline from the Hessian City Council.

But this hope has proved illusory.

"Unfortunately, after Greensill, the Hessian Association of Cities and Towns has not yet published a newly developed model installation guideline," says Vera Strobel, leader of the Greens parliamentary group.

According to its own statements, the Association of Cities provided its members with the online brochure on deposit protection published by the Federal Financial Supervisory Authority and explained it.

He referred to the minimum requirements for financial management at federal institutions.

What the municipalities derive from this is in turn their business.

The city's new investment guidelines should actually be in place by the summer break.

That's how it was originally planned, said SPD faction leader Christopher Nübel.

But nothing will come of it.

First of all, the Treasury must now develop formulation proposals for the changes to the rules on capital investment and forward them to the working group.

After that, it is important for the city to coordinate not least with the municipal supervisory authority and to include any additions.

As Strobel explained, the responsible committees are expected to decide on the new guidelines at the end of the year.