BGH judgment: banks play on their reputation – economy

The decisions of the Federal Court of Justice should slowly give food for thought to savings banks and Volks- und Raiffeisenbanken. For the second time in a short time, the Karlsruhe judges have handed down a judgment against them and in the interests of consumers: in April, they declared illegal the practice of imposing fee increases simply by changing the terms and conditions , without obtaining customer consent. Now they have rejected clauses with which many banks lowered interest rates on long-term savings contracts “owner’s style,” as the judges put it.

Both judgments will cost savings banks and cooperative banks billions. Germany’s top judges told them that for decades they had used illegal clauses to their own advantage and to the detriment of their clients. You could also say that they have systematically scammed their customers. In itself, this is insolence that the public is not yet fully aware of.

What makes the case a real scandal is the way the institutes are handling the latest decision on premium savings contracts. Instead of compensating their clients, most of them continue to gamble on time, apparently in the hope that more and more cases will become prescribed. Even financial supervisor Bafin, which has a reputation for being bank-friendly, intervened in June and asked financial institutions to repay customers on their own initiative for any lost interest. The result was that more than 1,100 banks appealed the decision.

Such behavior shows that savings banks and cooperative banks have not understood what it is: they are on the way to destroying their still good reputation. When the big banks brought the world to the brink during the 2008 financial crisis, German public institutions and cooperatives rightly took the opportunity to present themselves as a haven of stability that had nothing to do with it. the methods of others. Bank branches were seen as honest brokers who work in their field for the benefit of private and corporate clients and donate money to clubs and charities.

The image of the banker has suffered a lot

This image of the good banker has suffered a lot lately. This is probably a direct consequence of the fact that business has become difficult for bank branches. For decades, they’ve made a living taking money from savers at lower rates and lending them at higher rates than loans. The low interest rate policy of the European Central Bank, which has lasted for more than ten years, has sharply reduced this interest rate margin. The activity with commissions for the brokerage of insurance companies or funds does not pay as much anymore, because the direct cheap banks compete with the institutes having networks of branches. Finally, there were also the neo brokers, who offer free purchases of stocks and funds.

Savings banks and cooperative banks have come under pressure from many sides. This has caused them to feel compelled to pass this pressure on to their customers by increasing fees or illegally lowering the interest rate on long-term contracts. On the other hand, we have rarely seen a bank accommodating with its customers when it comes to enforcing their own rights. Whether it is in the event of an overdraft on the account or if a loan payment is not due.

What falls apart is customer confidence, one of the last advantages that savings banks and Volks- and Raiffeisenbanken still have over private commercial banks. You have to be careful not to lose that too. What is needed is nothing less than a cultural change. Financial institutions can no longer go on as before and treat customers like dairy cows. Because they ultimately only have very trustworthy clients, the young and flexible have already migrated to direct banks and neo-brokers. For a bank, this is not enough as a business model to survive in the future.

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