Pillars of deposit insurance
If you want to invest your savings domestically, you can trust that legal and voluntary security systems can compensate for bank failures. In Germany there are three pillars of deposit insurance.
- The so-called statutory deposit insurance currently protects investments up to an amount of 100,000 euros per customer and bank.
- Voluntary deposit insurance can at best protect investments up to 100 percent.
- Should the aforementioned security systems fail, the state guarantee guarantees private investors to fully reimburse all savings
Legal Deposit Guarantee
The statutory deposit insurance currently covers defaults of up to € 100,000 per creditor and bank. The protection of statutory deposit insurance includes all types of deposits such as sight, term and savings deposits as well as registered savings bonds. The legal basis of the statutory deposit insurance is the “Deposit Guarantee and Investor Compensation Act” (EAEG), which aims primarily to protect the funds of private investors and smaller companies. The implementation is entrusted to the “Compensation Institution of German Banks GmbH” (EdB).
All banks domiciled in Germany are required by law to join the statutory deposit insurance. The exceptions are the savings banks, Landesbanken, Landesbausparkassen and cooperative banks, including the Volksbanken and Raiffeisenbanken. Due to the association’s own support and security systems, they are exempted from the duty to belong to the legal deposit insurance.
Voluntary deposit insurance
In addition to statutory deposit insurance, there are voluntary security systems. The so-called deposit insurance funds of the banks should protect the customer investments in the event of bankruptcy beyond the statutory compensation claim.
Savings banks and Volksbanks
All savings banks in Germany are secured by a liability insurance. The solidarity community of the savings banks provides money to emergency savings banks, if necessary. For the savings bank customer, this means that all deposits are protected 100 percent without any cap. The Volks-, Raiffeisen- und Genossenschaftsbanken act in a similar way. As a result of the security scheme of the “Association of German Cooperative Banks (BVR)”, the customer deposits of the affiliated banks are also secured at 100% without any limitation.
The deposit insurance fund of the “Federal Association of Public Banks of Germany” (VÖB), the customer deposits of the affiliated public banks are unlimited to 100 percent secured.
Private banks can protect the funds of their customers in the deposit protection fund of the “Association of German Banks” (BdB) in addition to the statutory deposit insurance. The security limit is 20 percent of the liable equity of the bank. As a bank operating in Germany must have equity of at least EUR 5 million, investments per investor are protected at least up to a maximum of EUR 1 million. The only downer: For benefits from the voluntary deposit insurance funds of private banks investors have no direct legal entitlement. The Association justified this as follows: Granting a legal entitlement means that the Fund would take on the status of insurance, with the consequence that an insurance tax would subsequently have to be paid. This complicates and makes the process more expensive.
State guarantee & deposit insurance of foreign banks
The state guarantee is a federally provided with 568 billion euros filled pot that guarantees every saver the unlimited refund of its savings, term money or current account deposits made. Prerequisites for the provision of the funds are the membership of the bank concerned in one of the deposit guarantee funds mentioned above as well as the banking seat in Germany.
Banks based abroad
Banks that have branches in Germany but have their headquarters abroad are not subject to German deposit insurance. Rather, the deposit guarantee limits of the respective country apply here. In member states of the European Union, compensation for deposits according to an EU directive is currently guaranteed up to an amount of 100,000 euros. In addition, foreign banks have the opportunity to voluntarily join the deposit insurance fund of the “Association of German Banks” and thus additionally secure the deposits of German customers.
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