Berlin backs Hypo Real Estate bank privatisation bill

German deputies on Friday approved a first reading of legislation that could lead to a nationalisation of the Hypo Real Estate bank and the expropriation of US shareholder Christopher Flowers.

Berlin backs Hypo Real Estate bank privatisation bill
Photo: DPA

“The government will do everything possible to avoid using expropriation,” of HRE investors, which would only occur as a “last resort” and be compensated based on the share’s stock market value, a government statement said.

German officials seek full control of the troubled bank and want to “avoid HRE finding itself in a situation that would threaten not only German markets but international markets as well,” it added.

Berlin is concerned an HRE failure could have catastrophic consequences similar to those provoked by the bankruptcy of US investment bank Lehman Brothers in September, which slammed financial markets around the world.

HRE has already benefited from more than €100 billion ($136 billion) in private and public aid to keep it afloat.

Flowers, who heads a consortium that owns 25 percent of the shares in HRE, has said he wants to hang onto the stake, and warned that an expropriation would harm Germany’s reputation among international investors.

Following its approval by deputies in the Bundestag, or lower house of parliament, the bill must now be approved by the Bundesrat, or upper house, on April 3.

According to news agency DPA, it is yet unknown what Flowers will decide to do with his HRE shares. He will be allowed to sell them via the SoFFin (Sonderfonds Finanzmarktstabilisierung, or Financial Market Stabilization Fund) until early April.


German online bank N26 shutters US service

German online bank N26 said Thursday it was closing its operation in the United States next year, as regulators in Europe place the "fintech" start-up under increased scrutiny.

The N26 logo on a bank card.
The N26 logo on a bank card. Photo: picture alliance/dpa | Christophe Gateau

N26’s 500,000 customers in the US would be able to use their services until January 11th, 2022, the bank said in a statement, after which it would cease to operate in a market it first entered in 2019.

Instead the Berlin-based operation would “sharpen its focus on its European business”, where it already operates in 24 countries and is exploring expansion into more eastern European markets.

N26 said it would also look to launch new “investment products in the coming year” to sit along side its current account service.

Founded in 2013, N26 offers free, online-only banking services to around seven million clients and is one of Germany’s most high-profile financial technology or “fintech” firms.

In October, the bank raised $900 million from private investors, and announced a plan to hire a further 1,000 employees to reinforce its product development, technology and cybersecurity teams.

READ ALSO: German online bank N26 to create 1,000 jobs

At home, N26 has been in the crosshairs of the German banking watchdog BaFin since 2018 after a local news media investigation found that it was possible to open account with forged IDs.

Earlier in the month, the regulator said it was upping its oversight operations at N26, appointing a special representative to monitor the bank’s progress towards solving issues in “risk management with regard to IT and outsourcing” identified by BaFin.

The regulator also limited the number of new customers N26 could take on to 50,000 a month until the shortcomings were addressed.

N26 was already being monitored by BaFin over failures in the start-up’s anti-money laundering system.

BaFin issued N26 with a 4.25-million-euro ($4.8-million) penalty earlier this year in connection with around 50 “suspicious transactions” the bank failed to report promptly enough.