With the scandal surrounding the Greensill Bank, the German financial centre is sliding into its next misery. Municipalities are particularly affected, and that’s not such a bad thing. Because it is another sign that deposit insurance and Bafin need to be reformed.
The payment and banking scene is undeniably never boring. Not a month goes by without new products, banks, fintechs and payment solutions hitting the market. But who actually needs all this and do you have to find it all good? Our author Nils Wischmeyer illuminates in his column “Nils nörgelt” from now on monthly a product, topic or just the “latest hot shit”. After all, there is (almost) always something to complain about.
Good morning Germany, good morning Bafin, good morning next embarrassment of the financial center, glad you all could make it. After we were all so happy about the Wirecard case, here comes the unique opportunity to go through all the criticisms again, to finally conclude that German financial supervision is a toothless, slow hangover, deposit insurance only encourages more risk and Germany is a laughing stock on the international financial markets. So let’s be honest: if there is no reform package now, we might as well not do it.
But first, let’s take a quick look at the facts, which is why I’m falling prey to cynicism early this morning: The British-Australian financial conglomerate Greensill Capital took over, renamed and turned around NordFinanz Bank AG in Bremen a few years ago.
Since then, the bank has acted primarily as a house-and-court bank for the Greensill Group and has recently collected billions in customer funds with its interest rate promises. In the meantime, Bafin has blocked the bank from customer transactions, the public prosecutor’s office is investigating and the financial house is now being wound up by all means.
Let’s abolish deposit insurance – at least partially
German private investors – and this annoys me – come off frighteningly well. They first collected nice interest rates above the average, and now they are completely compensated for having been lured by high interest rates. Basically, this is how we allow clients to throw their money into risky products, whether self-found or brokered by fintechs, without ever having to bear a hint of risk.
If I demanded that for, say, stocks, people would rightly laugh at me. I would therefore like to suggest that deposit insurance in Germany should either be abolished or at least restricted to such an extent that it only applies to really safe investments – or that its inclusion in at least the statutory deposit insurance should be tightened up in such a way that windy banks cannot offer risky business models at the expense of other financial institutions. The latter would probably be the more harmless option for savers.
Anyone who doesn’t know that risk and return go hand in hand has little to do in the financial markets
This would also counteract what likes to be called stupid German money. Savers in this country can conclude risky interest transactions protected by deposit insurance, which decouples risk and return and which leads to the fact that millions flow again and again into everything that comes across as dubious.
Investors should not be protected in such investments, but should learn to bear the risk themselves. Those who do not understand that the high interest rates are only a desperate attempt to get capital should not be rewarded for such decisions. We’ll talk about the question of financial education starting in middle school when we get a chance.
Keyword financial education: The bankruptcy, on the other hand, hit the municipalities, which actually thought it was a good idea to park the money there. 15 million from Cologne, more than 30 million from Monheim, 50 million euros from Thuringia and the list goes on and on. This shows what happens to stupid German money when it is not protected, but the professionals themselves are responsible for it: The money is gone and everyone wants compensation, the state should help, immediately and in general, one could not have known – how unfair!
The stupid German money must dry up
The fact that all the treasurers and cities are now crying out for help and compensation is first and foremost embarrassing and then an oath of revelation. With such statements, the responsible finance departments merely show that they have understood neither the current legal situation nor the fundamentals of the financial markets.
More return, however small, means more risk. This is what every savings bank trainee learns in the first year of training, and in business administration studies, the first-year students are taught this rule. That the Greensill Bank is no exception is now being demonstrated in reality. Now you may ask: Does a treasurer have to audit a bank with a good rating himself? No, of course not. He just has to switch on his mind and then realizes that more return cannot be risk-free. Accordingly, I was amused to see that the Ministry of Finance refers to the current regulations for all questions concerning compensation. German bureaucracy 1:0 stupid German money.
It’s the first scandal that many municipalities have been on the receiving end of, and that’s a good thing. Because, should there be even a little bit of insight, they will not take such a risky step again and the stupid German money, it dries up at least a little bit.
“It’s the first scandal where a lot of municipalities have been caught flat-footed, and that’s a good thing.”
Oh yeah, I also wanted to talk about Bafin. She was late again, reportedly ignoring clues as well. Do what? Tear down and rebuild fundamentally different, more power, more authority, different corporate culture. But we don’t have to go through that again, the Wirecard scandal was enough. Questions? No? Then I have to thank you and hope I may welcome you to the next financial scandal in the coming months. Do the honors.