DThe good news first: A saver in Germany has not yet lost any money when a bank collapses. But no bank customer should feel safe, because the security pots of German banks and savings banks are far from sufficient to protect deposits in a major banking crisis. Whether this is imminent after the collapse of the Silicon Valley Bank could be suggested by the price losses in bank shares and the nervousness on the market. Regulators and central banks around the world are trying to sound the all-clear. Let’s hope they’re right.
Even if German savers have so far survived bank collapses without damage, the test case of a major bank failure has not yet materialized. And some bank customers have already had to lose feathers, such as the municipalities, which lost a three-digit million amount when the Greensill Bank closed in 2021. The chamberlains, like financial institutions, are no longer protected by the private banks’ deposit insurance, which is mainly funded by the contributions from Deutsche Bank and Commerzbank. Since the beginning of the year, insurers and semi-public companies such as public utilities have also been excluded from the protection.
Utopian promises
The Federal Association of German Banks (BdB) is responsible for the security systems of the private institutes. In the years after the financial crisis, he had to reorganize his deposit insurance twice, significantly reducing the scope of protection. This was also necessary because for a long time customers were promised an unrealistic scope of protection that could never have been met. In 2017, 11 billion euros were to be protected for each Deutsche Bank customer, compared to 6 billion euros for Commerzbank. These promises were utopian, so the reduction in promises of protection was necessary, but no saver should feel completely safe, even with their legal entitlement to statutory deposit insurance.
In the EU, this ranges up to EUR 100,000 per customer and bank. If you look at the figures from the EU banking regulator EBA, you can see how the protection systems are doing. At the end of 2021, private banks had covered deposits covered by the statutory guarantee of 705 billion euros. In the fuse pot were 3.9 billion euros. Things didn’t look much better for the savings banks and Volksbanks. As of the reporting date, the German Savings Banks and Giro Association protected legally guaranteed deposits amounting to 833 billion euros with 4.7 billion euros. The Federal Association of Volks- und Raiffeisenbanken was able to rely on 3.5 billion euros for 604 billion euros.
“German banks are robust and stable”
All three guarantee systems were each equipped with less than 0.6 percent of the covered deposits, by July 2024 they must reach 0.8 percent according to EU requirements. In this case, the private banks’ compensation scheme, which is responsible for statutory deposit insurance, would have 5.6 billion euros at its disposal instead of 3.9 billion. In view of the fact that Commerzbank, for example, has private customer deposits of a good 150 billion euros, this will hardly be enough for the famous drop in the bucket in an emergency.
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