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February 21, 2022

Grenke ordered to lift capital buffers by 1.5 percentage points

By Alejandro Gonzalez

CFO: Surcharge will not affect forecast growth

GRENKE AG, the German-based SME asset finance provider, has been ordered by the German Federal Financial Supervisory Authority (BaFin ) to increase its capital buffers by 1.5 percentage points and improve its adherence to rules around proper procedures.

BaFin said it has completed its bank-related measures resulting from the special audit of Grenke AG and Grenke Bank AG conducted between autumn 2020 and spring 2021.

As part of the regular supervisory review and evaluation process (SREP), its capital requirement is now 10.5 per cent compared to the previous 9 per cent. For the subsidiary Grenke Bank AG, the capital requirement at the single-entity level is now 11.5 per cent compared to 8.5 per cent previously (additional SREP capital surcharge: 3 percentage points).

The audits come on the back of a difficult 18 months at Grenke AG, on top of the interruption to business due to Covid.

Allegations by Viceroy Research, a US-based “investigative financial research group”, accused the Group in September 2020 of accounting fraud, saying its franchising operations were “designed to either hide fake cash or siphon off millions of euros to undisclosed related parties, or both” triggered an internal investigation as well as external audits by BaFin later in 2020.

In a statement, Grenke said it has launched an extensive organisational development project and has already addressed a large number of the regulator’s findings.

The additional SREP capital surcharge will be lifted as soon as BaFin is satisfied with its progress when it conducts a follow-up audit.

Michael Bücker, chief executive of Grenke, said: “We very much welcome the fact that this decision means that the intensive audit process is now over, and we can go back to business as usual.”

Sebastian Hirsch, the CFO of Grenke, added: “The capital surcharge will not affect the growth we have planned for the portfolio in 2022. At the same time, we are doing everything in our power to ensure that the surcharge is lifted again as quickly as possible.”

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