Interest rate platforms are threatened with stricter regulation

The Bafin has filed for insolvency for Greensill Bank. Interest rate platforms had brokered large streams of deposits from private investors to the money house. Politicians are now discussing stricter regulation of these businesses.

The SPD MP Cansel Kiziltepe is critical of the interest rate platforms: “Small savers can quickly lose track of things through such platforms.  Ultimately, it becomes more and more unclear who you are entrusting your money to.

Dhe large interest rate platforms on the Internet, which have brokered a lot of money from private investors to the Greensill Bank in Bremen, are coming under political scrutiny: A discussion has begun among members of the Bundestag as to whether, based on Greensill experience, stronger regulation of the platforms might be necessary. Next week the Finance Committee of the Bundestag wants to deal with it on Wednesday.

The politicians seem to be preoccupied with two questions: Must something be done to prevent some private investors from bringing money to a bank with slightly higher interest rates via interest rate platforms only because the deposit insurance takes over in case of doubt? And: does it deserve a closer look that the interest rate platforms result in noticeably large streams of deposits flowing to individual, otherwise often rather unknown banks?

However, the opinion in the parties still seems to be quite different. Small savers could quickly lose track of things through such platforms, said Cansel Kiziltepe from the SPD. It is becoming increasingly unclear who they are entrusting their money to. “If you ultimately bet on deposit protection, then we have a systematic problem.” If business models based on the ignorance of investors were possible, one would have to amend the law. Fabio De Masi from the Left Party expressed himself more clearly: “We need tougher guidelines for deposit brokers and effective supervision of interest rate platforms.” Lisa Paus, Member of the Greens, said it would have been desirable if the operators of the interest rate portals had taken a closer look. But first and foremost, she sees the financial supervision as a duty. Investing money in a German-based and regulated bank should not be a risky investment: “Regardless of this, we should take this as an opportunity to examine the business models of financial comparison platforms.”

Interest portals have huge advantages, they create transparency and thus ensure more competition among banks in terms of credit interest, said FDP finance expert Florian Toncar. This competition should of course not degenerate into speculation against deposit insurance. The deposit guarantee systems must therefore consistently move to a risk-adjusted contribution model: “Politically, we should also strengthen the responsibility of investors by introducing a low deductible in the single-digit percentage range for the deposit guarantee.”

Finance Committee will deal with it next week

Antje Tillmann, the financial policy spokeswoman for the CDU / CSU parliamentary group, emphasized: “We will take a close look at the circumstances that led to the moratorium being imposed on the Greensill Bank.” Dealing with the case: “Only when we have clarified the background exactly and know all the facts can, from my point of view, talk about whether this case gives rise to legislative measures.”

Many banks and savings banks do work together with the interest rate platforms. Nevertheless, Sparkasse President Helmut Schleweis attacked them last. “We see that these interest portals can be problematic if the banks behind them get a problem,” said Schleweis. He described interest rate platforms as “free riders” who ultimately benefited from the fact that funds from private investors were secured by deposit insurance.

Julian Merzbacher from the Finanzwende organization also sees a need for reform. “It would be good if the interest rate platforms had to become more transparent and also take a closer look at whose offers they were passing on,” he said. The consequences for investors remained very manageable due to the deposit protection in the Greensill case: “The main problems lie with the financial supervisory authority, the auditors and the auditing association of German banks. Something more comprehensive must finally be done here so that such scandals do not recur. “

Platform operators reject allegations

The interest rate platforms themselves defended their business model and rejected the allegations. Tamaz Georgadze, the head of Weltsparen, said any discussion of stricter regulation of intermediaries such as deposit platforms was “falling short”. They aim only at a fraction of the brokered volume of the Greensill Bank. Instead, one has to look at how the work of the auditors, rating agencies, the auditing association and the supervisory authorities can become more efficient and more responsive – and what contribution the interest rate platforms could realistically make.

Tim Sievers, founder of Deposit Solutions, cites two main reasons why interest rate platforms did not have a destabilizing effect on the financial system. On the one hand, the platforms provided banks with deposits from private customers. In the opinion of the supervisory authority, these represent a relatively solid refinancing compared to the capital market. On the other hand, platforms make it easier for bank customers to distribute money between several institutions – this also reduces the risks for them.