February 7, 2016 / 1:30 PM / 3 years ago

Financial watchdog closes German unit of Canada's Maple Financial

FRANKFURT (Reuters) - German financial watchdog Bafin on Sunday closed the German operations of Canada’s Maple Financial on impending financial over-indebtedness related to tax evasion investigations.

In September, German prosecutors searched offices and residences linked to Maple Bank in a probe of serious tax evasion and money laundering connected to so called dividend stripping trades.

The trades involve buying a stock just before losing rights to a dividend, then selling it, taking advantage of a now-closed legal loophole that allowed both buyer and seller to reclaim capital gains tax.

Bafin said in a statement that once Maple Bank made some necessary tax provisions, over-indebtedness loomed.

Maple Bank said in a separate statement that the requested tax provisions are connected to the ongoing investigations into dividend stripping trades carried out between in 2006 to 2010.

A Maple Bank spokeswoman declined to comment on the amount of the necessary provisions.

German daily Sueddeutsche Zeitung reported on Sunday that Frankfurt prosecutors allege that Maple Bank and its business partners have bilked the taxpayer of some 450 million euros.

The bank has an equity capital of just 300 million euros.

Bafin said in a statement that the lender with 5 billion euros ($5.58 billion) in assets posed no threat to the financial stability of the country.

Despite its small size, Maple Bank shot to fame in Germany in 2008, when the lender helped Porsche (PSHG_p.DE) in its takeover attempt of Volkswagen (VOWG_p.DE), which eventually led to the acquisition of the sports car maker by Europe’s leading car manufacturer.

Maple Bank specializes in equities and derivatives trading and as of Feb. 4 had 2.6 billion euros in liabilities mainly with institutional clients.

Bafin said it has barred Maple Bank from continuing its business to safeguard its assets.

While deposits of up to 100,000 euros are safeguarded by Germany’s deposits protection scheme, up to 60 million euros per client will be covered by Germany’s banking association’s guarantee fund if Bafin declares the bank an indemnification case, a spokesman for the bank lobby group said on Sunday.

Maple Bank is owned among others by the National Bank of Canada and the Ontario Teachers’ Pension Plan.

($1 = 0.8961 euros)

Reporting by Arno Schuetze and Alexander Hübner; Editing by Caroline Copley and Sandra Maler

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