Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options. HOMEPAGE

Bafin closes Bremen Greensill Bank - what this means for the time deposit of thousands of German investors

  • Greensill Bank, a German offshoot of the British-Australian Greensill Capital company, has run into difficulties.
  • Thousands of German investors had also invested money in the bank, which specializes in factoring, as fixed-term deposits via online interest rate platforms.
  • BaFin now sent a supervisor and froze all accounts. In Australia, the company has already filed for creditor protection.
Advertisement

This is an automated machine translation of an article published by Business Insider in a different language. Machine translations can generate errors or inaccuracies; we will continue the work to improve these translations. You can find the original version here.

Until a few days ago, hardly anyone knew it: the Greensill Bank from Bremen. Now the financial institution has hit the headlines - because it has run into financial trouble and with it the invested money of thousands of German savers.

The BaFin sent on Wednesday a supervisor of the federal bank into the Bremen financial institution, which should examine locally the business. And this came to drastic realizations: It had been determined that the Bremen-based institution was "unable to provide evidence of the existence of on-balance-sheet receivables that it had purchased from GFG Alliance Group," Bafin said.

On the same day, the financial supervisory authority closed the bank due to imminent over-indebtedness. A ban on disposals and payments was imposed, i.e. accounts were frozen. The so-called moratorium is intended to safeguard assets. In addition, the supervisory authority filed criminal charges against the institute, as a spokesman for the Bremen public prosecutor's office said on request. Neither he nor Bafin gave details.

Advertisement

But what does Greensill Bank do at all and who is behind it?

Greensill Bank originally traded as Bremer NordFinanz Bank before the British-Australian group Greensill Capital bought it in 2014 and renamed it Greensill Bank AG.

An institution specializing in advance 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 financing. Specifically, the bank would advance money to suppliers who had to wait a long time for their invoices to be paid and collect a discount in return - factoring, as some financial startups also do, but on a large scale. The bank bundled the payment claims against companies that were supplied into bonds for professional investors.

In 2020 alone, Greensill claims to have provided around ten million customers with financing worth more than 143 billion dollars. The parent company is based in Sydney, Australia, at the Greensill Capital division in London - and the German branch in the Hanseatic city.

Advertisement

Time deposits from German savers helped finance the bank

To generate the money needed for the factoring business, Greensill Bank in Bremen offered interest-bearing fixed-term deposits, including through interest platforms such as Weltsparen and Zinspilot. At Weltsparen alone, there are said to be over 15,000 private investors who have invested several hundred million euros in fixed-term deposits with Bremer Capital Bank, writes the SZ. When asked by Business Insider, Zinspilot did not want to comment on the specific customer figures but referred to the bank itself. According to the bank's 2019 annual report, the bank collected just under 3.3 billion euros from its customers, one billion of which is said to have come from German interest portals, according to rating agency Scope.

It could have gone on like this: satisfied customers receiving financing and satisfied German savers getting slightly more interest than elsewhere on their time deposits.

On Monday, however, Bloomberg reported dark clouds on the financial horizon: Greensill's illustrious clients, such as Credit Suisse AG and Japanese investor Softbank, raised doubts about the real value of the loans the bank was making. The banks had helped distribute Greensill's supply chain funds; Credit Suisse alone had sold professional investors funds from Greensill for tens of billions of dollars since 2017. Now on Monday, the Swiss temporarily suspended subscriptions and redemptions of shares in these funds. The Swiss fund house GAM also announced that it was winding down a similar fund.

Loans to a steel magnate allegedly paid from the bank's deposits

The reason for these drastic measures is said to be the loans to an Indian-British steel magnate Sanjeev Gupta and his family - loans which, according to media reports, are said to have come from the bank's deposits. Bafin is also said to have been investigating the events at Greensill Bank since last summer on the basis of these loans. Sanjeev Gupta is also no stranger to Germany: the head of the British steel trader Liberty Steel only wanted to take over the steel division of Thyssen Krupp at the beginning of the year, but this failed. He operated the business with Bremen-based Greensill Bank through his GFG Alliance Group.

Advertisement

The consequences are so serious 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 the financial investor Apollo on the sale of large parts of its operating business.

Highest bankruptcy since Lehmann

If this occurs, German investors would also be affected. The good thing is that 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," said a Greensill spokesman. Deposits are protected by law throughout 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 get their money back in the event of insolvency. Nevertheless, the sum in question is the highest since the Lehman bankruptcy 13 years ago, writes Der Spiegel. At that time, the BdB deposit guarantee scheme had to step in with 6.2 billion euros.

With material from dpa

Read the original article on Business Insider Deutschland. Copyright 2021.

This post originally appeared on Business Insider Deutschland and has been translated from German.

Follow Business Insider Deutschland on Twitter.
Jeevan Ravindran
Advertisement
Close icon Two crossed lines that form an 'X'. It indicates a way to close an interaction, or dismiss a notification.

Jump to

  1. Main content
  2. Search
  3. Account