BaFin Shuns Transactions of Maple Bank For Tax Dodging Allegations, NBC Pledges For Repatriation of Dividend Fund Taken

By Staff Writer

Feb 08, 2016 06:58 AM EST

National Bank of Canada (NBC) has warned for decrease in the regulatory capital level on its business activities on Sunday. The warning from NBC follows imposition of moratorium on business activity of one of its foreign investments, the German unit of Maple Financial Group.

The imposition appears to be a regulatory effort by BaFin, the financial watchdog of Germany. The niche investment bank in Frankfurt has played a prominent role in attempts by the Porsche family to take over Volkswagen several years ago.

BaFin has ordered for a halt to financial transactions by Maple Bank, the German subsidiary of Maple Financial Group of Canada. The German regulator's effort takes place while the bank is reportedly over indebted with around €2.6-billion ($2.9-billion). Maple Bank has also been facing investigation for tax dodging that led to raids on bank offices in September.

NBC, the Montreal-based sixth largest bank of Canada by assets, owns 24.9% stake in Maple Financial Group Inc. Consequently, National Bank plans to set aside enough cash to take a "full reserve" of its equity investment. The equity carries a value of C$165 million ($119 million).

The German regulatory efforts result from ongoing investigations launched by German authorities in September, 2015. The investigation focuses on selective trading activities performed by Maple Bank and some of its current and former employees. The trading activities, conducted during taxation years 2006-2010, allegedly violated German tax laws, according to a report published in Yahoo Finance.

German regulators have ordered a bank to shun financial transactions for the first time since December 2012. Maple Bank has about €5-billion in assets and is not big enough to pose a threat to the stability of the financial system, reports The Globe And Mail citing a BaFin statement as the source.

Customer deposits in Maple will be protected in line with the deposit-insurance law. Meanwhile, NBC has assured the German authorities for repatriation of dividend funds received from Maple Financial Group Inc subject to tax fraud attributions, reports The Wall Street Journal quoting an NBC statement.

Maple Financial has reportedly been contributing less than 1% to NBC's net annual income since the last two years. However, NBC hasn't witnessed regulatory capital level decrease for the first time in recent months.

The Maple Financial Group is going through investigation for tax dodging by BaFin, the German financial regulatory authority, since September 2015. In a sudden move, the regulator has ordered for closing all financial transactions of Maple Bank. Consequently, National Bank plans to set aside enough cash to take a "full reserve" of its equity investment, carrying a value of C$165 million. Thus the Canadian bank may face decrease in regulatory capital level and related aftermaths. 

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