The German banking regulator received a series of whistleblower tips over the past year that made “multiple allegations of fraud” at Greensill Bank, prompting it to sue for repairs at the bank, according to an internal German government report reviewed by The Wall Street Journal.
The regulator, known as BaFin, received the first series of warnings in the second quarter of 2020. The information alleges that some of Greensill’s assets were backed by fake invoices, according to the report, which outlines the regulator’s efforts over the past year to supervise banks.
BaFin received another alert in the third quarter of 2020 and three other submissions this year. The German-language report, which did not specify the origin of the filing, said the information raised “concerns about the financial situation of the Greensill Group as well as various allegations of fraud.”
Brazil’s central bank has stepped up its efforts over the years to crush the nation’s club banking industry, using the pandemic-driven shift to touchless payments to launch its own digital platform.
The payment system, dubbed Pix, was established and managed by a central bank and not by private payment players, unlike similar systems in other countries. Since launching in November, Pix has handled a larger share of digital payments than its private sector alternatives, advancing regulators’ goals to spur competition and get more Brazilians to use financial services.
In addition, Brazil’s central bank last month introduced so-called open banking, which mandates that institutions share key price data and credit history with rivals. That adds to recent efforts to boost fintech growth to provide consumers with more options and to attract unbanked Brazilians into the formal financial system.
The push is closely watched by investors, as financial startups use the Pix platform to gain market share in a sector where the top five banks held 93% of all assets in 2019, compared to 54% in neighboring Argentina or 41% in the US, according to BankFocus, Moody’s Analytics. The concentration of banking in Brazil is higher than in the other 16 developed and developing markets cited by the company.
“It’s all about breaking or challenging established banking brands,” said Chris Ward, researcher and digital banking consultant at the London-based unit of FBX Informa, about the Brazil experience. “Actually the central bank encourages that rather than the fact that they are not viable for society as a whole.”
A German court ruled Tuesday that a small bank linked to the collapsed British financial company went bankrupt, triggering losses for dozens of small German cities.
Greensill Bank AG was deemed bankrupt by the local court, leaving the city as a likely creditor. Around Germany, at least 12 cities with a combined € 200 million, equivalent to about $ 238 million, in deposits are in a similar situation. Individual depositors are covered by insurance.
Among them is Keny, a small town in southwestern Germany. Like most cities that put money into banks, Ken tries to avoid the small losses that come with negative interest rates.
Bremen-based Greensill Bank, formerly known as NordFinanz Bank AG, was acquired in 2014 by Greensill Capital, which itself filed for bankruptcy on March 8. The bank offers slightly positive interest rates, beating the negative interest rates offered by a growing number of German banks.
The mayor of the city, Stefan Bubeck, said that the city is not trying to get high interest rates, but to avoid negative interest rates. Cities “don’t want our savings to decrease,” he said. Mr. Bubeck is worried that most of the money invested will be lost. We were shocked.
The city said it had diverted € 6 million into three banks offering slightly positive interest rates. He deposited € 3 million – a third of his total reserves – at Greensill in November. The bank offers an interest rate of 0.6%, compared to the minus 0.5% offered by other regional lenders in the city.
Other cities said they shifted reserves to Greensill at a lower price to avoid the guaranteed loss of negative prices. Schwalbach am Taunus, a municipality outside Frankfurt that has € 19 million in deposits in Greensill, estimates that negative rates could cost taxpayers half a million euros a year.
Deposit fees have also forced a growing number of individual customers to shop for better prices elsewhere. In fact many park their money outside Germany, in countries such as Bulgaria and Latvia, use platform service providers. The European Union has domestic guarantees on retail deposits of up to € 100,000. Greensill retail customers will further be covered up to € 75 million each with a separate deposit insurance plan provided by commercial banks.
BaFin, Germany’s financial regulator, froze all bank accounts in Greensill earlier this month after an audit could find no evidence of specific collateral used by big customers to borrow money. BaFin has filed a criminal complaint against the bank with prosecutors, who will decide whether to carry out an investigation. On Tuesday, regulators said a local court started bankruptcy proceedings against the bank after BaFin determined the bank would not be able to repay all customer deposits.
A person familiar with the bank said it was currently estimated that up to € 700 million in deposits out of a total of € 3.6 billion would not be covered by insurance. The majority will likely come from local governments.
Cities have their deposit guarantees if they put their money in pseudo local and regional banks that charge negative rates. Their deposits at commercial banks like Greensill were protected until 2017, when insurance was canceled following an expensive bank failure in which many depositors were urban.
Local governments said they could not see the Greensill problem coming, and were confident about the bank’s investment grade rating from ratings agency Scope Ratings.
“Because of this bank’s rating, we had to take a very safe form of investment for time deposits,” said Schwalbach am Taunus Mayor Alexander Immisch.
In a statement, Scope said it now suspects relevant information about Greensill’s business and risks was withheld from analysts, and that misinformation was provided. A Greensill spokesman referred questions to Greensill Capital bankruptcy administrator Grant Thornton, who declined to comment.
In Giessen, a university town north of Frankfurt, Mayor Dietlind Grabe-Bolz said the city was taking all appropriate steps to deposit € 10 million – roughly one-fifth of the city’s reserves – in Greensill, including evaluating bids from banks brought by the institute. different finances. broker. The money is intended to help cover future expenses such as road repairs and school projects.
Miss Grabe-Bolz has raised concerns about BaFin, who began conducting forensic audits at the bank last summer, but her investigation was only announced this month. Giessen transferred his deposits to Greensill Bank in October and December last year for 0.09% and 0.1% interest.
“While BaFin has already started assigning special investigators without the knowledge of investors, Greensill’s bid is still continuing,” the mayor said. “All of this shows that BaFin has let us down.”
A BaFin spokesman said because of their confidentiality duties, they could not notify the city government and other investors about special audits or other surveillance measures. He added that cities are well aware that their deposits in commercial banks are not guaranteed.
A said on Friday that an investigation into his alleged involvement in handling payments from an Icelandic fishing company involved in the bribery investigation had been dropped.
The Norwegian National Authority for the Investigation and Prosecution of Economic and Environmental Crime, known as Okokrim, launched an investigation in November 2019 following the disposal of WikiLeaks data and the subsequent allegations made in the Icelandic media.
DNB said in a statement on Friday that it had been informed that the investigation had not yielded any information that provided a basis for criminal prosecution of the individual and that the public prosecutor did not think the company sentence was applicable in this case. “Because of that the case has been closed,” said DNB.
WikiLeaks published more than 30,000 documents called “Fish Files”, which show that the Icelandic fishing group Samherji hf has for years paid billions of dollars to Namibian officials for fishing quotas in the country’s waters.
Icelandic media later claimed that Samherji used DNB to funnel more than $ 70 million to a shell company in the Marshall Islands, part of the proceeds from his activities in Namibia.
Samherji said the figure was actually $ 28.9 million and related to fees for the crew but did not disclose which bank was used for the transaction.
“The dismissal of the case confirms that the allegations are pointless,” Samherji said in a statement on Friday. “Samherji is pleased with this result, because the company has always maintained that the allegations regarding Samherji’s affiliated transactions with DNB are baseless.”
Some of Europe’s largest banks are phasing out trade services for oil exports from the Ecuadorian Amazon, a move that reflects the growing focus of global banks on climate change and their shift from increasingly risky fossil fuels.
The eurozone’s largest bank and one of the region’s trading centers, said in December that it would immediately exclude from its trading activities exports of oil by sea from the Esmeraldas region in Ecuador under the latest environmental finance policy.
Ecuador is not one of the largest oil producers in the world, but petroleum exports are a major contributor to the country’s economy. Petroecuador, the state-owned oil company, did not respond to a request for comment.
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The bank’s flight from Amazon crude followed fall in oil prices last year and a growing fear of so-called abandoned assets, namely fossil fuels losing their value as the world transitions to cleaner forms of energy. In December, Credit Suisse said its lending to the oil and gas industry fell to $ 6.9 billion in the third quarter of 2020 from $ 7.7 billion in the first quarter.
“Assessing environmental and climate change risks from specific project funding is becoming the main legal idea for the banking sector and trade finance operations,” said Monica Feria-Tinta, a lawyer at London-based firm Twenty Essex.
With these increased risks, more and more European investors are turning away from fossil fuels.
“We have cut ourselves off from all the big oil companies because not only are they major emitters of greenhouse gases, they also carry the risk of devastating spills and other negative social and environmental impacts,” said Anders Schelde, chief investment officer in the $ 20 billion Danish pension fund. AkademikerPension.
The bank has also faced calls from environmentalists and indigenous peoples to limit their involvement in fossil fuels. In Ecuador, a campaign by activists and indigenous peoples encouraged ING and Credit Suisse to reduce their exposure to the Amazon oil trade. Nonprofits Stand.earth and Amazon Watch published a report last year seeking assistance from banks – including ING, Credit Suisse and BNP Paribas – with their financing of Amazon crude.
“The banks identified in our report face serious accusations about double standards for making climate pledges while continuing to fund Amazon’s oil trade,” said Moira Birss, director of climate and finance at Amazon Watch.
He said the new commitment from the bank was a positive step towards strengthening protection of the Amazon rainforest and respecting the rights of indigenous peoples in the region.
An ING spokesman said the lender shares many of the concerns in the report, which is why he is reviewing its exposure to the oil and gas trade flowing from the Ecuadorian Amazon. “Meanwhile, we have decided not to enter into a new contract to finance the flow of oil and gas trade,” he said from the region.
Credit Suisse’s decision to pull out of Amazon oil trading in Ecuador is part of the bank’s regular renewal of a growing sustainable finance effort, a bank spokesman said. “As part of our commitment to tackling climate change, protecting biodiversity and respecting human rights, we introduced further restrictions on the financing of fossil fuels last year,” he said.
Banks and insurance companies also cut ties with Arctic oil drilling. This month,
& Co. – also said they would stop funding for new drilling and exploration projects in the Arctic.
In the US, the Trump Administration’s Office of Currency Control passed “fair access” rules limit the bank’s capabilities to refuse loans to certain industries, including fossil fuels. The rules, which will take effect on April 1, could be canceled or postponed under the Biden administration, policy analysts said.