Bafin closes the Greensill bank in Bremen
- Greensill Bank, the German subsidiary of the Anglo-Australian company Greensill Capital, is in difficulty.
- Thousands of German investors had also invested money in the bank, which specializes in factoring, in the form of term deposits via online interest rate platforms.
- BaFin has now sent a supervisor and has frozen all accounts. In Australia, the company has already filed for creditor protection.
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Until a few days ago, hardly anyone knew: Greensill Bank Bremen. Now the financial institution has hit the headlines – because it has encountered financial problems and with it the invested money of thousands of German savers.
BaFin on Wednesday sent a supervisor from the Federal Bank to the Bremen financial institution, which is expected to look into the matter locally. And this resulted in drastic achievements: It was determined that the Bremen-based institution was “unable to provide proof of the existence of balance sheet receivables which it had purchased from the GFG Alliance group,” Bafin said. .
On the same day, the financial supervisory authority closed the bank due to impending over-indebtedness. A ban on transfers and payments was imposed, meaning that the accounts were frozen. The so-called moratorium is intended to protect assets. In addition, the supervisory authority has filed criminal proceedings against the institute, as a spokesperson for the Bremen public prosecutor’s office said on request. Neither he nor Bafin gave details.
But what is Greensill Bank doing and who is behind it?
Greensill Bank was originally marketed as Bremer NordFinanz Bank before the Anglo-Australian group Greensill Capital bought it in 2014 and renamed it Greensill Bank AG.
An institution specializing in the pre-financing of suppliers
Greensill Capital, in turn, was founded in 2011 by Australian Lex Greensill. An investment banker by training, he had a specific business idea for his institution: it should focus on supply chain finance. Concretely, the bank would advance money to suppliers who had to wait a long time for their invoices to be paid and would receive a discount in return – factoring, as some financial startups also do, but on a large scale. The bank consolidated the claims for payment against companies which were provided as bonds for professional investors.
In 2020 alone, Greensill claims to have provided ten million customers with financing worth more than $ 143 billion. The parent company is based in Sydney, Australia, in the Greensill Capital division in London – and the German branch in the Hanseatic city.
German savers’ term deposits helped fund the bank
To generate the money needed for the factoring business, Greensill Bank in Bremen offered interest-bearing term deposits, notably through interest platforms such as Weltsparen and Zinspilot. At Weltsparen alone, there are more than 15,000 private investors who have invested several hundred million euros in term deposits with Bremer Capital Bank, writes the SZ. When asked by Business Insider, Zinspilot declined to comment on specific customer numbers but referred to the bank itself. According to the bank’s 2019 annual report, the bank raised just under 3.3 billion euros from its customers, one billion of which would come from German interest portals, according to the Scope rating agency.
It could have continued like this: satisfied customers receiving financing and satisfied German savers receiving a little more interest than elsewhere on their term deposits.
Monday, however, Bloomberg signaled dark clouds on the financial horizon: Greensill’s illustrious clients, such as Credit Suisse AG and Japanese investor Softbank, have expressed doubts about the true value of loans made by the bank. Banks had helped distribute funds from Greensill’s supply chain; Credit Suisse alone had sold professional investor funds from Greensill for tens of billions of dollars since 2017. Today, Monday, the Swiss temporarily suspended subscriptions and redemptions of shares in those funds. The Swiss fund house GAM also announced the liquidation of a similar fund.
Loans to steel tycoon allegedly paid from bank deposits
The reason for the drastic measures is believed to be loans to Indo-British steel magnate Sanjeev Gupta and his family – loans which the media say came from bank deposits. Bafin is also said to have investigated events at Greensill Bank since last summer on the basis of these loans. Sanjeev Gupta is no stranger to Germany either: the boss of British steel trader Liberty Steel only wanted to take over Thyssen Krupp’s steel division at the start of the year, but it failed. He operated the business with Greensill Bank, based in Bremen, through his GFG Alliance group.
The consequences are so dire for Greensill that insiders are already talking about insolvency. In Australia, Greensill has filed for creditor protection. As Bloomberg reports, Greensill is currently negotiating with financial investor Apollo to sell much of its operating business.
Biggest bankruptcy since Lehmann
If that happened, German investors would also be affected. The good thing is that the Bremen-based Greensill Bank operates as an independent AG, under German law – which in turn protects investors. “Customers ‘savings deposits are protected by the German private banks’ deposit protection fund,” a Greensill spokesperson said. Deposits are protected by law across Europe up to 100,000 euros. In addition, Greensill Bank is a member of the German Deposit Protection Fund of the Association of German Banks (BdB), which protects a volume of 75 million euros per customer.
Customers would therefore be reimbursed in the event of insolvency. Nevertheless, the sum in question is the highest since Lehman’s bankruptcy 13 years ago, writes Der Spiegel. At that time, the BdB deposit guarantee was to intervene with 6.2 billion euros.
With dpa material