From 2030, only 1 million euros will be protected for savers
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Private banks restrict deposit insurance
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Bank towers in Frankfurt.
Photo: dpa / Boris Roessler
Frankfurt Private banks in Germany are reorganizing their deposit insurance. In the future, maximum limits will be applied to protect customer deposits: from 2030, only 1 million euros must be secured for individuals. Public corporations should not be protected at all.
The bankruptcy of Grensell Bank this year was perhaps the last impetus that the BdB in Germany needed for a radical overhaul. Because three billion euros of customer deposits had to be compensated, and private banks had to pay two-thirds of it. The Maple Bank case was also costly: in 2016, the Australian bank subsidiary was saddled with additional tax claims after previous transactions and could no longer repay customer deposits totaling €2.6 billion. Deposit insurance now needs to be more targeted so that it can do justice to its primary mission, which is to protect investors who really need deposit insurance, said Christian Swing, president of Deutsche Bank, president of Deutsche Bank, Christian Swing. They still have to not worry about their deposits in the future a top priority for private financial institutions.
In principle, deposits are legally protected for each client and bank up to 100,000 euros. In addition, individual banking groups offer more comprehensive voluntary protection. In the case of savings banks and cooperative banks, this is done through an enterprise-specific security system. Private banks have a different system they want to fix now. To date, the protection depends on the equity of the respective organization, i.e. 15 percent for each client. Banks must own at least five million euros of shares, after which it will be 750 thousand euros for such small enterprises. But according to BdB bank information, the average safety limit is 190 million euros.
This limit will now be set in three steps – 2023 to five million euros, 2025 to three, and finally 2030 to one million euros per capita. “This reform will not change anything for 98 percent of private savers,” said BDP Swing.
The focus of reform is more on companies. Because this is where the biggest restrictions will be in the future. Their short-term deposits of up to twelve months must be secured in three steps until 2030 in the amount of only ten million euros. Professional depositors such as insurance companies and investment companies, as well as public law companies and public law organizations, will not be protected at all in the future. The decision was made to do this because they can professionally assess the risks of the bank, unlike individuals and medium-sized companies. “This is the rationale behind the reform,” said Christian Osig, chief executive of the Association of Banks.
However, banks want not only to adjust the level of deposit protection by 2030, but also to reform their audit union. You must be able to identify potential banking risks more quickly. Because then they can act at an early stage, said the head of the Association of Bankers Sewing. To this end, auditors are not only provided with new tools, but also with appropriate personnel. The seamstress was confident that this ongoing “monitoring”, i.e. continuous monitoring of risks, would help the ADB moving forward.
The fact that the banks were not aware of the high risk of Greensell Bank so quickly could also be due to the fact that it collected many deposits through the interest gates. Because in such a situation there is no direct connection between the savers and the bank. After all, special customers were covered. However, municipalities are still concerned about the millions of their deposits in Greensell Bank. Because they haven’t been covered by voluntary deposit insurance since 2017. This also applies to short-term funds from the federal and state governments.