In Emmerich, Mayor Peter Hinze, a German city off the coast of the Rhine, feels “a great desperation”, while his municipality, like dozens, will lose millions of euros handed over to the Greensill Bank, defrauding and threatening the establishment of bankruptcy.
“We will lose 6 million” or a third of the available cash, confirms the councilor to AFP whose municipality of 30,000 residents, located in North Rhine-Westphalia (northwest), is set aside to refund its expenses – This damage will have to be cut in different ways.
The municipality named the greensill in 2014 after it was acquired by a British financial conglomerate of the same name in 2014, in the accounts of a discretionary bank in Bremen (North).
In mid-February, Emmerich placed its biggest bets by handing over 5 million euros to the establishment. On 8 March, it was a slap in the face: the bank’s activities were suspended by the order of German financial supervisor Baffin, and on Tuesday the Bremen court placed Greensill Bank, whose assets are valued at 4.5 billion euros.
A good portion of the deposit, valued at EUR 3.6 billion, comes from private customers who will recover their savings thanks to a guaranteed fund matched by private banks in the country.
But this is not true for German municipalities, to the left and to the right, who have put their money into establishing Bremen: they will give a slip of more than 250 million euros, according to a partial calculation made by the AFP. In about 25 municipalities.
There is also the Thuringia region which says it sits at 50 million Euros.
Fund guarantees for municipalities and other large investors were halted in 2017, following the loss from the 2008 financial crisis and the discovery of risky financial arrangements by some local authorities.
The German press has estimated a total loss of around 500 million euros with more than 50 municipalities.
– black sequence –
“Germany is the world champion in exports, but plays in the regional leagues, when it comes to investment,” mocked Weekly Spiegel in the face of the recently announced disaster.
Because the confidence in the German financial center has been shaken by several spectacular bankruptcies in recent years: that of the American bank’s German subsidiary Lehman Brothers in 2008, investment bank Maple Bank in 2016, and the recent scandal that affected it Had happened. Financial Company Wirecard.
In these cases “something is common”, financial expert Gerhard Schick tells Spiegel: “It often happens that a small, largely unknown bank changes its business model – for example because it was bought by a foreign player Is … (…) For example, the German banks were the North Channel and Maple, the German side for international tax evasion and the Greensil bank for the dangerous transactions of the Australian-British parent company. “
Greensil’s parent company filed for bankruptcy in the United Kingdom on 8 March, once dropped by one of its insurers and by investors suspecting the sound of its assets.
In Germany, Baffin filed a criminal complaint against the establishment on suspicion of accounting fraud.
– Late warning
But for Mr. Sheik, the German financial policeman is also part of the responsibility, as does the Federal Association of German Banks (BDB), which took too long to respond.
“He saw in 2019 that Greensill Bank customers were accumulating (…) everyone could see that Greensill were paying savers compared to 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 municipalities to “maintain their financial fortitude and not let themselves be overwhelmed by negative interests”, as Mr. Hinz has emphasized?
A good twenty cities will now try to recover part of their stake and plan to initiate “liability action”.
Baffin ordered an audit on the bank in September, then sent a special representative there in January: so rare a decision but not disclosed because of “strict respect for privacy”, the authority states.
In Lower Saxony (North), in the municipality of Osnabrück, the head of finance, Thomas Fillep, is angered.
Knowing these red flags, his city would never have invested 11.5 million euros in Greensill in mid-November, bringing its total exposure to 14 million euros, he claimed in the press.