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RECESSION

Hypo Real Estate needs five years to pay off state aid

Troubled German property financier Hypo Real Estate (Hypo RE) will need until 2015 to repay about €100 billion of state aid, chief executive Axel Wieandt said Monday.

Hypo Real Estate needs five years to pay off state aid
Photo: DPA

“The group will not be in a position to repay the liquidity support facility in full before the year 2015,” Wieandt told an extraordinary meeting of Hypo RE shareholders in Munich, southern Germany.

“The group’s existence as a going concern in the foreseeable future will remain contingent upon the continued availability” of external sources of cash, but could make a profit again by 2012, he added.

Hypo RE needs around €10 billion in fresh cash to cover losses for 2009 and the following years, in addition to €78 billion in loan guarantees already provided by the government, Wieandt said.

The bank has been provided with up to €98 billion in loan guarantees by the German financial market stabilization fund SoFFin.

Hypo RE faces several threats to its survival, including high costs for refinancing and restructuring, a sharp devaluation of its assets and the need to take higher provisions against bad loans.

The specialist in real-estate lending was hammered when US investment bank Lehman Brothers collapsed in September 2008.

Hypo RE was privatised since then by Berlin to prevent a collapse that authorities say would have threatened the entire German banking sector.

The state now owns 90 percent of Hypo RE and shareholders are expected to approve a squeeze-out option that will allow the bank to become fully state owned.

That would mark the final step in the first nationalisation of a German bank since the republic was formed in 1949.

In addition to its real-estate operations, Hypo RE plays a pivotal role in the issuance of “Pfandbriefe,” bonds in which small investors, savings banks and insurance companies have placed large sums.

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BANKING

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.

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