Regulator shutters alternative Noa Bank | Business| Economy and finance news from a German perspective | DW | 19.08.2010
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Regulator shutters alternative Noa Bank

German regulators have closed a small retail bank that billed itself as a transparent alternative to traditional financial institutes. When it opened, Noa said it would focus on ethical and ecological banking.

Shutter on a Noa Bank window

Counters closed at Noa Bank on Wednesday

Germany's financial services overseer, BaFin, said on Wednesday that it imposed a moratorium on the Noa Bank in order to "secure the remaining investments."

The regulator said it was concerned that a bankruptcy filing, also on Wednesday, by Noa Factoring, a subsidiary of Noa Bank, would leave the company facing insolvency and over-indebtedness.

Describing Noa as a non-system relevant bank, BaFin reported the bank had assets of about 179 million euros ($231 million) and accrued liabilities of 172 million euros. German regulations require banks to keep equity of at least 8 percent on hand to cover operating risks.

Founder broadsides BaFin

Francois Jozic

Jozic said he couldn't face struggling with BaFin anymore

The bank's founder, Francois Jozic, wrote in his blog that he was "giving up the fight" after trying to reach a deal with reglators regarding the bank's capitalization, but he added that he would not, as requested by BaFin, remain silent as to what caused the bank's closure.

"The financial system is organized to be inflexible," Jozic wrote in a blog entry dated August 18. "I tried to change it, but I have failed."

Jozic said he has struggled to keep open the bank and complained that regulators disregarded steps Noa had taken to increase its capital by 2 million euros at the end of July. He also said authorities ignored a message that investors had promised an additional 12 million euros in capital.

"I was sure that BaFin would recognize the results achieved in a short amount of time," he wrote. "BaFin never responded to me. The only thing the bank received was a letter dated July 30 in which [BaFin]'s formally stated its intent to revoke the bank's license."

Attempt at a sustainable banking option

Wednesday's moratorium stops the bank's sales, payments and dealings with clients, who for the moment cannot access their savings. The bank is currently only able to accept customers' debt repayments.

Noa Bank opened its doors in November 2009 when the effects of the global financial crisis were still looming. It promised customers attractive interest rates and allowed them to decide whether their deposits would be invested in ecological, cultural, regional or health sectors.

When the bank opened Jozic said it would be "getting back to the traditional banking of borrowing and lending." He added that enough money could be made without relying on huge deals or speculation.

A person taking money out of an ATM

It could be months until customers can get their hand on their money

"This is a profitable approach, much more sustainable than the other classical banks," he said at the time.

While the moratorium prohibits the bank from paying money out to customers, it is not necessarily the end of the bank, according to the Association of German Banks.

"A new investor that takes over the bank's operations could still be found," spokeswoman Kerstin Altendorf told Deutsche Welle.

At its apex, the bank had about 15,000 customers and 300 million euros in deposits. Should the bank be forced to close completely or go bankrupt, customers' deposits would be insured up to 50,000 euros, Altendorf said.

"In a case such as the Noa Bank it would usually take about two months from the point when compensation is deemed necessary for customers to receive their money - short of any unforeseen circumstances," she added.

The Dusseldorf-based Noa Bank is not associated with the bank of the same name based in the United States.

Author: Sean Sinico
Editor: Sam Edmonds

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