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FRANKFURT

Commerzbank makes €2.5 billion capital hike

Commerzbank, Germany's second-biggest bank, said Wednesday that it will undertake a €2.5 billion capital hike to repay further chunks of a state bailout it received during the 2008-2009 financial crisis.

Commerzbank makes €2.5 billion capital hike
Photo: DPA

“Commerzbank is planning an early repayment in full” of about €1.6 billion in so-called “silent participations” from the German bank bailout fund SoFFin and a further €750 million from insurance giant Allianz, the bank said in a statement.

Silent participations are a form of debt under which creditors agree to forego voting rights in the company.

In order to raise the funds needed for repayment, Commerzbank had decided to undertake a capital increase, which it would ask shareholders to approve at the annual general meeting of Commerzbank, originally set for May 22 but now being brought forward to April 19.

Once the operation has been completed, SoFFin’s shareholding in Commerzbank was expected to decrease from 25 percent plus one share to below 20 percent, the bank said.

In 2008 and 2009, the state invested around €16.4 billion in Commerzbank as it struggled to integrate the distressed Dresdner Bank.

Commerzbank has already repaid most of the money and “with the announced repayment of the remaining €1.6 billion, the silent participations of the Federal Republic will be repaid in full,” Commerzbank said.

“With the complete repayment of the silent participations of SoFFin we are repaying ahead of schedule all components of the state support over which we have influence,” said chief executive Martin Blessing.

“The support of politicians and the taxpayer was very important for us during the financial crisis. For us the repayment of the silent participations and the reduction in the Federal Republic’s stake marks the beginning of the end of the Federal Republic’s engagement in Commerzbank,” Blessing said.

On the Frankfurt stock exchange, Commerzbank shares were the biggest losers in midday trading however, shedding 8.51 percent in a slightly softer overall market.

AFP/jcw

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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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