German Deposit Insurance Raises Fees by Over 50% on Greensill
(Bloomberg) -- German banks will have to pay an extra 275 million euros ($333 million) a year into the nation’s mandatory deposit-insurance program to cover losses from the collapse of Greensill Bank AG, handing a bill for the failure of the trade-financing firm even to lenders who had no exposure to it.
In order to meet a legal funding requirement by 2024, insured banks must plug the around 1.1 billion-euro gap left by payouts to Greensill depositors on top of their existing contributions which came to about 483 million euros last year, according to internal documents seen by Bloomberg.
A spokesman for the fund declined to comment.
Germany’s financial regulator shuttered Bremen-based Greensill Bank in March as part of the unraveling of a business empire built by its owner, Lex Greensill. Deutsche Bank AG said on Wednesday that it expects to pay an additional 70 million euros to the mandatory fund this year and 60 million euros over each of the next three years. Commerzbank AG, which is the next biggest contributor, has yet to quantify how much more it needs to pay.
Greensill Bank had about 3.5 billion euros in deposits when it collapsed, about 1.1 billion euros of which were covered by the mandatory deposit insurance fund. Another 2 billion euros of deposits at Greensill Bank were covered by a voluntary insurance and the rest wasn’t protected.
The additional payments to the insurance fund will further strain the notoriously low profitability of Germany’s banks. Neither Deutsche Bank nor Commerzbank had any direct business with Greensill.
Commerzbank last year contributed 154 million euros to the mandatory fund and the voluntary one combined, according to its annual report. It doesn’t further break down those payments.
The payments may decline if the fund can recover money from Greensill Bank’s administrator but it’s uncertain at this point how much that will be and when, a person familiar with the matter said.
It’s also not yet clear how much payments to the voluntary fund will have to rise as a result of Greensill. A decision is likely to be made toward the end of the year when the Association of German Banks, a lobby organization that runs both the mandatory deposit insurance and the voluntary one, will present findings of a review of eligibility criteria kicked off in the Greensill aftermath, the person said.
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