German regulator shuts operations of Canada's Maple Financial
08 February 2016
German financial watchdog Bafin has closed the German operations of Canada's Maple Financial over expected financial over-indebtedness related to investigations into tax evasion.
Maple Bank's premises were searched by German authorities a part of a probe into serious tax evasion and money laundering related to so-called ''dividend stripping trades.''
The trades involved acquisition of a stock just prior to losing rights to a dividend, then selling it, taking advantage of a legal loophole, which was later closed, that allowed both buyer and seller to reclaim capital gains tax.
According to a statement by Bafin, once Maple Bank made some necessary tax provisions, over-indebtedness loomed.
Maple Bank said in a separate statement that the requested tax provisions were tied to the ongoing investigations into dividend stripping trades carried out between in 2006 to 2010.
According to a report in the German daily Sueddeutsche Zeitung yesterday, the Frankfurt prosecutors alleged that Maple Bank and its business partners had cheated the taxpayer of some €450 million.
The bank's equity capital stood at only €300 million.
Bafin said in a statement that the lender with €5 billion in assets did not pose any threat to the financial stability of the country.
Meanwhile, National Bank of Canada said it would write off the full C$165 million ($119 million) carrying value of its stake in Maple Financial Group Inc, after Bafin's action.
According to the Montreal-based bank's statement, the writedown would be included in fiscal first-quarter results to be announced on 23 Februay, cutting the company's common equity Tier 1 ratio by about 13 basis points. National Bank, had in October signalled that a reduction of the kind was possible. Maple owns a 24.9 per cent stake in Maple Financial, the parent of Maple Bank GmbH.
Maple Bank spokeswoman, Barbara Fuchs, said in Frankfurt, that the company could not comment on investigations.
''These events result from ongoing investigations launched by German authorities in September 2015 focusing on selected trading activities by Maple Bank, and certain of its current and former employees,'' National Bank said Sunday. ''None of National Bank of Canada and its employees were involved in these trading activities, nor to our knowledge is National Bank of Canada or any of our employees the subject of these investigations.''