BaFin had previously filed an insolvency petition against Greensill, and the insolvency court in Bremen opened insolvency proceedings on 16 March 2021. It appointed an insolvency administrator who is now responsible for managing Greensill’s affairs.
Greensill is a member of the German Deposit Protection Fund of the Association of German Banks (the Fund). The Fund safeguards the deposits of customers of private commercial banks up to a certain percentage of the liable capital of the bank as of the date of the last published annual financial statements.
The guaranteed amount in this case would be approximately €74 million per Greensill customer.
The Fund does not cover certain liabilities, including the following:
- Liabilities for which Greensill has issued bonds payable to the bearer
- Liabilities arising from securities repurchase transactions (also known as “repos”), as well as redelivery obligations arising from securities lending business
In the case of structured financial products and banks that have complex corporate structures, it is sometimes questionable whether a claim falls under the Fund’s coverage. According to the Fund’s by-laws, liabilities to other banks or similar customers are not safeguarded. Because the by-laws provide no explicit definitions in this respect, it is also unclear whether foreign institutional customer are protected. Furthermore, liabilities based on legal acts which would be voidable in insolvency proceedings under section 129 et seq. of the German Insolvency Code (Insolvenzordnung) are not protected.
The Fund only covers deposits and depositors if, and to the extent that, they are not already covered by the statutory deposit protection scheme, that is, the Compensation Scheme of German Banks (Entschädigungseinrichtung deutscher Banken (the EdB)). The EdB is the compensation scheme called for under the German Deposit Guarantee and Investor Compensation Act for private commercial banks and private building and loan associations. The protection provided by the EdB is limited to €100,000 per depositor.
Next steps
Retail and commercial customers of Greensill should receive a letter from the EdB shortly in respect of their potential claims and the payment process. In addition, we expect the insolvency administrator (or the court) to notify all of Greensill’s known creditors of the commencement of the insolvency proceedings, the appointment of the administrator, and the process for filing claims and claiming any security in the proceedings.
This is particularly important for those creditors that are not entitled to compensation by the EdB and the Fund. Creditors will need to file their claims with the administrator by a certain date. They will be entitled to participate in creditors’ meetings before the court, where the administrator will provide further information on the insolvency and will review the claims that have been filed. Creditors will be asked to vote at the first creditors’ meeting on certain questions that are material to the insolvency proceedings, such as the appointments of the administrator and of the creditors’ committee.
Client Alert 2021-079
