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Greensill Bank in need: Gerhard Schick on the failures of Bafin and the banking association

2021-03-08T13:25:25.207Z

How did the Bremer Greensill Bank get away with their interest rate bets for so long? The supervision is ailing, says financial expert Gerhard Schick. Why is Germany more of a regional league when it comes to investments as world export champion?



Icon: enlarge

Greensill Bank building in Bremen

Photo: FABIAN BIMMER / REUTERS

SPIEGEL

: Mr. Schick, Germany is the scene of a financial scandal again: Bremer Greensill Bank, which had offered unusually high interest rates for years, was closed for the time being by the financial supervisory authority Bafin.

Why do such scandals happen so often here?

Or is the impression wrong?

Schick

: Unfortunately, the impression is not wrong.

It's grotesque: Many Germans are incredibly proud of our export successes, for example with cars.

But when it comes to dealing with the proceeds, we are amateurish.

German investments abroad earn less interest than those from other countries, and billions are constantly being lost in frauds and bankruptcies.

To put it bluntly: We could also give away tens of thousands of cars directly to fraudsters every year, the effect would be the same.

SPIEGEL

: Why is that?

Schick

: Because too little political attention is paid to Germany's role as a capital exporter.

We have to be careful that we are not constantly pinched at this point in the global division of labor.

SPIEGEL

: What do you mean by that?

Schick

: Look, these financial scandals have something in common.

It is often the case that a small, largely unknown bank changes its business model - for example because it is bought by a foreign player and becomes part of a global corporation.

The German banks North Channel and Maple, for example, were the German part for international cum-ex tax frauds, the Greensill Bank from Bremen for the dangerous deals of their Australian-British parent company.

Wirecard also did dirty business through its German group bank.

SPIEGEL

: The Bafin and the auditors of the Federal Association of German Banks (BdB) are blaming each other in the Greensill case.

Who screwed it up?

Schick

: Apparently both.

They noticed in 2019 that Greensill Bank's customer deposits were exploding;

then it was clear that something gigantic was happening.

Especially since everyone could see that Greensill pays savers more than other banks.

The interest tables are public, and higher interest rates show that someone really wants to collect a lot of money.

SPIEGEL

: But?

Schick:

Even then, the Bafin could have forbidden Greensill from collecting even more deposits.

Or at least have to make it clear what the money is needed for and whether the risk management is adequate.

Then everything would have been exposed earlier.

Apparently, it was not the supervisors who stopped the bank, but rather other players in the financial market: Credit insurers have terminated the default protection for Greensill bonds and the major Swiss bank Credit Suisse has stopped selling Greensill funds.

Otherwise the bank would have been able to continue collecting deposits.

SPIEGEL

: What does that mean?

Schick

: The Bafin just has to get faster.

She has to build up the competence herself to audit such banks and not first hire an auditor as in the Greensill case.

It all takes too long.

SPIEGEL

: And the banking association?

He blames the Bafin alone.

Schick

: Wrongly.

That too was negligent.

In the past, the BdB has already shown that it can impose conditions on its member banks.

He didn't do that at Greensill at the crucial moment.

SPIEGEL

: Is Greensill the new Wirecard?

Schick

: No.

Unlike Wirecard, there have been no fraud allegations for years.

And this time, the wrong people were not pursued, as was the case with Wirecard.

But the central problem remains the same: Quick and decisive action is required against unclean business models.

It is just not enough to send the scouting party in front of you.

Sometimes the cavalry has to come.

SPIEGEL

: How do the Bafin and the BdB auditing association have to change?

After all, the BdB may now have to pay for the damage that one of its member institutes has caused.

And this damage can amount to up to three billion euros.

Schick

: The most important thing is that the institutions change their self-image.

You need to feel responsible for protecting the wealth of citizens and customers, and to get better at preventing property damage.

Take the P&R case ...

SPIEGEL

: ... the company on the gray market that has promised its customers that they will use their money to rent containers anywhere in the world in order to benefit from the global trade boom.

Until it turned out that these containers mostly didn't exist.

Schick

: Exactly.

The container industry has been in crisis since the financial crisis in 2008, but P&R was able to collect investor money for another ten years.

And that, although there were additional indications of inconsistencies.

Or take Maple: The Federal Ministry of Finance has been dealing with the issue of Cum-Ex since 2009, but the financial supervisory authority, Bafin, only closed Maple in 2015.

SPIEGEL

: Why is there always this delay?

Schick

: The overseers are too formalistic.

This is also due to the fact that mainly lawyers work at Bafin.

Nothing against lawyers, but they have to be supported by colleagues who look more economically.

The Bafin has too little focus on the business models.

SPIEGEL

: What can investors learn from the Greensill case?

Schick

: Of course it would be nice if people learned at school that they don't put all their eggs in one basket.

So don't make provisions for your pension by investing your entire capital in one share, as was often the case with Wirecard.

But that's not the problem with Greensill, as the deposit insurance takes over.

SPIEGEL

: Is Germany also susceptible to gamblers because the deposit insurance is very generous here?

Schick

: Yes, that is the case.

We have weak supervision and good deposit insurance, a dangerous mix.

The deposit protection of private banks even goes beyond the statutory 100,000 euros.

It was not until 2017 that the private banks drew conclusions from the bankruptcy of the US bank Lehman Brothers nine years earlier.

Fortunately for them, otherwise they would have to compensate institutional investors such as municipalities who invested in Greensill.

SPIEGEL

: What will be a problem: municipalities have parked around 500 million euros in deposits at Greensill, which could go wrong.

The first chamberlains demand that the federal government should compensate them because the Bafin, which is subordinate to the Ministry of Finance, has failed.

Schick

: The fact that the Bafin intervened too late does not absolve the treasurers of the obligation to look where they are investing their money.

That is the responsibility of the chamberlain.

SPIEGEL

: Many investors have placed their money with interest rate platforms, which then pass it on for them to earn interest, such as Greensill.

Do these platforms need to take a closer look at what they're doing?

Schick

: Of course it would be desirable that you take a closer look.

The consequences are still manageable: Greensill savers will not get their money for a few weeks in the event of bankruptcy, but thanks to the deposit protection they will ultimately not suffer any financial loss.

SPIEGEL

: If Greensill goes bankrupt, the BdB will have to compensate the institutional customers and the small investors get their money back.

Who else is harmed besides the municipalities?

Schick

: Once again Germany's reputation as a financial center.

And ultimately also the mass of customers of the private banks.

Because the private banks will somehow get the money from their customers that they have to raise for the losses of their deposit insurance, for example through higher account fees.

Icon: The mirror

Source: spiegel

All business articles on 2021-03-08

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