A moratorium is a ban on payments and sales within the meaning of Section 46 of the German Banking Act (KWG) imposed by the responsible supervisory authority, the Federal Financial Supervisory Authority (BaFin). During a moratorium, the bank cannot accept or pay out funds. It is only allowed to accept payments intended for the repayment of debts.
Under Section 46 of the German Banking Act (KWG), exceptions to the ban on payments and sales are only permissible if they are necessary to ensure the business continuity of the bank.
Exceptions for payments to customers are unfortunately not permitted, even in cases of social hardship.
A compensation event is a formal determination by the Federal Financial Supervisory Authority (BaFin) that a bank is no longer in a position to repay the deposits entrusted to it and/or meet liabilities resulting from securities transactions. BaFin must determine that a compensation event has occurred if a moratorium lasts longer than six weeks. Only when BaFin formally determines the occurrence of the compensation event may the Compensation Scheme of German Private Banks begin to compensate depositors.
The Compensation Scheme of German Private Banks (Entschädigungseinrich-tung deutscher Banken GmbH [EdB]) protects deposits up to a level of €100,000 per customer. The protection covers demand deposits, term deposits and savings deposits, including registered savings bonds. Liabilities in re-spect of which a bank has issued bearer instruments, such as bearer bonds and bearer deposit certificates, are not protected on the other hand.
The deposits of private individuals and companies are protected. Not protected, however, pursuant to Section 6 of the Deposit Guarantee Act (Einlagensicherungsgesetz [EinSiG]), are deposits by among other banks and financial service providers, insurance companies, asset management companies and public authorities.
The coverage level for deposits increases to a total of up to €500,000 for a period of six months after a deposit has been credited if and to the extent that it results, for example, from a realestate transaction relating to private residential property or is linked to special life events of a depositor. These life events include marriage, divorce, retirement, termination, dismissal, redundancy, birth, sickness, care dependency, invalidity, disability and death. A full list of cases where the coverage level is higher can be found in Section 8, subsections 2 to 4 of the Deposit Guarantee Act. If a depositor believes that their deposits in excess of €100,000 fall within the scope of this higher coverage level, they must provide the EdB with credible evidence of the fact.
The EdB also protects 90% of liabilities arising from securities transactions, up to the equivalent of €20,000. Compensation in connection with securities transactions is payable if the bank, contrary to its duties, is unable to return securities owned by the customer and held in custody on the customer’s behalf.
The Greensill Bank AG participates in the Deposit Protection Fund. In order to simplify the compensation for the depositors, the Compensation Scheme of German Private Banks (Entschädigungseinrichtung deutscher Banken GmbH [EdB]) has commissioned the Deposit Protection Fund to compensate on its behalf. The Deposit Protection Fund and the EdB will therefore provide the compensation “from a single source”. As a result the compensation will be realized by the Deposit Protection Fund.
The bank's liabilities will be protected according to the statute of the Deposit Protection Fund. This means that deposits from natural persons and foundations like time and savings deposits, and as well as registered savings bonds issued by non-banks, are protected up to a limit of EUR 74.964 million per depositor.
Deposits of other depositors are not protected if those are registered bonds or bonded loans. Generally not protected are bearer and registered bonds, deposits of bank's equity capital, and deposits from credit institutions, financial institutions, securities firms and territorial authorities.
In the case of joint accounts, deposits will be distributed equally among the account holders unless different arrangements were agreed when the account was opened. If there are two account holders, e.g. a married couple, this means total protection of up to €200,000.
When the Federal Financial Supervisory Authority (BaFin) has determined that a compensation event has occurred, the Compensation Scheme of German Private Banks and the Deposit Protection Fund will inform all protected depositors by letter about the occurrence of the compensation event and about the compensation procedure.
Before the money can be paid out to depositors, the names of the depositors must be established and the amount of the deposits determined. As soon as the customer data have been evaluated, compensation for protected deposits will be paid by transferring the amount to an account named by the depositor. All protected depositors will be contacted beforehand and asked to provide their new bank details.
The precise length of time this takes depends, among other things, on the number of customers and the internal organisation of the bank. We would ask customers to refrain from making personal enquiries as these cannot speed up the procedure.
Upon completion of the compensation procedure, customers will receive a statement showing the compensated amounts of capital and interest.
Yes, the interest paid out by the Compensation Scheme of German Banks is taxable. Neither the Greensill Bank AG nor the Compensation Scheme of German Banks has deducted investment income tax for this interest. Please take this into account in your tax return. If you have any questions, please contact your tax adviser.
If the bank becomes insolvent, customers renting a safe deposit box have a so-called right of segregation with respect to the items in their box. A bank subject to a moratorium can therefore ask the Federal Financial Supervisory Authority (BaFin) for permission to open the safe deposit boxes for its clients. This request will generally be granted.
This security can only be released when the loan it secures has been repaid.
The obligations continue to apply in full as before. There is no need to send customers special requests for payment.
These commitments cannot be met as long as the moratorium is in place.
Yes, any loan can be repaid early. In this case, security transferred to the bank can also be returned. A period of notice may need to be observed when repaying the loan. In this case, an early repayment penalty may apply.
Changes of name or address must be notified to the Greensill bank in writing in order to ensure that compensation can proceed smoothly. Staff will update the data accordingly.
If the money is still held by a partner bank prior to being transferred on to Greensill Bank AG, the partner bank is not affected by the moratorium on Greensill Bank AG. Please contact the partner bank for enquiries about a possible transfer back.
If the partner bank has already transferred the money to Greensill Bank AG, it is covered by BaFin’s moratorium. Should a payout event be determined, the provisions of the German Deposit Guarantee Act will apply.
In this case, too, the money is covered by the moratorium and can no longer be transferred back despite the right of withdrawal. These customers, like all other depositors, will be compensated pursuant to the provisions of the German Deposit Guarantee Act if a payout event is determined.