Germany joins China development bank

Update: Finance Minister Wolfgang Schäuble confirmed on Tuesday that Germany has agreed to join the China-led Asian Infrastructure Investment Bank (AIIB), despite pressure from the US.

Germany joins China development bank
Chinese President Xi Jinping (R) and Singapore finance minister Tharman Shanmugaratnam (L) at the founding meeting of the Asian Infrastructure Investment Bank (AIIB), October 2014. Photo: DPA

Germany, France and Italy "want to bring our long experience … to help the bank build a solid reputation," Schäuble said at a joint press conference in Berlin with Chinese vice-premier Ma Kai.

"We want to make a contribution to the positive development of the Asian economy, in which German companies are actively taking part," he said.

France and Italy have also agreed to become members of the $50-billion institution, seen as a rival to the World Bank, the newspaper reported, citing European officials.

The decision came a week after Britain announced it would join the bank, which was launched last year by Chinese President Xi Jinping. The bank is seen as being part of China’s plans to widen its international influence.

UK Finance Minister George Osborne said the move would give British firms the best opportunities to invest and work in the world’s fastest growing markets as parts of the country’s long-term economic plan.

But London's decision drew a cautious response from Washington, in a rare note of discord in their "special relationship", and followed criticism from the US about Britain's cuts to defence spending.

The FT said the move by Germany, France and Italy was a major diplomatic setback for the Obama administration, which argues that western countries would have more influence as non-members and could push for the bank to hold itself to higher lending standards.

Washington also has concerns about the bank’s standards of governance as well as environmental and social safeguards.

There are also worries that the institution, which aims to attract investment in infrastructure in areas such as transport, energy and telecommunications throughout Asia, would contribute to the spread of China’s “soft power” in the region, at the expense of the US.

The FT reported that Australia is also now rethinking its position.

Martin Schulz, the president of the EU parliament, was quoted by Reuters as saying that he welcomed the four European nations joining the AIIB, but stressed that the bank must conform to internationally accepted standards.

China and 20 other countries signed a memorandum of understanding to establish the Beijing-headquartered bank in October.

The bank has support from countries including India, Singapore, Malaysia, Cambodia, Pakistan, the Philippines, Uzbekistan and Vietnam.

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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”.