Beijing, Berlin, Düsseldorf Mostly once a year, China’s head of state and party leader Xi Jinping gives a speech to high-ranking ministry and provincial leaders at the Central University of the Communist Party, which sets the course for the year. But this time it had a special meaning. Because the five-year plan is currently being finalized, which should set the course for the economy in the People’s Republic from March to 2025.
Foreign company representatives may not have liked what Xi said behind closed doors earlier this week. “The most essential feature of building a new development pattern is to achieve a high level of self-sufficiency and self-improvement,” says Xi. ”
Düsseldorf / Frankfurt New meeting – new prominent witnesses: the Wirecard investigative committee of the Bundestag meets again on Thursday. Then in the Europa Hall of the Paul Löbe House the role of the banks in the multi-billion dollar fraud scandal involving the insolvent payment service provider.
Invited are Deutsche Bank boss Christian Sewing, ex-Commerzbank boss Martin Zielke and the bosses of LBBW, Rainer Neske, and Goldman Sachs, Wolfgang Fink. In addition, representatives of KfW and BayernLB should testify. Political Berlin is particularly excited about the statement by Sewings, whose institute had been Markus Braun’s house bank for years and provided the imprisoned Wirecard CEO with loans.
Düsseldorf 24 companies in Malaysia, 224 alleged pension funds in the US, more than 70 companies in islands in the Caribbean, the United Arab Emirates and elsewhere. The trail of the money in the tax investigation proceedings against the investment banker Sanjay Shah leads halfway around the world – including Germany.
Search is expensive. The Danish state alone puts the costs of convicting Shah and other suspects at 317 million euros. His network is said to have evaded nine billion Danish kroner, which is the equivalent of 1.5 billion euros.
Belgium, Great Britain, Luxembourg and the USA also report damage. In Germany the public prosecutor’s office in Cologne is investigating. Europol is involved, the hunt for Shah is under the umbrella of Eurojust, the European Union’s agency for judicial cooperation in criminal matters.
Now there is the first charge. Per Fiig, the Danish Attorney General for Serious Economic Crimes and International Crime, accuses Shah and a second defendant of 3,000 individual acts. “This is a case of an extremely serious and extremely extensive crime against the Danish state,” says Fiig. The public prosecutor is therefore not demanding the usual eight years in prison, but twelve. The two defendants were guilty of “cynical and carefully planned fraud”.
Frankfurt, Berlin, New York They were embarrassing remarks that a potential candidate for chancellor can hardly afford. “Bafin is perhaps good at proving to medium-sized companies that tradesman’s invoices were posted incorrectly,” said Green Co-boss Robert Habeck in an interview in the summer. “But it is bad at controlling international financial actors.”
Habeck drew a lot of ridicule with it. Because the German financial supervisory authority Bafin actually oversees banks, insurers and capital market companies. Tradesmen’s invoices, on the other hand, are controlled by the tax office. Habeck’s remarks show that even some top politicians do not know what exactly the bank inspectors are doing. And from the point of view of experts and insiders, this shortcoming is also reflected in the public debate about reforming the Bonn authority.
The Handelsblatt asked current and former employees, financial politicians and experts from Germany and abroad where the weaknesses of the German supervisors actually lie – and how they can be remedied. Their tenor: New skills alone will not be enough to make Bafin more effective after the fraud scandal at the payment service provider Wirecard. Rather, it is crucial that the authority itself gets more qualified staff to sift through balance sheets and keep an eye on companies during on-site inspections.
“The Bafin is one big structural personnel problem,” says a former employee. Only a few employees have ever seen a company from the inside, there are virtually no specialists in auditing or forensics.
“In the Bafin there are many officials with a legal background who nod off what is presented to them from the outside at their desks and tick off tally lists,” complains the ex-employee. So there is no point in simply hiring 100 or more new civil servants. “It’s just shop window politics. As long as nothing changes in the qualifications of the staff, nothing will change. “
Another long-term Bafin employee sees it similarly. “We don’t just need more people, we have to get closer to the companies,” he says. The number of in-house auditors in banking and securities supervision is currently far too low to effectively monitor the financial sector.
Gerhard Schick, chairman of the citizens’ movement Finanzwende, shares this assessment. Instead of permanently assigning test orders to third parties, the Bafin itself has to develop competencies, he demands. In the opinion of Schick, investigations should only be outsourced to auditors in the future in exceptional cases – for example in the case of technical niche topics or incidents abroad.
Schick named the US deposit insurance FDIC as a model, which is also an important bank regulator and primarily relies on its own auditors. Advisors could be called in for forensic investigations or for areas in which new technologies are used, said former FDIC boss Sheila Bair the Handelsblatt. “But the actual analysis should be done by the agency’s supervisors. You shouldn’t give that away. “
If there is a knowledge deficit, the supervisors have to be trained accordingly, instead of simply outsourcing tasks to consultants, says Bair, who recently took over the management of the board of directors at mortgage financier Fannie Mae.
Up until two years ago, the Federal Reserve’s bank regulators were still at the headquarters of the US institutes that they supervised. That was abolished under Fed Chairman Jerome Powell. Bair thinks this is a mistake. “Some believe that having a local presence makes the supervisors less independent because they are too close to the bank’s staff,” she says. On the other hand, the mere presence of the regulators in the banking towers is “a good reminder that they are regulated institutions”.
Only five auditors
Compared to the US authorities, the Bafin is much more dependent on third parties to control banks and companies. From a small question from the Left MP Fabio De Masi it emerges that the authority currently only employs five experts who are licensed as auditors. “This means that Bafin remains dangerously dependent on the Big Four” – that is, the auditing companies Deloitte, EY, KPMG and PwC – criticizes De Masi.
When the Bafin audits companies, it can either do this with its own employees or commission auditors, consulting firms or the Bundesbank to do so. In banking supervision, it is regulated by law that on-site inspections are usually carried out by Bundesbank employees. However, Bafin employees can take part if they want to get an idea of the situation for themselves.
In practice, however, this rarely happens. “A total of 105 Bafin employees regularly take part in on-site inspections by banks and financial service providers,” writes the federal government in its response to the left-wing inquiry. This corresponds to just under four percent of all 2,722 employees that Bafin employed at the end of 2019.
According to the federal government, the information only relates to audits that are the responsibility of the Bafin and not the ECB. Nevertheless, in the meantime, both the Ministry of Finance and the Bafin leadership have come to realize that Bafin needs more of its own staff.
“We weren’t close enough”
The Bonn authority had built up its own auditing capacities in the past, said the top Bafin banking supervisor Raimund Röseler in November at the Handelsblatt conference “European Banking Regulation”. But: “I think we have to expand that.”
According to Röseler, the authority is currently concentrating heavily on the equity and liquidity resources of banks. That makes sense for traditional credit banks, but not for financial service providers from the technology sector. “This demands a lot more people who interact much more closely with the banks and understand much better: ‘What kind of business does the individual bank do?'”
For example, Wirecard reported a margin of around six percent in payment transactions, said Röseler. “Anyone who is active in the market knows that six percent are conspicuous.” Dero Bank, which collapsed in 2018, made two thirds of the commission income with a customer. “That was of course noticed,” said Röseler. “But we have to be self-critical: we were probably not close enough to such banks.”
Finanzwende board member Schick sees it similarly. “There is a lack of economic penetration of the business models,” he says. “That is why the Bafin does not recognize criminal business models.”
That was also the case with the so-called cum-ex deals, which resulted in billions in damage for taxpayers. From Schick’s point of view, the Bafin should have taken a closer look at why there were so many stock transactions around the dividend date – and how the trading departments of the banks made so much money.
In the financial sector there are different assessments of the competence of the Bafin. Some institutes report that Bafin employees are very closely involved in issues such as liquidity management and are also familiar with the smallest details. Other financial institutions, on the other hand, express the wish that the Bafin employees responsible for them understand their business better – and then make better decisions on this basis.
The FDP financial expert Florian Toncar and supervisory expert Andreas Steck from the law firm Linklaters are also of the opinion that the Bafin should strengthen their auditing expertise.
“The skills profile of the Bafin must broaden: away from an administrative culture of authorities, more towards economic thinking,” says Toncar. “For this, Bafin needs more employees with industry experience: auditors, accounting experts, IT specialists.”
“Money is not everything”
Linklaters lawyer Steck also advocates more own examiners. “It’s always good to have more competencies in-house and not depend too much on reports from third parties.”
In addition, Steck, who regularly advises banks on regulatory issues, calls for a more intensive personal exchange between Bafin and the private sector. “In the USA and other countries, such page changes are common and contribute to the fact that the supervisory authorities get very good staff.” In the United States, it is considered an honor to work for the regulator.
“That shows: Money is not everything,” says Steck. A supervisory authority will never be able to pay employees as much as banks or law firms. “But if the job for Bafin is also seen as a possible career springboard, it will certainly be easier for an authority to attract talent.”
Steck and also the Finanzwende board member Schick emphasize, however, that clear rules are needed in order to avoid conflicts of interest. “I am in favor of a debate about the conditions so that a change of sides does not result in harm to the citizen, but rather leads to a transfer of competencies in the public sector,” explains Schick, who sat for the Greens in the Bundestag from 2005 to 2018.
Jörg Kukies, who left the investment bank Goldman Sachs in 2018 to become State Secretary in the Ministry of Finance, is from Schick’s point of view an example that such page changes can also work in Germany. “I was pretty much at it when he switched,” says Schick. “But I have the impression that he’s doing a few things really well and that he’s on the taxpayer’s side.”
Do we need a culture change?
At the Bafin, from Schick’s point of view, not only the staffing but also the attitude must change. “The Bafin often lacks the decisive will to implement a change for the consumer and to fight crime.”
In an investigation by Bafin in 2017, the European financial market supervisory authority Esma complained that the Bonn authority was often pursuing a “legalistic approach” when it came to accounting issues. Some of the Bafin shy away from denouncing errors “if there is a risk that a court could decide differently”.
Schick and many opposition politicians are of the opinion that a new start at Bafin can only succeed with a change in personnel at the top. Authorities chief Felix Hufeld has rejected such claims. Hufeld also cannot understand calls for a cultural change at the Bafin. “This is gross nonsense,” he said at a recent conference. “We are a very tough overseer.”
In Hufeld’s view, the main reason why the Bafin did not prevent the Wirecard scandal is the lack of authorizations. “We act within the framework of the legal regulations,” says the Bafin President. “And a lack of skills cannot be replaced by an excess of culture.”
More: EU supervision sees serious failures at Bafin in the Wirecard scandal.
London Great Britain has agreed on a free trade agreement with the EU. However, it does not apply to the financial sector: British financial service providers will lose their “passporting” rights in mainland Europe from January. What will happen to London, the previous financial center of the EU?
UK will initially lose part of its EU business, says KPMG advisor Kay Swinburne, who advises the UK government on its future strategy for the financial sector. But Britain can now be more flexible with regulation and react more quickly to changes.
One area that Swinburne sees opportunity is in the funds industry.The government should make funds tax-neutral as soon as possible in order to compete with the EU locations Luxembourg and Dublin, she says.
The fact that the EU has several financial centers after Brexit is “suboptimal” in an international comparison, she says. “Investors and traders prefer a center.” She is therefore convinced that London will remain a global financial center.
The former British MEP has worked on numerous EU financial directives and is well versed in the industry.
Read the full interview here
How will London’s financial center fare outside of the EU? London has been a global financial center since the 1980s. Only a third of the business is related to the EU. In the short term, the volume of trade with EU customers will decline due to pressure from Brussels, but in the long term it is more important how London adapts to technological developments. If the government has sound rulebook and a keen eye on global competitors and technology, the city will remain a healthy financial center.
KPMG-Beraterin Kay Swinburne
She advises the UK government on its future strategy for the financial sector.
What happens on January 1st if the EU Commission does not recognize the British regulations as being equivalent? My contacts in the EU say quite frankly that the equivalence decisions on equities and derivatives trading will no longer come this year because the EU wants to get some of this trading. Many London-based companies will therefore start operating their trading platforms in Paris and Amsterdam on January 1st and conduct EU trade there. You won’t risk acting outside of the legal framework for even a single day. The EU recognized this a long time ago and is using this lever.
When do you expect the EU to make equivalency decisions? The Commission will wait until the new EU regulation for investment firms IFR2 comes into force. This was originally planned for January, but is now not expected before March.
By then, a number of activities will have shifted to the continent. The EU would have achieved its goal. Yes, markets go down the path of least resistance when legal obstacles are in their way. The question is whether the conditions in Paris and Amsterdam are good enough for trading to take place there permanently. I always say: in the short term you can force liquidity, in the long term you cannot lock it up.
Also read on the topic:
What would the EU have to do to keep these markets long-term? It must implement its set of rules consistently. At the moment there are big differences between the Member States. The regulator Esma has long failed to use its power to bring the rules together. For example, bankruptcy law and withholding taxes vary from country to country. Investors want to know which law applies.
Does the EU have to have a single financial center to compete with London? It is much more difficult when you have multiple centers like the EU. Investors and traders prefer a center. But the EU has always thought that everyone should have a piece of the pie.
Does that mean the EU will only ever be a secondary player in the financial sector? It will always be suboptimal to have multiple locations. If the EU had to choose a financial center, it should choose Frankfurt because the big international banks have their main daughters here. This means that this is where the largest trading volume occurs. However, some investment banks also divide their business: stocks and currencies are traded in Frankfurt, bonds and derivatives in Paris. You choose the most favorable regulatory environment in each case.
Another question is whether the clearing of euro-denominated securities should in future take place in the euro zone instead of in London. How great is the power of the EU to force such a move? The business models of the global players set considerable limits. Every derivatives trade has two legs. The actors have an interest in both legs being settled on the same platform. You can then offset items with one another, which significantly reduces costs. It becomes inefficient if you have one leg in sterling in London and the other leg in euros on Deutsche Börse. If the EU insists, trade is likely to move to a location that is outside the EU but is EU equivalent (such as New York, editor’s note).
Many funds are based in Dublin and Luxembourg but are managed out of London. Can it stay that way? The targeted settlement of the funds has made a significant contribution to Ireland’s recovery after the financial crisis. The UK decided at the time not to offer the same tax benefits, but supported Ireland’s growth. The fact is that many of these funds have no EU component. The capital comes from somewhere in the world, it is managed in London and invested in global assets. So Great Britain will certainly compete for this business in the future.
As? The UK government must provide tax neutrality for funds – such as Luxembourg, Ireland and the Cayman Islands. You should address this urgently. It will not be easy to find the time in Parliament for this because there are so many other things to do. But there is no reason not to. Why should we leave this business to the EU?
Is this one of the benefits of Brexit? I find it hard to say that there are advantages. I fought hard to stay in the EU. But we are where we are. Brexit will cause economic damage, but the UK will be more flexible and react faster to changes.
Will the EU always lag behind Great Britain in the future? The EU can do anything that the UK can do. The EU Commission is very capable. It’s just a matter of speed. The British supervisors no longer had to draft rules in the financial sector because everything was regulated at EU level. Now the relevant departments have to be filled with good people. Will it work? We will try.
City of London complains that the British government has completely ignored the interests of the financial industry in the free trade talks. Will that change in the future? At the beginning there were extensive discussions about the future cooperation, in which I was also involved. After Theresa May changed government to Boris Johnson, it was decided that we no longer wanted a comprehensive free trade agreement.
I hope that relations with the EU in highly regulated areas such as pharmaceuticals and finance will be deepened again in the coming years. We have agreed on close cooperation in the financial sector with Switzerland, and we want to achieve the same with other countries.
So the equivalence regime with which the EU recognizes the regulations of third countries as equivalent is not the last word? I do not think so. The equivalence regime has many shortcomings. It’s inconsistent and doesn’t allow deep collaboration.
More: This is what the Brexit trade deal means for companies
Munich, Frankfurt A year ago, Daimler board member Martin Daum looked powerless and tired of his office to many colleagues. Internally, not a few were surprised why the head of the important truck business at the Stuttgart-based automaker actually spent so much time at his second home in Portland, USA – while market shares in Europe were persistently crumbling.
Even high-ranking colleagues began to tease Daum: In 2019, he would have “mouthed too much” and once again failed to deliver the promised return on sales of eight percent, blasphemed a top manager. Daum’s star at the Mercedes manufacturer seemed to be falling, especially since global sales of its truck unit had been stagnating for years. But now the critics have largely fallen silent.
The 61-year-old has recently been bursting with enthusiasm for work. Structures at Daimler Trucks are streamlined almost every week, partnerships that protect the balance sheet are concluded and strategic flaws are eliminated. The effect is not immediately noticeable in this business with its long cycles, but the course has been set.
In any case, the Supervisory Board is impressed by his performance. As a result, his contract, which expires in early 2022, is likely to be extended by at least three years in the near future, the Handelsblatt learned from corporate circles. Daimler declined to comment on the contract extension.
One thing is clear: Daum can count on the backing of both Daimler boss Ola Källenius and works council boss Michael Brecht. There are not many alternatives to the business graduate who has headed the truck business since 2017.
The corporate management gives him credit for having set up the US subsidiary Freightliner on a solid basis. “He should now repeat that at Mercedes in Europe,” said one manager. Källenius will follow the development very closely. Daum is supposed to fulfill one of the most important tasks that the Daimler boss has on the agenda.
The order to Daum is to quickly refurbish the truck and bus business, which has a turnover of almost 45 billion euros. As early as the end of 2021, Daimler Trucks could be separated from the rest and go public, according to corporate and financial circles. “The step is more likely in 2022,” said one manager. Daimler did not want to comment on the considerations.
When you first look at the bare numbers, a listing currently doesn’t seem very promising. Shaken by the corona crisis, the operating profit of Daimler Truck AG slumped to 32 million euros from January to the end of September – a decrease of 99 percent compared to the previous year.
At the same time, sales fell by more than a fifth, and sales even fell by a third. In particular, the coach business is “dead as a whale”, it is said internally, disillusioned. Incoming orders: null.
At second glance, however, an IPO or spin-off of the truck unit no longer seems so absurd. 2020 would have been a weak year for the truck industry even without Corona. The industry is in a cyclical downturn after having been up for years.
In 2021, however, the freight forwarders should gradually order more volumes. Pandemic-related lingering effects could even trigger a small special boom in some places. Coupled with the first noticeable savings successes, the prospects for Daimler Trucks are perhaps better than generally assumed. This would also make a partial IPO conceivable, so the calculation.
Structurally, a listing of trucks has been possible for more than a year. After all, since November 2019 Daimler AG has only acted as the parent company of three legally independent units (car, truck, financial services). In the course of the organizational restructuring, Daimler had always emphasized that it would not strive to break up the group, but why else did the Swabians spend more than 700 million euros on the restructuring?
Nothing is fixed, but the simulation games in Stuttgart are becoming more concrete. The question is no longer whether trucks will be listed, but only when, according to corporate circles. The task now is to find the best time to get the most out of Daimler and its shareholders. The unfortunate IPO of the VW commercial vehicle holding Traton (MAN, Scania) in mid-2019 is a daunting example for the Stuttgart-based company. You want to avoid such a flop.
The prerequisite for this – everyone agrees – that Daimler Trucks is set up more solidly beforehand. “The bride still has to get a lot prettier,” states a Daimler veteran. In particular, the European business around the core brand Mercedes-Benz Trucks delivers chronically poor results. Martin Daum should clear the permanent construction site, turn the ailing business at last.
Quality defects and angry customers
The trained banker from Karlsruhe has already proven that he can successfully reorganize a company. Daum is considered to be the architect of the turnaround for the US commercial vehicle subsidiaries Freightliner and Western Star. Under his leadership from 2009 to 2016, Freightliner even rose to become the most profitable truck brand in the world. Since then, most of Daimler Trucks’ profits have come from North America.
The Swabians are strongly positioned overseas, the market share of heavy articulated lorries has skyrocketed to more than 39 percent in recent years. The development in Europe ran parallel to the opposite. Here, Daimler has lost a good five percentage points compared to the competition since 2014 and currently only has a market share of 19.3 percent. The problems in the EU were and are manifold.
For example, quality defects in the retarder, which is a wear-free permanent brake, annoyed numerous customers. The Actros flagship is also considered “overengineered”. In case of doubt, many freight forwarders would prefer to forego bells and whistles like video rear-view mirrors if the semi-trailers would cost a little less. In addition, the sales network is sometimes perceived as incomplete, with Scania more than Mercedes providing top service.
Daimler Truck Board Member Daum wants to eliminate the weak points. With the F-Actros, for example, he is bringing a kind of slimmed-down basic version of his most important product onto the market. He hopes to be able to better stand up to rivals like MAN in the tough price war.
He doesn’t want to go the realignment path alone: Daum is making a pact with Volvo Trucks for fuel cells and with Google’s sister company Waymo for autonomous driving. In both cases, he wants to cut the cost of the expensive technology in half.
At the same time, rigorous savings are being made in Europe. Thousands of administrative staff are to go, the management force is being decimated and sales are being reorganized under the project name “Force 2025”. The works councils are now popping up more often. Not least because the drive shift away from the combustion engine and towards electric motors is likely to hit local truck locations hard.
Job cuts “unfortunately inevitable”
According to an extreme scenario, Daimler Trucks could even lose half of the 30,000 jobs in Germany by 2035. It is unlikely to be that bad, but the workers are alarmed and rail against widespread “clear-cutting”.
Daum faces criticism. The deeply religious Christian recently assured his employees in an internal letter that there will be no arbitrary job cuts. At the same time, the manager made it clear that it was “unfortunately inevitable” to cut many jobs in the course of the discontinuation of diesel technology. Daimler can only survive if the company operates profitably. “We cannot compromise here. Otherwise we endanger the big picture in the long run for short-term pseudo success, ”Daum blew into his troop.
Such clear announcements are well received at the top of the group. But even more important: Daum is finally dedicating itself to Daimler Trucks’ strategic Achilles heel: China. In the world’s largest truck market, the Stuttgart-based company and its partner Foton build inexpensive commercial vehicles under the Auman brand. But these are neither bestsellers nor profit makers.
Higher margins and five-digit sales should soon bring another product to the Far East. From 2022 Daum wants to build the Mercedes Actros in the People’s Republic. “One day, China could become our largest market for the Actros,” predicts Daum. It would be exactly the growth story that the manager is currently missing. But every expansion also brings risks.
In 2012, for example, Daimler Trucks started an offensive in India. But business is sluggish and the Swabians are already losing massive market shares. Things are hardly getting any better in Turkey, and the group has been burning money in Brazil for years. Between 2017 and 2019 alone, the losses in the South American country totaled 866 million euros, according to the KPMG impairment report. This figure also includes the minus from the auto business, but the truck division is at Mercedes-Benz do Brasil Ltda. for more than 80 percent of the result.
Truck unit is worth 30 billion euros
Daimler boss Källenius and CFO Harald Wilhelm put pressure on. The two managers want to significantly increase the carmaker’s market capitalization from currently more than 60 billion euros in order to ensure the Group’s independence. An IPO for trucks promises the greatest leverage here. Bernstein analyst Arndt Ellinghorst values the division at around 30 billion euros. A spin-off of the division makes strategic sense.
For a long time, trucks at Daimler were only viewed as a “second business” alongside the all-important auto business. Now the restructuring of the area suddenly has top priority in the group. This leads to a paradoxical situation: Although the unit should soon be given more freedom than ever, Trucks is currently kept on the short leash of the holding company, according to corporate circles.
Head of division Daum enjoys the trust of the 20-person truck supervisory board in which Källenius and Wilhelm set the tone, but he mustn’t be too sure. As an alternative to a partial IPO, another scenario is being discussed in the small group: a larger proportion of trucks could also be sold to a private equity investor in a first step. With the help of an external partner, trucks could be managed “more uncompromisingly” and a faster increase in value generated, according to corporate circles.
That would not go down well with the employees. For the works councils, a partial IPO is only an option if the proceeds from it are reinvested in their own business. On the other hand, Arbeiterführer Brecht strictly rejects any special distributions to shareholders – and an investor who intervenes in the operative business, even more so. Now it is up to truck boss Daum to decide which path Daimler takes.
More: Double-digit growth: Daimler’s car sales in China are booming.
Berlin The Primus is a Finn. Under the slogan “More yourself, less constantly”, Holvi, with its headquarters in Helsinki and Berlin, is particularly successful in courting the self-employed. With a total of 90,000 business customers in Germany, the fintech company is the top dog in this segment among neo banks.
Co-founder Tuomas Toivonen is therefore no longer primarily looking at the fintech competition. He has completely different rivals in his sights. “Our main competitors are the traditional banks, the savings banks, Volksbanks and private banks,” Toivonen told Handelsblatt.
The Finnish advance is an attack on the established – and it is not led by Holvi alone. Numerous online commercial banks are upgrading. With more and more services they want to compete with conventional banks’ customers. They rely on better service and greater user-friendliness – and can definitely score with that.
Several digital challengers are looking for a test of strength with the established banks. The German market, with its 3.5 million freelancers, self-employed individuals and small businesses, also attracts digital commercial banks such as Penta, Kontist, Moss (formerly Vanta), Qonto and Finom. Even smartphone banks like N26, which primarily target private customers, are interested in business customers.
For Sven Korschinowski, Partner Digital Payments at the business consultancy KPMG, the development does not come as a surprise. “Founders, self-employed and small companies often experience difficulties in practice in opening a business account with traditional banks,” says the expert.
But in order to convince the clientele to switch to the start-ups, the young companies have to offer added value. According to Korschinowski, many score points with a quick, reliable and uncomplicated account opening. Digital application and processing processes are also designed to be user-friendly – and other services are to follow.
The digital commercial bank Penta, which belongs to the Finleap Group, wants to herald the end of the paper mess. In the future, Penta customers will be able to prepare their bookkeeping directly from their bank account and digitize their document management. This is made possible by a cooperation with Datev, the leading IT service provider for accounting.
“With the help of the Datev marketplace integration, the customer can synchronize his receipts via the account in order to make them available to the tax advisor online,” says Chief Product Officer and Managing Director of Penta, Lukas Zörner, the Handelsblatt. In this way, banking and accounting are merged, which saves the entrepreneur a huge amount of time.
The digital business account from Holvi combines invoicing, expense management and accounting functions. Customers of the fintech, which was taken over by the Spanish BBVA Group in 2016, should concentrate on their core business and not worry about financial management, is the claim.
The French-born fintech Qonto is also trying its hand at the German market. “We not only offer a business account with a card, but also try to create added value with our business finance management,” said the new head of Qonto Germany, Torben Rabe, to the Handelsblatt. Rabe replaced Philipp Pohlmann, who surprisingly left the company in autumn.
With Qonto, for example, sub-accounts can be created for accounts that are assigned their own IBAN at the click of a mouse to ensure separate incoming payments. In autumn 2020, Qonto was awarded the Fintech Germany Award 2020 by the Frankfurt financial center for the best foreign fintech on the German market.
Qonto’s target group overlaps with the range of customers that Penta is also targeting. “We are an alternative for one-person companies up to companies with up to 250 employees,” says Rabe, a former management consultant who previously worked for the scooter start-up Bird. Particular attention is paid to the founders. “With our 120,000 customers in France, Italy, Spain and Germany, a third of the account openings are made by start-ups,” said Rabe.
Above all, freelancers and self-employed people are targeted
Unlike Penta and Qonto, Kontist, like Holvi, relies on self-employed people and freelancers. A new tax service was launched a few months ago, which is supposed to cover all the services that a traditional tax advisor offers to freelancers. “With the new function of our app, users are able to use tax management and accounting fully automatically from a single source,” says Kontist founder Christopher Plantener. In the end, the customer knows how much tax he has to pay. These would then also be declared and paid.
For the digitization expert Korschinowski, the fact that neobanks differ from the established providers with their additional services is a must. “Ultimately, the challengers encounter an existing market with countless banks that will gradually make up for alleged or actual deficits.”
But Holvi sees himself on the right path. Toivonen believes that the company continued to make up ground, especially during the corona crisis. The pandemic is of course also affecting Holvi customers. But the bottom line is that Toivonen sees the pandemic as a major accelerator for digital banking.
“Our main target group, freelancers, freelancers and companies with up to ten employees have realized that there are good alternatives outside of the traditional banking market,” believes Toivonen. The fintech customer base will continue to grow in 2020. Holvi currently has around 200,000 customers across Europe.
Fintech expert Korschinowski also sees the corona crisis as a digitization accelerator, but considers the outcome to be open. “We will see massive changes in the next months and years. The wheel will not be turned back, ”he is sure. But the outcome has not yet been decided. “It remains to be seen whether the neobanks, with their often more innovative offerings, their user-friendliness or quick decision-making processes, will benefit disproportionately from this – or the established banks with their many years of experience, strong capital base and their trust joker.”
Because so far only a few smartphone banks have offered corporate loans. The Dutch fintech Finom, which only started in Germany in October, is also holding back on the subject of loans. Co-founder Konstantin Stiskin said in an interview that he sees the great importance of loans for companies and freelancers, especially in the current environment. But a timely offer from Finom is not to be expected. Holvi also has no specific plans.
In contrast, the head of Qonto Germany is tackling the issue aggressively. “Loans are definitely something our customers want,” says Rabe. Two projects are being worked on. On the one hand, Qonto wants to apply for a banking license. In addition, a collaboration with a partner is currently being explored. There are many specialized players in the market who offer solutions for loans.
Loans are also an issue for Penta. The online bank already complained in the spring about the so-called house bank principle when passing through KfW quick loans. Many Penta customers were interested in these aid loans, but their online bank could not help them at first.
Downside corporate loans
A few days ago, Penta presented a digital solution to the problem together with the fintech Banxware. Then the quick loan can be applied for, then the cooperation partner Vereinigte Volksbank Raiffeisenbank checks the loan application as a loan broker and sends it to the state bank KfW. The money then ends up in the Penta business account.
Penta intends to leave this service at the moment. “We are not currently planning to issue our own loans,” says Zörner.
That could turn into a competitive disadvantage. “It is not always easy for founders and various medium-sized companies to obtain loans in the desired volume or on suitable terms,” observes Korschinowski. Neobanks that can make a good and fair offer here have an advantage over others.
So far, Penta has not experienced any disadvantages. On the contrary. “We now have 25,000 customers and are aiming for further growth in 2021,” says Zörner. After the latest product enhancements, there is “no longer any reason for German customers to prefer a Volksbank or Sparkasse to us,” he claims. Now all he has to do is convince the customer.
More: Why it could get more difficult for fintechs next year
The products of the fragrance and flavor manufacturer can be found in countless everyday goods such as toothpaste. Symrise was recently even considered a candidate for inclusion in the Dax.
(Photo: Christian Burkert for Handelsblatt)
Düsseldorf The Lower Saxony MDax group Symrise fell victim to a serious attack by unknown hackers. Production in the company founded in Holzminden in 2003 is largely at a standstill. “In order to be able to assess the consequences and to prevent possible further effects, the company shut down all important systems,” said Symrise.
The group with a market value of almost twelve billion euros, more than 10,000 employees and annual sales of over 3.4 billion euros is a promising candidate for promotion to the leading index Dax.
According to Symrise, the perpetrators smuggled a virus into the company network. Symrise does not provide any information on whether data was encrypted as a result, as is customary in such attacks. “As far as we know, it is a criminal act with extortion intent,” said a spokeswoman. Symrise works together with the State Criminal Police Office. It is not known what demands the hackers make.
So far it is also unclear what consequences the attack will have beyond the company. Symrise produces fragrances and flavorings. There is hardly a consumer goods company, food producer or cosmetics manufacturer that can do without Symrise supplies. Customers include Danone, Coca-Cola, Henkel, Unilever, L’Oréal and Nestlé. In addition to the supplies for these companies, their data could also be affected by the attack.
Out of caution, standstill was the message from Symrise Corporate Communications on Sunday evening. The employees received information via WhatsApp that unknown persons had hijacked the company. “As a result of the attack, large parts of the company departments such as production facilities had to temporarily stop production in order to be able to analyze the effects of the virus as best as possible.”
Since then, the whole company has been on hold. If at all, the workforce at Symrise can only work to a very limited extent this week. The employees should learn more from their superiors, but only by phone or WhatsApp.
Düsseldorf When the employees of the automation specialist Pilz came into the office on October 14, 2019, unexpected news was waiting for them: On hand-written notes on the doors, the company announced that it had been the “victim of a criminal hacker attack”. “Working on the PC will not be possible today. More information will follow. “
A criminal group had broken into the network of the medium-sized company, encrypted important data and demanded a ransom for the release. In order to avert further damage, the IT department switched off all systems – whether production control or warehouse management, accounting or word processing.
“It’s zapping duster in a company where there is no screen, where no machine is working,” said Thomas Pilz, who runs the family business in the third generation with his sister Susanne Kunschert, on Monday at the digital Handelsblatt cybersecurity conference. It was only after five weeks that business was back to normal.
Zappenduster, that’s how it looks at many companies. The digital extortion that Fungus has suffered – called ransomware – is rampant. But the medium-sized company has learned lessons from the incident that will prepare it for future crises. He even benefits from a “strategic change in IT” in the corona crisis. The case shows: If organizations want to strengthen resilience against cyber attacks, management is particularly challenged.
From the point of view of criminals, ransomware is probably the perfect crime: The encryption of data creates urgency, the payment with Bitcoin or other crypto currencies creates anonymity. Most criminal groups target companies because there is a lot to be gained there. There are many targeted attacks on “financially strong victims” such as car manufacturers and suppliers, warns the Federal Office for Information Security (BSI) in its annual report.
The ransom demands are horrendous: “Nowadays, rather large attacks are carried out”, reported Michael Sauermann, partner at the auditing company KPMG, at the Handelsblatt conference. The claim could amount to two to three-digit million amounts. In IT circles you can hear that many companies still pay – for fear that operations will be idle for a long time.
“Like protection money for the mafia”
The incident was particularly spicy for Pilz: the specialist in electronic security technology, known for the red emergency stop button, had a reputation to lose. Nevertheless, the management went public after a few days. It was important to inform employees, customers and suppliers. Secretly settle the claim and continue, that was out of the question for the managing director: After all, it was like paying the mafia protection money.
Instead, the IT department tried to use agile methods to get things going again. In standing conferences, the experts discussed what to do and divided the big project into many small tasks. But that alone is not enough, says Thomas Pilz. “You have to build up knowledge.” This is the only way to work efficiently with an external service provider, without whom hardly any medium-sized company can cope with such an incident.
At Pilz, business has long been back. The automation provider has prepared itself for future incidents: constant investments are needed in the security concepts, emphasizes the managing director. The company benefits from this in the corona crisis: In order to be able to communicate with customers and suppliers again quickly, Pilz introduced a communication system from the cloud and was able to quickly send employees to the home office.
The bookseller Osiander was also hit: In May 2019, an IT employee accidentally noticed a strange process – and immediately switched off all systems. It was luck in misfortune for the medium-sized company, the ransomware could not encrypt data. Nevertheless, the damage was great, as the technology, including the online shop, PCs and telephones, was largely at a standstill. Only the cash registers worked.
For the company it was “the worst case scenario”, reported managing director Christian Riethmüller at the Handelsblatt conference: The dealer’s business was severely restricted – so there was no access to customer orders. One had “existed fears for weeks”.
The problem: Osiander grew rapidly in the early 2000s, from five to 70 branches. During this time, the company neglected IT, reported Riethmüller. The system was ailing and out of date, and there was no proper documentation.
Starting up the technology again and replacing all the devices at the same time was therefore an enormous effort: “IT took six weeks to fix the worst.” Normal operation only resumed after nine months.
For Osiander, the greatest lesson from the incident is that IT is of central importance. This is why the bookseller is now using the platform of the competitor Thalia as part of a partnership instead of developing and maintaining its own system. The company has also added external managers to the management – the family did not have the necessary know-how, reports Riethmüller.
Build up knowledge and modernize IT: These were also the measures that the Ameos hospital chain took in 2018 after a ransomware incident. The company has created two posts and a team for operational security.
Particular attention is paid to the hardware: This is how you replace old devices more consistently, reported managing director Axel Paeger. In addition, the chain now uses standard components, which makes it easier to install updates, for example. He now sees the company as much better equipped. “But we are not generally immune,” he says. The ransomware business is too lucrative for that.
More: Hacked and embarrassed: danger from ransomware grows through new scams
The term Cum-Ex stands for the biggest tax scandal in German economic history.
(Foto: Taxi/Getty Images)
Düsseldorf For an industry that needs to look very carefully, a lot went wrong in 2020. At the beginning of the year, investors in the P&R Group complained that their auditors had certified a million more shipping containers than existed. An insolvency administrator now rules at P&R – just like at Wirecard.
The Munich-based payment service provider admitted in the summer that 1.9 billion euros of assets on the balance sheet did not exist. EY, one of the most respected auditing firms in the world, was responsible for the certification of this balance sheet. A few days ago, the public prosecutor initiated investigations against EY examiners over Wirecard.
And in Germany’s second major financial scandal, the cum-ex complex, the industry is increasingly coming under fire. After research by the Handelsblatt, some auditors have already changed status at the investigating authorities: from witness to accused. Advisors from smaller and larger companies are affected.
At the end of October, EY had to defend itself in court against another insolvency administrator’s suit. Michael Frege, who has been taking care of the claims of its creditors since the collapse of Maple Bank, demands 195 million euros. This is the damage, writes Frege, that EY caused for the financial institution through its poor work.
Maple Bank had participated in stock transactions in which papers with (cum) and without (ex) dividend entitlements were traded in a circle. One of these owners then paid capital gains tax, two had it “refunded”. When the tax office found out what was happening, they refused to refund the tax. Due to the structure of the cum-ex deals, Maple Bank not only lost its profit, but also lost large parts of its stake. In February 2016 it went bankrupt.
EY claims that it did not do anything wrong in this case and rejects the claims. Outside the courtroom, however, according to information from the Handelsblatt, there is already haggling.
A spokeswoman for the Stuttgart Regional Court confirmed: “The court discussed the factual and legal situation as well as the possibilities of an amicable settlement with the parties at the trial date and indicated a possible corridor for a payment by the defendant.” to consider a comparative agreement.
Prosecutors are investigating 1000 people
The term Cum-Ex stands for the biggest tax scandal in German economic history. More than 130 banks were involved, and prosecutors are investigating more than 1,000 suspects. The role of auditors has not been illuminated so far, but they are increasingly coming into focus.
Gerhard Schick has therefore sent a questionnaire: to the industry giants EY, KPMG and the Institute of Auditors (IDW), the umbrella organization of the industry. How was it possible, asks the former member of the Bundestag and today’s head of the citizens’ movement Finanzwende, that of all things the great auditors played such a role?
“You can hardly overestimate the responsibility of the auditor, especially for the cum-ex business,” says Schick. “At least parts of the auditing industry were apparently part of the problem here, instead of – which would have been their job – to be enlighteners and preventers of criminal transactions in the German financial market.”
Freshfields-Büro in Frankfurt
The law firm issued reports on the tax harmlessness of cum-ex transactions.
While law firms such as Freshfields issued reports on the tax safety of cum-ex transactions, from 2009 auditing firms helped with so-called professional certificates in reaching into the tax coffers. The background was that politicians realized in 2009 that cum-ex deals were still increasing despite a change in the law.
The supposed solution: Anyone who wanted to trade shares using the Cum-Ex method had to get certified from auditors or tax consultants that they did not know the other participants in the share group transactions. The so-called professional certificates became mandatory.
And so the cum-ex business continued – with just such certificates. KPMG issued them, as did EY, and many other auditors are named in the investigation files across the country. There are now numerous witnesses who have confirmed in court that cum-ex deals would not have been possible without extensive and detailed agreement between the parties involved.
There is a simple explanation for this contradiction: the examiners could certify what they should certify because they kept the examination within narrow limits. “Our mandate is primarily limited to questioning company employees and analyzing documents,” said the IDW main technical committee at the time. The forum is intended to ensure a uniform professional understanding of the profession. The issuing of professional certificates continued thereafter.
“Auditors who have issued such certificates must have turned a blind eye,” says financial expert Schick. “Or they have even taken an active part in disguising the criminal business.” Which auditor falls into which category must be clarified in court in case of doubt. He no longer trusts the industry itself.
Taxpayers lost twelve billion euros through cum-ex deals. A sum of damage, says Schick, that auditors would now have to hold up against. “The IDW could have made the cum-ex deals look legal as early as 2006 and initially planned to do so,” explains the financial expert. “Then no bank would have participated and the billions in fraud against all of us could have been prevented. What then internally stopped this proposal is still unknown. “
The Handelsblatt has found the answer. “Between 2004 and 2006, the IDW aimed to develop a generally accepted statement on accounting,” explains a spokeswoman for the institute. With such a statement, “the principle of an economic approach should also be given greater importance in the Commercial Code”. The draft of this statement, says the spokeswoman, was then “open to public consultation”.
Critics prevented changes
The consultation was then negative. According to the IDW, the IDW “further developed interpretation of the commercial legal framework” was “criticized by numerous respondents as being in contradiction to tax jurisprudence and administrative opinion and too largely”.
These critics are still immortalized on the IDW website, including the Federal Association of German Banks, the law firm Freshfields Bruckhaus Deringer and the auditing company KPMG.
Representatives of these professions – bankers, lawyers, auditors – were later, as well as tax consultants, directly or indirectly involved in cum-ex deals. The offices of the banking association and the Freshfields law firm have therefore already been searched by public prosecutors. The former Freshfields tax chief is now one of the defendants in the Maple case, as is another former partner. According to the will of the public prosecutors, Freshfields should answer to the court as a confiscation party – a process that is unique in Germany.
Note: In an earlier version of this article, we claimed that the German Association of Tax Consultants was directly or indirectly involved in cum-ex deals. This is incorrect and has been corrected. We regret the mistake.
More: How Germany’s most influential law firm got involved in the cum-ex business