New details on Greensill fiasco: Local councils knew about investing

The millions in losses at Greensill Bank occupy Oberschleißheim.

Now more details are known: some local councils knew about the investments.

Oberschleißheim

- Last week it came to light: The Oberschleißheim town hall miscalculated in investment transactions with the insolvent Greensill Bank.

The community has lost five million euros.

Two thirds of the savings are probably gone.

The bankruptcy tears a huge hole in the municipality's budget - with serious consequences.

Now, after an internal review of the administration around Mayor Markus Böck (CSU), it has become known that the finance committee was aware of at least part of the investments at Greensill Bank.

The current budget situation was presented to the committee on June 23, 2020.

It documents three tranches at the bankruptcy bank: two transfers from November 7th and one from December 12th, 2019. Investment amount: one million euros each.

The municipality also invested almost 4.7 million euros in Akbank, based in Eschborn.

This money was invested during the term of office of former mayor Christian Kuchlbauer (FW).

The offer at Bremer Bank was "best"

Only after the meetings of the finance committee in June and August 2020 did the town hall transfer another two million euros to Greensill on behalf of Mayor Böck. The administration had previously withdrawn this amount from Akbank because the investments there had expired. From then on, the administration relied almost exclusively on one bank: the Greensill. There was a reason. At the Bremen financial institute, the offer was "best," explains Böck on request.

The plant at Greensill Bank was known to the councilors on the finance committee.

Could you have responded?

Or have to?

Fritz-Gerrit Kropp (Greens) accused Mayor Böck at the latest meeting of the finance committee that reports about the uncertainty of investments at Greensill Bank were known as early as 2019.

Shouldn't the municipal councils have intervened themselves after inspecting the budget report?

"At that time the risk was spread 50:50 with two banks"

Call to Christoph Münster, spokesman for the Greens in Oberschleißheim.

“At that time, the risk was spread 50:50 with two banks,” he says.

That is why there was no reason for intervention at the time.

It was only through the reallocation that Böck “increased the risk extremely”.

That shouldn't have been, says Münster.

It would have made sense to submit the process to the local council before investing the money.

Mayor Böck does not comment on the members of the finance committee's inspection of the interim report.

The town hall administration is currently investigating "at full speed" the cooperation with long-term financial brokers.

They also advised the community on the Greensill investment.

New indoor swimming pool has already been postponed

How are things going with the community budget now?

The "ongoing operation of the administration" is secured, emphasizes Böck.

In addition, the "long-term performance of the community" is not in danger.

Böck: "Existing and also planned projects such as the new industrial park, the shopping center on Stutenanger and the upcoming residential developments can be continued safely."

In the future, special attention will be paid to the designation of the commercial area.

Böck wants to improve the municipal treasury again through increased trade tax income.

Tax or fee increases are currently not under discussion.

The mayor assures that there is no impact of the loss of millions on the citizens.

In future, however, the budget will have to be set up more precisely because there are no reserves for a possible compensation.

In addition, the community will have to make savings in “every nook and cranny” in the future, for example when building the new indoor swimming pool.

The construction project has already been postponed.

Empty municipal coffers - what now?

That's what the city council says

What happens when municipalities become insolvent? "Municipalities cannot become insolvent," explains Achim Sing from the Bavarian Association of Cities on request. There are state mechanisms that prevent insolvency. First of all, communities would have the opportunity to take out cash loans, so Sing. There is also help in the context of municipal financial equalization: higher key allocations (e.g. for urgent building projects at schools; up to 90 percent of the costs can be covered) or needs allocations. Municipalities in financial distress receive one-off payments for certain projects so that the municipality remains able to act. According to the Association of Cities, such support measures only occur in individual cases. The financial equalization makes use of one pot, in the municipalities, districts,Administrative districts and the Free State deposit money. However, the aid is linked to obligations: “The community must take an austerity course and postpone certain investments,” says Sing. Municipalities can raise trade tax or postpone construction projects.

You can find more news from Oberschleißheim and the district of Munich here.