dChan - Q Origins Project Archive

German development bank could lose 100 million euros from Wirecard insolvency

Germany’s state development bank KfW could lose 100 million euros ($112.17 million) after payments company Wirecard filed for insolvency, a spokesman said on Saturday. KfW subsidiary Ipex Bank lent Wirecard the sum two years ago Boersen Zeitung newspaper first reported. The funds were fully drawn down but were not hedged by Ipex, the KfW spokesman confirmed on Saturday.

“Ipex threw 100 million euros into the fire,” the KfW spokesman, who declined to be named, told Reuters. Wirecard collapsed on Thursday, owing creditors almost $4 billion in what is shaping up to be one of Germany’s biggest corporate scandals. German regulator BaFin has been criticised at home and abroad for not spotting problems sooner.

Ipex is not alone in its exposure. Fifteen Wirecard lenders have mandated FTI Consulting as financial adviser in talks with the company on whether to waive covenants on roughly 1.75 billion euros in loans to the German firms.

https://www.reuters.com/article/us-wirecard-accounts-kfw/german-development-bank-could-lose-100-million-euros-from-wirecard-insolvency-idUSKBN23Y0I4

Credit card industry reins in balance-transfer offers as banks from JPMorgan to Amex fear defaults

Banks have pulled back from a popular credit card promotion on concerns that borrowers struggling during the coronavirus crisis may leave them with defaulting loans.

Balance transfer offers, which typically entice borrowers to move their debt to a new lender in exchange for a temporary 0% interest rate, have been sharply reduced at banks including JPMorgan Chase, Citigroup, Bank of America, Barclays and Capital One, according to people with knowledge of the matter at each firm.

American Express took the most drastic step, dropping the product altogether, according to a company spokesperson.

“We are not currently offering balance transfers across all our card products,” American Express said in a statement. “From time to time, we make adjustments to our offerings to ensure we’re managing risk for our customers and the company in a responsible way.”

When the economy was booming, credit card issuers fell over themselves to lure borrowers and their debt, mailing hundreds of millions of no-interest solicitations. Banks made money from transfer fees, typically around 3%, and begin to earn interest on debt after the promotional period, usually lasting six months to as long as two years, ended.

But banks were burned in the 2008 recession when users of balance transfers defaulted at among the highest rates in the industry, according to the sources. Some theorized that borrowers took advantage of balance transfers after worrying about their job security, or even after they’ve lost their jobs, putting them at risk of eventually defaulting.

Now, lenders are being more selective about who they make no-interest offers to, favoring customers with higher credit scores and other advantages, said the people. More than 40 million Americans have filed for unemployment benefits since the pandemic began.

At the same time, the industry has offered many borrowers forbearance during the pandemic, waiving late fees and interest for months. For many customers, those programs are ending soon, and it’s an open question as to whether they will resume making payments.

The irony is that while banks have never been more flush with deposits, taking in $2 trillion since February, they are pulling back from lending products they consider risky in their mortgage, auto and credit card businesses.

The industry’s move deprives borrowers of one of the best ways to cut down on credit card debt. When used properly, balance transfer cards can save thousands of dollars in interest payments over time.

https://www.cnbc.com/2020/06/27/credit-card-industry-reins-in-balance-transfer-offers-as-banks-from-jpmorgan-to-amex-fear-defaults.html

The big banks and credit-card co's have already set aside millions of dollars (in a few cases billions) for loan-loss provisions. When the loss' do not meet the amount of money set aside for said loss the system takes the difference between actual reported loss and the set aside amount and then applies it directly to the balance sheet as earned income. Done it like this for years.

Look for this to habben again when the Q2 earnings reports from the banks and credit co's come out.