Germany: Germany's Maple Bank Indemnification: Implications For Creditors

On 12 February 2016, the German Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, or BaFin) declared Maple Bank GmbH ("Maple") as an indemnification case, meaning that the German deposit insurance institutions can compensate the bank's creditors.

BaFin had previously filed an insolvency petition against Maple, and the insolvency court in Frankfurt am Main opened insolvency proceedings on 11 February 2016. It appointed an insolvency administrator who is now responsible for managing Maple's affairs.

Maple is a member of the German Deposit Protection Fund of the Association of German Banks ("fund"). The fund safeguards the deposits of customers of private commercial banks, up to a maximum of 20 per cent of the liable capital of the bank at the date of the last published annual financial statements. According to the BaFin announcement, the guaranteed amount in this case would be €59,834,000 per Maple customer.

The fund safeguards all the liabilities listed under 'liabilities to customers' on Maple's balance sheet. Among these are demand, term and savings deposits, including registered savings certificates.

The fund does not cover certain liabilities, even if required to be listed under 'liabilities to customers' on the balance sheet:

  • Liabilities for which Maple has issued bonds payable to the bearer;
  • Liabilities to foreign affiliates of Maple within the meaning of section 18 German Companies Act, which constitute banking business as defined in section 1 (1), sentence 2, no. 2 German Banking Act;
  • Liabilities arising from securities repurchase (repo) transactions, as well as redelivery obligations arising from securities lending business.
  • Liabilities arising from registered mortgages (Pfandbriefe) and public registered mortgages;
  • Deposits to secure registered mortgages and public registered mortgages.

Particularly for structured financial products and for banks that have complex corporate structures, it is sometimes questionable if a claim would fall under the fund's coverage.

Furthermore, according to the by-laws of the fund, liabilities to other banks are not safeguarded. As the by-laws provide no explicit definition of 'bank', it needs to be evaluated whether a foreign institutional customer would be considered as a 'bank' or 'non-bank' under the by-laws.

Nor do the bye-laws cover liabilities, among others, to:

  • Managers of Maple;
  • General partners of Maple, even if they are not managers;
  • Limited partners, shareholders of a limited liability company, shareholders of a stock corporation and silent partners if the share in the capital of the bank held by any such person amounts to 50 per cent or more. The liabilities shall, however, be protected if they arise from claims which are part of restricted assets pursuant to section 54, German Insurance Supervision Act (Gesetz über die Beaufsichtigung der Versicherungsunternehmen) or of fund assets pursuant to section 2, German Investment Act (Investmentgesetz);
  • Members of a board of Maple designated to supervise the conduct of management, where the supervisory powers of such board are provided by statute (supervisory board).

Furthermore, liabilities based on legal acts which would be voidable in insolvency proceedings under sections 129 et seq. of the German Insolvency Code (Insolvenzordnung) shall not be 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, the Compensation Scheme of German Banks (Entschädigungseinrichtung deutscher Banken (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 We expect retail and commercial customers of Maple to receive a letter from EdB shortly in respect of their potential claims and the process of payment. In addition, we expect the insolvency administrator (or the court) to notify all creditors of Maple (that they are aware of) of the commencement of the insolvency proceedings, the appointment of the administrator and the process of 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 review the claims that have been filed. Creditors will be asked to vote at the first creditors' meeting on certain questions material to the insolvency proceedings, such as the appointments of the administrator and of the creditors' committee.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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