Monday, September 19, 2011

Germany's Siemens Pulled 500 Million Euro from a French Bank

One day after the announcement that the company will pull out of nuclear power business, it has been revealed today that Siemens, headquartered in Munich, Germany, had pulled 500 million euros (US$684 million, 52 billion Japanese yen) 2 weeks ago from an unnamed French bank which is not BNP. (So it's either Societe Generale or Credit Agricole...)

And what did the company do with the money? It deposited the money to the European Central Bank for safety and higher interest. How could an engineering company make a diposit at a central bank? Because Siemens does have a bank, for about a year.

From Financial Times (9/19/2011):

Siemens withdrew more than half-a-billion euros in cash deposits from a large French bank two weeks ago and transferred it to the European Central Bank, in a sign of how companies are seeking havens amid Europe’s sovereign debt crisis.

The German industrial group withdrew the money partly because of concerns about the future financial health of the bank and partly to benefit from higher interest rates paid by the ECB, a person with direct knowledge of the matter told the Financial Times.

In total, Siemens has parked between €4bn ($5.4bn) and €6bn at the ECB’s facilities, mostly through one-week deposits, this person said. Only a handful of large companies have the banking licences that allow them to deposit cash directly with the ECB.

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The company’s move came almost a year after Europe’s largest engineering conglomerate prepared itself for a future financial crisis by launching its own bank, an unusual move for an industrial group outside the car sector, where companies run big car financing and leasing businesses.

In an interview last December, Roland Châlons-Browne, chief executive of Siemens’ financial services unit, said its banking business would enable the group to tap the central bank for liquidity and deposit cash at the ECB.

“In the case of another financial crisis, we will be able to broaden our flexibility and take out risk with our own bank,” Mr Châlons-Browne said at the time.

Siemens does not only use the ECB as a haven; it also gets paid a slightly higher interest rate than it would get from a commercial bank.

The ECB paid an average interest rate last week of 1.01 per cent for its regular offers of one-week deposits, under which it withdraws from the financial system an amount of liquidity equivalent to the amount it has spent on eurozone government bonds.

That compares with an average overnight interest rate paid by eurozone banks of 0.95 per cent.


Anonymous said...

lol, the Deutsche & francium ARE the European Union

arevamirpal::laprimavera said...

Yup. What's half a billion among friends... Italy just got downgraded by S&P. Not surprising.

I'm sure Big Bad Ben at the US Fed will surely come to the rescue in his Blackhawk, come Wednesday. With Swiss central bank and BOJ tagging along in their desperate efforts to debase their currencies.

netudiant said...

Siemens, like GE, its US equivalent, has a banking subsidiary, which allows them this direct access to the ECB. Ordinary mortals have no such privilege, nor do most corporations.
In any event, it is very difficult to see this as anything other than a very public no confidence vote by Siemens in the European banks.

Anonymous said...

What's the relation to nuke business? Many corporates have bank subsidiaries, GE, Sony, Toyota.

Siemens has exited the nuke business, invests heavily in green energy, they manage risk of their capital with this, put it where they get more interest… anything wrong with this? Sure, not a confidence vote for French banks, so what? Money makes the rules, no rewards for loyalty to anyone.

Anonymous said...

@anon 7.07pm:

Don't forget that this was a financial blog before march 11 tsunami/earthquake/nuke disaster ;-)

jmdesp said...

There's not only three banks in France, it could just as well be Credit Lyonnais, oups it has merged with Credit Agricole. So that leaves only BPCE and CIC-Crédit Mutuel as major banks outside those three, which means it's probably one of the big 3.

Atomfritz said...

Siemens for decades has been called "a corporation which could be a bank itself" in Germany.
If I remember correctly I have read a newspaper article long time ago that stated that Siemens has more than 30 billion DM (or was it euros?) in liquid assets.
So they are richer than many banks and even could buy or found a major bank if they wanted to. But they are just satisfied to have their own "bank department" to save banking costs.

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