The financial crisis was a long time ago, but it’s not really over – neither in Germany nor in other European countries. Even after 2008, taxpayers had to bail out the banks again and again, and the federal government continues to hold a stake in Commerzbank. Latest case: At the end of 2019, Lower Saxony, Saxony-Anhalt and local savings banks had to put 3.6 billion euros in the Nord-LB, which had gotten rid of loans to ships. Instead of liquidating the Landesbank, the Länder and the savings banks finally agreed, after months of hanging, to invest in the bank again. The savings banks and the Landesbanken gave 1.1 billion for the rescue operation, the rest of the country took over.
The verdict of the banking supervisors after the Nord-LB affair is unequivocal: the ECB and the German financial supervisory authority Bafin consider that the savings banks with their system of mutual protection at several levels are too slow, and in case urgently, the institutes of public law think a lot from the point of view of the controllers too little loan money. They therefore urge savings banks and Landesbanken to increase the funds available for rescue operations by around five billion euros, with funds for securing deposits and institutions to be separated. Otherwise, they threatened, they would lose important regulatory privileges.
According to information from SZ, the savings banks and Landesbanken have now agreed on a solution after difficult negotiations, which they intend to present to the ECB soon. This Friday, the general assembly of the German Association of Savings Banks and Giro (DSGV) in Berlin is due to vote on the necessary modification of the statutes. From Sparkasse circles, it was said that it had not yet been conclusively clarified whether the supervisory authority would accept the proposals, but that they were confident. A spokesperson for DSGV said key issues relating to the common security system are on the right track. The objective is to make a decision within the committees and to implement it. “This further strengthens the banking security of the Sparkassen-Finanzgruppe, which is advantageous for our customers,” said the spokesperson.
“A compromise that can be agreed”
Oliver Stolz, President of the Schleswig-Holstein Association of Savings and Credit Transfers, spoke a little more clearly: After many constructive discussions, a good and unanimous compromise was found within the Sparkassen-Finanzgruppe . “I am optimistic about the success of the alliance and the approval of the ECB,” Stolz said.
Plans call for savings banks to save 250 million euros per year from 2025 to 2032 and give 600 million euros in “promise to pay”. In addition, the Landesbanken pour 2.6 billion euros into the new pot and are also liable in the first place and not on an equal footing with the savings banks if one of the four big Landesbanken is in difficulty. In total, savings banks and Landesbanken must save an additional 5.2 billion in order to strengthen their mutual accountability commitments.
The ECB believes this is urgent. Public institutions tell their clients that they always support each other. In return for this promise, the banks benefit from certain privileges; For example, they don’t need to back up loans with each other with equity. Until now, savings banks and Landesbanken have always kept their promises, which is why they have never allowed a bank to fail to the detriment of their customers. In addition, there are 13 different security systems of the regional associations, Landesbanken and Landesbausparkassen, which are bound by a complex set of rules. Who pays how much in which constellation is to be traded first, and if in doubt, it takes a long time. In the end, things always went well in an emergency because the financial institutions were able to draw on the budget funds of the Länder or the municipalities, that is to say taxpayers’ money, if necessary.
Complicated plans for bankruptcy
But did politicians not promise after the financial crisis that taxpayers would no longer have to bail out the banks? After all, many European countries had borrowed heavily during the crisis to save money in homes, which they then had to save elsewhere. So today there are complicated plans for bank failures to occur without endangering the entire system. First and foremost, wealthy owners and creditors should be held accountable.
In Landesbanken and Sparkassen, on the other hand, the situation is more complicated. Their owners are the taxpayers themselves, that is, municipalities, districts and states. Many politicians there, in turn, consider that as landlords they can inject more money at any time, provided the parliaments agree. On the other hand, almost everyone in the financial industry agrees that even state-owned banks should not be constantly backed by taxpayer money, but should generate the necessary funds themselves.
The rush in the Sparkassen-Finanzgruppe now also concerns the issue of burden sharing between the Länder and the municipalities. Above all, the savings banks of North Rhine-Westphalia, Schleswig-Holstein, East Germany and Hamburg no longer have significant investments from the Landesbank and therefore do not wish to be held responsible for ‘possible imbalances in Bavaria, Baden-Württemberg, Hesse or Lower Saxony. Among other things, they had imposed that the Landesbanken would be primarily liable to each other in the future, up to 2.6 billion euros. Savings banks would only have to replace Landesbanken for larger sums.
Germany’s 371 savings banks, the five Landesbanken and associated fund company Deka and building societies should now be in a good position to save the extra billions. Banks in EU member states will have to set aside money for the European deposit guarantee scheme for up to four years. It also costs billions, but at least the charges would be balanced in terms of time: the savings phase for the new fuse box would not begin until 2025.