The European Central Bank may conduct a review of Deutsche Bank shareholders from Qatar and China under its authority to verify sources of funds for large stakes in banks, and in particular to see if money-laundering or terrorism financing is involved.
The Qatar ruling family and the Chinese firm HNA each hold just under 10 percent of Germany’s largest bank, making them Deutsche’s largest shareholders. The 10-percent threshold would automatically trigger an ECB review, but the central bank has the discretion to investigate any situation where a shareholder may be exerting influence on the bank.
The possibility of such a review, first reported by the German daily Süddeutsche Zeitung, comes amid the controversy over Qatar’s alleged support for terrorist organizations after four Arab countries imposed a commercial embargo on the emirate. Chinese investment in Germany as a rule comes under close scrutiny from the authorities.
A negative review of the shareholdings by the ECB could jeopardize Deutsche’s efforts to shore up its capital base to cope with tougher requirements in the wake of the 2008-09 financial crisis.
Qatar has been a shareholder in Deutsche since 2014 and HNA, originally the operator of a regional airline in China, has spent billions in recent years on foreign acquisitions and acquired its packet of Deutsche shares earlier this year.
For Deutsche, already battered by fines and investigations for its global activities, the new probe would open up another front in its worldwide battle with regulators. The bank’s troubles have already led to top management changes and a succession of reorganizations.
A negative review of the shareholdings by the ECB could jeopardize Deutsche’s efforts to shore up its capital base to cope with tougher requirements in the wake of the 2008-09 financial crisis. Among other sanctions, the ECB could prohibit the two shareholders from exercising their voting rights.
Qatar and HNA each have a representative on Deutsche Bank’s 20-member supervisory board. In Germany’s dual board system, the supervisory board sets the company’s strategic goals and supervises the executive board, which manages the company day to day. Half of the supervisory board members are elected by company employees under Germany’s codetermination law.
The board representation alone could be viewed as exerting influence on the bank. HNA’s representative on the board is Gerd Alexander Schütz, head of the C-Quadrat investment firm in Vienna, which holds the HNA packet in Deutsche. Qatar’s representative is the Swiss-based lawyer Stefan Simon.
Aside from the influence on the board, there were suggestions from shareholders at the bank’s annual meeting that the two foreign entities might be colluding on votes with their own agendas in mind.
The HNA stake in the spring was actually a welcome sign for Deutsche management because it was a vote of confidence after the bank in December agreed to pay $7.2 billion (€6.3 billion) to settle US charges in connection with toxic mortgage securities.
One of the criteria in any eventual ECB review would be whether these large shareholders are willing and able to inject more capital into the bank if it runs into difficulties. Both Qatar and HNA took part in Deutsche’s recent rights offering to raise €8 billion, although they were careful to stay under the 10-percent threshold.
The ECB supervisory authority declined to comment on the report of a possible review. Likewise, Germany’s bank supervisor, BaFin, as well as the two shareholders and Deutsche itself all declined comment.
However, the feeling in Berlin seems to be that having two big “anchor” shareholders has helped stabilize Deutsche Bank and Felix Hufeld, the head of BaFin, last year welcomed participations in Deutsche as a “positive narrative.” The Süddeutsche report said a decision on the ECB review had not yet been made.
Several Handelsblatt editors contributed to this report. To contact the authors: email@example.com