Varengold scraps dividend amid compliance probe

Varengold Bank has cancelled its dividend payment to protect its bottom line, after the German regulator increased its capital requirements on the lender amid a compliance probe.

The Hamburg-based bank, which has funding agreements with peer-to-peer lending platforms across Europe, had announced at the beginning of the year that it planned to pay out €3.6m in dividends at the next annual shareholder meeting.

However, due to the regulator’s “special audit” of its business operations, it said “the originally advised result for the financial year 2023 will not be achieved… due to a loss of commission income in the commercial banking business division respectively in the payment transaction business.”

As Peer2Peer Finance News reported earlier this month, the German Federal Financial Supervisory Authority (BaFin) “intensively examined” Varengold’s payment transaction business in the commercial banking division, due to possible compliance violations.

As such, the bank restricted payment transactions with some of its international corporate customers while it plans restructuring measures in that part of the business.

Varengold said today that its capital recommendation was raised by BaFin from 2.7 per cent to 6.5 per cent “due to the planned adjustments of the business strategy and the future profit situation”.

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The bank said it is able to meet these increased requirements but cancelled its dividend for 2022 “for the purpose of precautionary measures as well as to strengthen the capital base”.

“Varengold Bank will report in the short term as soon as the business planning has been finally adjusted and a new profit forecast for the financial year 2023 can be derived,” the bank added.

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