How the Greensill Capital Collapse touched the German Fintech Scene — Founder Interview

This story was migrated from our old blog, originally published on March 12th, 2021.

This article is part of our coverage of Scaleup Founder Interviews from Germany, Austria, and Switzerland.

Executive Summary

• This story was migrated from our old blog, originally published on March 12th, 2021.

• This blog post first appeared first on old medium publication (https://medium.

• Greensill was a fintech — called aggressive and controversial by some -, specializing in supply chain financing, especially in the steel industry in the UK and Australia.

• In 2018 New York-based PE company General Atlantic invested 250 m US$ and in 2019 Softbank invested 800 m US$.

• Today’s Greensill Bank is an institute with a long history.

How the Greensill Capital Collapse touched the German Fintech Scene — Founder Interview Startuprad.io brings you independent coverage of the key developments shaping the startup and venture capital landscape across Germany, Austria, and Switzerland.

This story was migrated from our old blog, originally published on March 12th, 2021.

New Blog

This blog post first appeared first on old medium publication (https://medium.com/startuprad-io), and was moved to this blog with the relaunch of our website in summer 2024.

Greensill was a fintech — called aggressive and controversial by some -, specializing in supply chain financing, especially in the steel industry in the UK and Australia. They have been headquartered in the UK, in Northwich (close to Manchester). The company was founded by Lex Greensill in 2011. Greensill bought invoices from companies and bundled them in bond-like securities. They financed fraudulent NMC Health and were involved in the collapse of GAM funds as well, according to press reports.

In 2018 New York-based PE company General Atlantic invested 250 m US$ and in 2019 Softbank invested 800 m US$. Greensill has been deeply involved with Zurich-based Credit Suisse (think bond-like securities), whose retreat appears to have triggered the collapse.

You can read more about them here and many other articles:

• http://brontecapital.blogspot.com/2021/03/greensill-who-is-holding-bag.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+BronteCapital+%28Bronte+Capital%29

• https://www.bloomberg.com/news/articles/2021-03-09/greensill-gupta-and-credit-suisse-how-a-business-empire-collapsed

• https://www.bloomberg.com/opinion/articles/2021-03-05/how-lex-greensill-risked-his-fortune-and-his-firm

• https://www.bloomberg.com/news/articles/2021-03-03/greensill-s-overnight-fall-from-grace-was-months-in-the-making

Greensill Bank in Germany

Today’s Greensill Bank is an institute with a long history. The bank is located in the northern city of Bremen. It was founded in 1927, after the hyperinflation of the Weimar Republic as Norddeutsche Finanzierungs-AG. After being bought and sold several times, Greensill Capital bought an 80% stake in the bank in 2014.

After the transaction, the bank was rebranded as Greensill Bank. The bank offered in an environment of zero or negative interest “good” interest rates. This lured in savers for time deposits and sight deposits.

Now BaFin declared a moratorium on March 3rd due to suspected overextension. Bafin suspects Greensill Bank was cooking their books and filed criminal charges after a forensic audit by KPMG. The books of Greensill Bank have been audited before by Ebner Stolz, a midsized auditor with more than 1.700 employees, headquartered in Stuttgart.

Due to the moratorium, no money can be retrieved, which is invested in the bank (e.g. deposits). This is one of the largest cases of bank closure in Germany in the last 20 years. Of those only, the German depandance of the Kaupthing Bank re-opened again. In the next six weeks, Bafin has time to decide if the bank will be opening again or the “Entschädigungsfall”. Entschädigung means compensation and in such a case the fund of Germany’s private banks, as well as the government will step in and compensate. All retail savers will get their money likely back. The German government guarantees all savings up to 100.000 € and the remaining money will have to come out of the fund of private banks. Multiple municipalities have deposited money there as well, several million in each known case (e.g. Hessen’s Capital Wiesbaden fears for 20 million Euros). The municipalities don’t have a great chance to see all of their money again.

• Yahoo Finance (English)

• Witschaftswoche (German)

• Greensill Bank in Germany is closed by Bafin. Now the city of Wiesbaden fears for their 20 m Euros Deposits https://buff.ly/2OGcwaP

This brings us to the impact on German Fintechs

The two fintechs Weltsparen (a local brand of raisin) and Zinspilot (Deposit Solutions) are headquartered in Germany and earn money brokering deposits for German retail investors mostly across the European Union. Both brokered retail deposits to Greensill, as well as the platform Check24.

All of them together are suspected by Handelsblatt to have brokered “hundreds of millions” in deposits to the bank. Now, this led to criticism by politicians, comparing it to another blow for fintechs in Germany, after Wirecard (Danyal Bayaz). In an interview, Tamaz Georgadze defends his company Raisin (you can listen to our interview from 2017 with him here). He states (as we think correctly) that looking from the outside the bank was well capitalized and that the business of the deposits brokers is not the auditing of books of banks.

We agree with his statement since banks have a compliance department, internal audit, external auditors, as well as the oversight of BaFin, all put in place to avoid bank collapses and ensure compliance with all rules and regulations.

Note that most of the deposits (like the City of Wiesbaden) were channeled through more traditional brokers than the fintech platforms. It seems unlikely that the fintechs have done anything wrong.

Further Readings:

Interview with Tamaz, the CEO of raisin (German)

Article in Handelsblatt with the statement of Danyal Bayaz

Another article in German, which sparked the interview with Tamaz

https://finanz-szene.de/banking/wie-viel-wirecard-steckt-im-fall-der-bremer-greensill-bank/

Finally the take of FT in English

Key Takeaways

• In 2018 New York-based PE company General Atlantic invested 250 m US$ and in 2019 Softbank invested 800 m US$.

• This article covers a significant development in the DACH startup and venture capital ecosystem.

• The DACH region (Germany, Austria, Switzerland) continues to be one of Europe's most dynamic startup markets.

Frequently Asked Questions

What are the key facts about Greensill Capital Collapse touched German?

This story was migrated from our old blog, originally published on March 12th, 2021.

How does this affect the German startup ecosystem?

Greensill was a fintech — called aggressive and controversial by some -, specializing in supply chain financing, especially in the steel industry in the UK and Australia. They have been headquartered in the UK, in Northwich (close to Manchester).

What are the latest startup funding trends in the DACH region?

Startuprad.io tracks venture capital and startup funding across Germany, Austria, and Switzerland. Explore our pillar coverage pages for the latest data.

About the Host

Joern "Joe" Menninger is the host of the Startuprad.io podcast and covers founders, investors, and policy developments across the DACH startup ecosystem. Through more than 1,300 interviews and nearly a decade of reporting, he documents the evolution of the European startup landscape. Follow Joern on LinkedIn.