A chaotic day in Frankfurt

Shares prices fell and rose again in Frankfurt on Wednesday as the US Federal Reserve enacted an emergency 75 basis point cut. During the afternoon, the Dax, a composite index of the 30 biggest German companies, had fallen almost 6 percent and was at 6386 points, its lowest point since December 2006.

After the Dax’s initial 6 percent drop, the index levelled off to about minus 4.8 percent. Both the MDAX, an index of 50 German companies who are a class smaller than the Dax 30, lost 3 percent.

The Fed’s emergency cut of 75 basis points that brought the Fed funds rate to 3.5 percent in order to calm the mass panic on the world’s bourses has had a fading effect in Frankfurt, where the markets had a volatile opening and a disappointing closing. Even substantial gains in the Asian stock markets boosted European stocks, but not enough to put the Dax on positive ground.

The cause for further losses in Frankfurt is fears over a US recession and an initial 2 percent loss on the Dow Jones Industrial Average. Even the Dow Jone’s later recovery of this loss was not enough to quell fears in Frankfurt.

“The clear boost during the morning was amazing,” Marko Pillep, a market strategist from Heleba told the Frankfurt daily, Frankfurter Allgemeine Zeitung. Pillep said that the rate cut on the part of the Fed would not solve the problem.

Losses for some blue chip technology companies also added to the traders’ fears. Apple, the electronics manufacturer, and Motorola, the telecommunications equipment manufacturer, both saw their stock fall by about 13%. Infineon, the German semiconductor manufacturer, saw their stock drop by about 8 percent upon news of its subsidiary Qimonda’s negative earnings.

Opinions as to the future of the European and German economy vary. Andreas Hürkamp, stock market strategist for Commerzbank told Frankfurter Allgemeine Zeitung, “We are not reducing our forecast yet. We are convinced that the Dax will increase once again before the year’s end, and the Dax at the end of the year will be above 8000,” the expert added. Hürkamp said, however, that the mood in the market is the worst it’s been in years.


German watchdog steps up monitoring of popular N26 online bank

Germany's financial watchdog on Wednesday ordered online bank N26 to step up "internal controls and safeguards" to prevent money laundering and terrorist financing, and said it was appointing a special representative to monitor progress.

German watchdog steps up monitoring of popular N26 online bank
An N26 card. Photo: Wikimedia Commons

Bafin’s announcement marks an escalation of previous warnings to the popular Berlin start-up, which has come under fire in the past for not properly verifying the identities of new customers.

“Bafin ordered N26 Bank GmbH to rectify deficiencies both in IT monitoring and in customer due diligence,” the regulator said in a statement.

N26 “is required to ensure that it has the adequate personnel, technical and organisational resources to comply with its obligations under anti-money laundering law,” it said.

A “special commissioner” would oversee the company’s efforts, Bafin added. Founded in 2013 and known for its transparent debit cards, digital bank N26 is one of Germany’s most high-profile financial technology or “fintech” firms and now has seven million customers in 25 countries.

Its rapid growth has rested in part on fast-track identity procedures for new customers.

READ ALSO: What is the digital German bank N26 that’s about to hit a million users?

In 2019, German business weekly WirtschaftsWoche said it had managed to open accounts using forged IDs.

N26 on Wednesday pledged to “work closely” with Bafin and the special representative.

It said it had already significantly increased measures to prevent money laundering in recent years, “but we recognise that more must be done in this area”.

The coronavirus crisis had contributed to a spike in fraudulent online transactions worldwide, N26 added, “increasing the demands placed on banks in the fight against crime”.