German banks to avoid Greek state bonds

In further signs of the finance world’s shattered confidence in Greece, major German banks plan to stop buying government-backed investments in the ailing country, business daily Financial Times Deutschland reported Friday.

German banks to avoid Greek state bonds
Photo: DPA

Banks Eurohypo, Hypo Real Estate and Postbank intend to stop buying Greek government bonds, while Deutsche Bank plans to reduce its engagement, the paper reported.

Eurohypo and Hypo Real Estate, the two biggest investors in government bonds, said they would not apply for Greek bonds in the forthcoming new round of financing.

Postbank also told the paper it would invest no more money in the Mediterranean country’s bonds.

Deutsche Bank, meanwhile, plans to limit its role to one of an investment bank for the private placement of bonds – rather than investing money itself in Greek government securities.

Germany’s large state banks such as BayernLB and Stuttgart’s LBBW declined to comment.

But a source in one of the banks said investment in Greek bonds was “barely conceiveable.”

The loss of confidence in Greek government bonds – normally considered the most rock-solid of investments – is a further blow to the troubled European Union member, restricting its options to raise money.

The rest of Europe, led by Germany, is widely expected to bail out the heavily indebted country through short-term loan guarantees, having few other options. A “sovereign default”, in which a country cannot pay its debts, would be calamitous for the EU and its currency, the euro.

On Wednesday the head of Germany’s debt agency, Finanzagentur, told a conference in London that Germany had little choice but to help Greece, albeit with tight conditions, even though many Germans are angry at having to bail out their neighbour.

“If one member of the eurozone were to step out for any reason, this would be a collapse of the entire system,” Carl Heinz Daube told the Euromoney bond congress in London, according to British media reports. “It would mean that after ten years, the euro experiment has ended.”

Mr Daube added: “It is very hard to clarify to a man on the street why one country should step in to help another country.”

Greece is already indebted to the tune of $43 billion (nearly €31 billion) to German banks via government bonds, the FTD report said.

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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”.