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German town fears $46 million loss on Greensill Bank investment

·1 min read

FRANKFURT, March 4 (Reuters) - The mayor of Germany's Monheim am Rhein is concerned that it may lose 38 million euros ($46 million) invested with Greensill Bank after a warning on Wednesday by the country's financial regulator of "an imminent risk" to the lender.

The sleepy northwestern German town, which has a population of 40,000 and boasts a medieval tower, parked the sum -- which equates to almost 1,000 euros per resident -- at Bremen-based Greensill Bank, the mayor said in an emailed statement.

German watchdog BaFin warned of the risk that Greensill Bank would become over-indebted on Wednesday, imposing a moratorium on the lender making disposals or payments.

BaFin's move was another blow to Bremen-based Greensill Bank's owner, Greensill Capital, which said on Tuesday it is in talks to sell large parts of its business after the loss of backing from two Swiss asset managers which underpinned key parts of its supply chain financing model.

"It is possible that we lose the entire amount of invested money," the statement quoted the town's mayor Daniel Zimmermann as telling council members in a letter.

"We are now following the investigations by BaFin."

Germany's deposit protection scheme primarily protects individuals and not towns, Thursday's statement added.

"In order to avoid negative interest rates, the city had in part nevertheless invested money with private banks. We are now examining whether these cash investments constitute a violation of the city's investment guidelines," Zimmermann wrote.

A special meeting of a town audit committee is scheduled for Tuesday to discuss the matter.

Greensill was not immediately available for comment. ($1 = 0.8317 euros)

(Reporting by Tom Sims, additional reporting by Tom Bergin; Editing by Alexander Smith)